Gerald Lavey, 30, said his children clung to him during the attack by up to six men at his home at Ballymagowan Avenue, Creggan, on Monday.
He said the gang dragged him from his living room to the front garden where he was beaten with iron bars and nails.
Hours after the attack, a wheelie bin was set alight next to the house.
Police said they consider both incidents to be linked.
"Any other night I would normally lock the door and put the keys out of reach so nobody could break the glass," said Gerald Lavey.
"But the wee'uns [children] didn't lock the door and the next thing we heard was footsteps coming up the stairs and I just knew then that's what it was.
"They were dragging me down the stairs into the garden and started battering me with iron bars. Just before, my wee girl clung onto me when she seen them and they just pulled her off me."
Mr Lavey said he feared for the safety of his daughter, 9, and his five-year-old son.
"Its terrible, I don't think they should have had to witness anything at all. They were squealing. I was lying on the garden and they were just welting into me with iron bars with nails in them.
"While I was in the front garden getting battered they [the gang] were smashing up the house. One of them said that's enough, that's enough but the last boy out had to hit me five or six slaps more and then they ran off down the street."
Gerald Lavey called those behind the attack "cowards".
"They were shouting about coke but I don't take any sort of drugs. I'm addicted to prescribed medication and that's it. I don't bother anybody I just keep myself to myself.
"Cowards. They had to all come in masks and iron bars and it took five or six of them."

Despite decades of tobacco control policies, population growth has seen an increased number of smokers, it warned.
Researchers said mortality could rise further as tobacco companies aggressively targeted new markets, especially in the developing world.
The report was published in the medical journal The Lancet.
"Despite more than half a century of unequivocal evidence of the harmful effects of tobacco on health, today, one in every four men in the world is a daily smoker," said senior author Dr Emmanuela Gakidou.
"Smoking remains the second largest risk factor for early death and disability, and so to further reduce its impact we must intensify tobacco control to further reduce smoking prevalence and attributable burden."
The Global Burden of Diseases report was based on smoking habits in 195 countries and territories between 1990 and 2015.
It found that nearly one billion people smoked daily in 2015 - one in four men and one in 20 women.
That was a reduction from one in three men and one in 12 women who lit up in 1990.
However, population growth meant there was an increase in the overall number of smokers, up from 870 million in 1990.
And the number of tobacco-related deaths - more than 6.4 million in 2015 - increased by 4.7% over the same period.
The study found some countries had succeeded in efforts to help people quit, mostly through a combination of higher taxes, warnings on packages and education programmes.
Over the 25-year period, Brazil had seen the percentage of daily smokers drop from 29% to 12% among men and from 19% to 8% among women.
But, the report said, Bangladesh, Indonesia and the Philippines saw no change from 1990 to 2015.
Russia saw smoking among women rise by 4% over the same period and similar trends were emerging in parts of Africa, the authors warned.
A man beaten with iron bars by a masked gang has blamed dissident republican paramilitaries for an attack at his home in Derry.
[NEXT_CONCEPT]
Smoking causes one in 10 deaths worldwide, a new study shows, half of them in just four countries - China, India, the US and Russia.