Investing in Enabling and Applied AI

Mark Gorenberg, Managing Director, Zetta Venture Partners

Mark Gorenberg, Managing Director, Zetta Venture Partners

2021 was a record breaking year for Venture Capital with $329 Billion dollars flowing into US based startups, nearly doubling total investments for the previous year, according to Pitchbook. While late-stage rounds got larger, early-stage funding grew as well, with nearly 10,000 angel and seed rounds - up from 6,900 in 2020 - as virtual meetings and the second year of the pandemic raged on. It was also a record year for venture capital fundraising – 730 funds raised $128.3B and venture-backed IPOs created $774.1B in liquidity – creating a lot of dry powder coming into 2022.

It was an especially good year for New York’s startup ecosystem, which experienced the fastest growth of any major US city. Last year New York based startups saw a 276 percent increase in venture dollars and 139 percent increase in deals. Storied Silicon Valley firms like Andreessen Horowitz, Greylock, Lightspeed and Redpoint opened New York offices in 2021 and tech giants like Google and Facebook doubled down on their already large NYC campuses. Our firm Zetta opened our first New York outpost in 2018 which now accounts for half of our investment team.

While the city has always been a top choice for fintech and marketing tech founders - looking to leverage proximity to Wall Street and Madison Ave - New York is beginning to rival the Bay Area for deep tech startups as well, especially in artificial intelligence where we invest. AI continues to be among the biggest and fastest growing areas for venture investment - seeing almost a doubling in funding ($68B) and more than tripling in exits ($50B a quarter) - with New York accounting for a greater share. The number of NY based AI unicorns (startups valued at over $1B+) rose sharply last year including Zetta portfolio company Tractable, and Bluecore, ASAPP, K Health and Augury among others.

New York is also on the cutting-edge of AI research. Despite not having a top-five computer science program like the Bay Area (Stanford, Berkeley) or Boston (MIT), NYC is home to Facebook’s AI Research Group (FAIR) and offices for Google Brain and DeepMind. Facebook’s Chief AI Scientist Yan Le Cunn, one of the inventors of deep learning, and Gary Marcus, who led Uber’s AI Lab both teach at NYU, which has become a quiet powerhouse of top AI talent and launchpad for AI companies.

" The appetite for entrepreneurs to start companies and venture capitalists to fund them is recreating the economy faster than ever "

And, as the pandemic lifts, with the Tri-state area being home to many of the Fortune 1000, AI companies will begin holding their conferences here again. For example, Enterprise ML Ops leader Domino Data Lab just announced that their REV Conference for data scientists and AI leaders will return to NYC on May 4-6.

Since the start of the pandemic, digital health and bio startups have seen incredible growth and have been an especially fruitful area for AI. New York’s medical schools and research hospitals, among the best in the world, have been at the center of much of that innovation. Memorial Sloan Kettering’s AI diagnostic spin-off Paige raised $100M, alongside a massive round for 2-year Weill Cornell spinout C2i Genomics and a public debut of Mt. Sinai startup Sema4. New York based clinical trial startups TrialSpark and Aetion both had banner years, raising large rounds and acquiring smaller startups to bolster their AI efforts. Even breakout AI companies founded outside the US like biotech unicorns Owkin (France) and ImmunAI (Israel) have made the move to New York, choosing the city as their US headquarters and base of operations.

Building on all of this momentum, 2022 promises to be a breakout year for New York startups, especially those working in AI. There’s never been a more exciting time or place to start an AI company and at Zetta we can’t wait to see what the new year brings. So if you’re a founder working on an early-stage AI company, or know someone who is, we’d love to hear from you!

Zetta Venture Partners is an early-stage investor in AI-native startups. Founded in 2013, Zetta was the first dedicated AI investor and remains the most focused seed fund in the space. Zetta invests in applied AI as a well as tools for AI engineers and data scientists. The firm has invested in over 50 companies including Tractable, Domo, Domino Data Lab, Invenia and Lilt. We have written playbooks to help AI-first startups grow and we pen a monthly newsletter and moderate a live interview series with industry luminaries. We invite you to subscribe to the Zetta Bytes community. Dylan Reid leads Zetta’s New York office with Zetta founding partner, Mark Gorenberg.