by Magdalena Vuckovic and Jakov Novakovic - Junior Analysts, Azafran Data Team
New York Start-Up Scene
Last year, venture-backed firms in the greater New York City region raised more than $52 billion, more than double the $20.2 billion raised in the metro in 2020. Oscar Health and UiPath were two of the largest conventional IPOs for venture-backed firms situated in New York in the recent decade, by transaction size.
It's basically been a snowball that's been rolling for a while, and it's reached a huge inflection point in the last two to three years, especially as we've seen larger-scale exits from this market than we've seen previously.
When it comes to startup investment, New York stands out as one of the most diverse, with a strong presence in fintech, digital media, consumer, real estate, corporate software, health, and, increasingly, biotech. In other words, it appears that anything that doesn't need a massive production plant may be scaled up there.This diversity may be seen at all phases. While the focus was on later-stage rounds so far, it's worth mentioning that early-stage and seed investment activity in New York has remained solid in 2021.
New York City has always been mentioned when it comes to areas to start a business, but it has always been overshadowed by the Bay Area and even Boston, which are recognized for garnering venture capital for biotech startups. Remote work offered a chance at residing for a few months in towns where life felt easier. For a rising number of tech employees and their firms, the tale of the Bay Area's newest tech period is coming to a close. They've suddenly found themselves with mobile employment and money in the bank — money that will go a long way somewhere else. But where? The No. 1 pick for people leaving San Francisco is Austin, Texas, with other winners including Seattle, New York and Chicago.
As the world grows more global and diverse, and businesses need to be more internationally oriented and diversified, what better location to start a business and be than the world's most global and diverse metropolis, which is New York.
Semiconductor Shortage and the Global Supply chain Hiatus
The world we live in today is one in which the Brits will struggle to get hold of the newest luxury car models as a BMW plant in Oxford closes operations due to the severe pressures the global semiconductor shortage is exerting on the automotive industry. Furthermore, with the continuation of chip demands outstripping the supply, carmakers are not the only companies feeling the squeeze. Computers, smartphones, everyday appliances, etc. are all becoming increasingly difficult to manufacture – which in turn, according to the US Bureau of Labor Statistics, drove one-third of all inflation Americans experienced in 2021.
Venture Capital
Despite the chip shortage, there hasn't been a lack of venture investment poured into the space recently. Crunchbase numbers show VC-backed semiconductor startups saw in excess of $6.4 billion in funding in 2021, easily more than doubling the $3 billion from the year before. On the back of large deals, the pandemic and supply chain disrupted semiconductor industry is trying to keep up with the exploding number of connected devices and emerging sectors such as robotics and autonomous vehicles. This overwhelming need for improved connectivity, accelerated by the pandemic, coupled with our collective push towards 5G networks, presents a huge opportunity for some of our prospective portfolio companies.
M&A
The recent news of Nvidia’s intent to back down from the proposed $40 billion acquisition of Arm Holdings is just the last of large semiconductor deals to have been put under immense scrutiny by the regulatory bodies in Europe, the US and China fearing such unions would choke competition.
However, agreements like Intel’s $5.4 billion acquisition of Tower Semiconductor show the sector still remains hot and signal the intent of large players to decrease the pressure on the tight supply chain.
Last year we saw most M&A deals in the semiconductor space since 2015 and although dealmaking has slowed down this calendar year, at Azafran we see this as a great opportunity for startups that are earlier in their growth development if the regulators continue to pile pressure on large M&A ventures.
Supply Chain
Most of the goods we rely on for our daily existence are being delivered by an ‘orthodox’ supply chain model built on seeking out the lowest cost routes. Christopher Mims argues the modern supply chain while cost-effective, still isn’t necessarily resilient and this is why we are experiencing troubles covered in this article. A move away from these orthodoxies including seeking the lowest-cost manufacturers wherever they might be probably isn’t in on the cards in the near future, but the term we all know as the supply chain has, at this point, definitely turned into a web.