Early stage Startups in New York continued to slog through the downturn in Q3. Average seed round size fell 16% from Q2, according to a new report from Primary Venture Partners.

It’s Not the Summer Slump

The Funding market is highly seasonal. There are two big fundraising seasons — spring and fall. Summer is usually slow.

But the seasons aren’t the cause of this drop. The total funding raised fell 41% from the same period a year earlier.

In a Dim Report, Healthtech Shines

One bright spot: healthtech startups.

This quarter, we saw a spike in healthcare seed rounds. HCIT deals are up 35%, from 14 in Q2 to 19 in Q3. 

I actually invested in an awesome NYC healthtech startup in Q3 myself. I hope to be able to announce it soon.

AI Frenzy Cools — For Now

Despite the enthusiasm for AI, funding actually slowed down in the most recent quarter:

…AI saw a slowdown to the fundraising frenzy. AI deals are down this quarter by 53%, from 15 in Q2 to 7 in Q3.

I saw a flood of AI startups a few months after OpenAI released GPT-4 in March. Those new capabilities led to a lot of new companies.

But now, GPT-4 is over 6 months old. It makes sense that the pace of AI startup creation would slow a bit.

Once GPT-5 comes out, I expect to see another huge wave of AI companies that use its capabilities. I’ll probably invest in some of them!

What I’m Seeing in New York

What I’m seeing in the startup scene here is incredible dynamism. I made two investments in NYC companies in Q3 alone — one SaaS, one healthtech.

That ties with the Bay Area and, curiously, Phoenix. There are some hustlers down in the Sun Belt! Maybe it’s all those hours locked inside next to the AC.

Wrap-Up

In the end, Funding Levels go up and funding levels go down. If you’re a founder, just build something customers want and scale the heck out of it.

That’s true in New York or anywhere else.

What are you seeing in the NYC tech world? Leave a comment and let us know!

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