Why Index Ventures is expanding its investment team in New York

While online discourse might suggest that the venture firm has retreated to the Bay Area, where the most important place to launch a startup is San Francisco, Index Ventures is looking to strengthen its New York-based investment team.

The company is currently looking for another investor from New York and plans to add three or four new people to the team over the next year, Shardul Shah, partner at Index Ventures, told TechCrunch. He’s an aggressive addition to the current 10-person team.

“For a venture fund, this is hypergrowth,” Shah said, adding that Index is trying to “invest in the ecosystem and the energy that we have as a team.”

Shah said New York’s ecosystem is different from San Francisco’s and has a lot to offer. While the Bay Area may be more dense when it comes to engineering talent and venture capital, Shah said New York has an advantage in one key area: customer density. This is especially true for companies in the healthcare or financial industries, he said. While plenty of investors are helpful for early-stage startups, a deep customer pool is what really helps companies grow sustainably. The city’s industrial diversity is also another advantage, Shah said.

He added that it is also a natural place for companies to maintain a presence if they have portfolio companies or associates in both San Francisco and Europe. He added that European companies expanding to the United States typically set up shop in New York first, which is another interesting stream of potential deal flow.

It probably doesn’t hurt that Index already has a successful New York portfolio under its belt. The company has previously invested in some of the city’s biggest startup winners, including Datadog, which went public in 2019 at a valuation of $7.8 billion, and Cockroach Labs, which was valued at almost $5 billion.

The index was launched in 1996 in Geneva and expands to a new geographic area about every 10 years, Shah said. The company opened its office in New York in 2022 on the wave of expansion of investors from the Bay Area to the east. That same year, Lightspeed Venture Partners opened an office in New York. Sequia opened one in 2023.

And naturally, this wave is mixed with many notable New York homegrown VC firms, such as the $80 billion assets under management of Goliath Insight Partners and renowned firm Union Square Ventures.

According to PitchBook data, New York consistently maintains its position as the second largest venture ecosystem in the US. New York startups raised $12.6 billion in the first half of 2024. While this is significantly less than the $40.4 billion invested in California startups in the first half of this year, it’s nothing to complain about.

There are also 122 unicorns in New York compared to 182 in San Francisco, according to unicorn tracker CB Insights. When you add those from the larger area (Palo Alto, Redwood City, etc.) there are many more of them. ). But there are many more of them in New York than in any place other than Silicon Valley.

Still, the New York ecosystem has a weakness: big exits. Datadog is probably the most significant startup exit from the ecosystem, and it happened five years ago.

The index is ready to finance further growth.

“It seems like people have gone back 20 years, like when they said Europe was a museum,” Shah said of the current rhetoric. “It’s not accurate to say that (venture capital) only happens on the West Coast. It’s not even close.