A group of executives meet for a meal roughly once a month at the Buffalo Club to talk business.
Their names place them among the region’s business elite: Jacobs, Hamister, Friedman, Lipke and Pierce. But they don’t gather to discuss development or politics or even their own business ventures.
They talk about investing in high-tech startup companies.
“There is a myth that there’s not a lot of opportunity in this town,” said Jeremy Jacobs Jr., co-CEO of Delaware North. “Having gotten the word out that we’re investing, the deal flow is both amazing and never-ending.”
Business professionals are pushing their time and money toward such companies in unprecedented volume. They join a communitywide awakening around innovation that plays off the region’s talent pipeline, entrepreneurial history and existing clusters of expertise in biomedicine, engineering and materials science.
The Buffalo Club group operates under the brand Buffalo Capital Partners and was pulled together by Scott Friedman, president and CEO of Lippes Mathias Wexler Friedman LLC and a longtime investor. Other members include Jacobs; Ted Pierce, an investor whose family owned Niagara Envelope Co.; Brian Lipke, retired chairman and CEO of Gibraltar Industries; and Mark Hamister, chairman and CEO of the Hamister Group LLC.
In 2015, the group’s first full year of operation, Buffalo Capital Partners injected venture capital dollars into five companies, including three from Buffalo, Graphenix Development, which is developing ultracapacitor electrodes; City Dining Cards, which is building consumer and business technology strategies off its digital dining cards; and Mimivax, a Roswell Park Cancer Institute spinoff that is in trials for brain cancer therapy.
Those companies are different in many ways but are joined by the idea that a technology built and nurtured in Western New York could make international waves.
“I personally love building things, and that doesn’t always mean bricks and mortar,” Hamister said. “As I get older, I’m turning more of the company over to my son. This keeps my mind active and challenged. And lastly, it’s good for the community.”
The investors blend into a local venture capital economy that has evolved substantially in Buffalo in recent years. The incremental deal flow from Rand Capital Corp., a longtime venture capital firm in Buffalo, has been joined by the state-backed fund at Z80 Labs and the increasingly active Buffalo Angels, which closed a $1.2 million fund in 2014.
Through the fund and individual members, the Buffalo Angels invested more than $1 million for the first time in 2015, a jump from the previous high of $791,000 in 2014.
“We’re evolving our ecosystem at a much-accelerated rate thanks in part to some programs set up for entrepreneurs,” said attorney David Colligan, a longtime angel investor and part of the Buffalo Angels. “This new wave of investor is, in my opinion, part of the evolutionary process.”
Buffalo Capital Partners is a significant part of that new wave, thanks in no small part to Friedman, an equity investor with deep connections in the health sciences community.
In a recent period, he spent an afternoon talking to the Mimivax team, had dinner with the founder of Photolitec, another Roswell spinoff, and spent the next morning on the phone with Dr. L. Nelson Hopkins, renowned neurosurgeon, medical device expert and entrepreneur who founded the Jacobs Institute.
“There are so many interesting companies that are forming here and developing intellectual horsepower that is really world class,” Friedman said. “Everyone recognizes that some of these companies have the potential to create high rates of return while supporting local economic development.”
Buffalo Capital Partners isn’t the only new venture capitalist on the scene.
Jonathan Amoia and Larry Stolzenburg backed two local companies in recent years. The duo met through their day jobs at a Buffalo wealth management firm and recognized opportunities outside that firm’s scope. So they invested equity growth financing into GClip Corp., a company seeking to disrupt the rowing shoe industry, and Vader Systems, a specialty 3-D printing company developing its first sales model.
They said they moved seamlessly to becoming angel investors as individual opportunities presented themselves.
“It’s in my nature to be on the lookout for companies that are selling for good value,” said Stolzenburg, a CPA whose career has spanned accounting to business valuation to money management. He also founded a profitable campground on Grand Island.
Amoia said he and Stolzenburg are business wonks who complement each other’s skill sets and enjoy the challenge of being involved in a company rather than just picking valuable stocks.
“I’ve spent my career studying investments and companies, watching managers do things right and wrong, watching companies merge and fail or succeed,” Amoia said. “You’re standing on the sidelines just watching the game. At some point you’re tempted to just jump in.”
Another group of investors coalesced around SelectOne, a Williamsville headhunting firm whose leaders have been involved with Z80 Labs for several years. SelectOne principals were originally drawn to the downtown tech incubator because they viewed it as a threshold for a major local growth sector, and the relationships it built led to investment.
For instance, SelectOne partner Sam Russo and COO Kevin Kerl were having a beer with then-Z80 manager Dan Magnuszewski before the Buffalo Sabres home opener in 2014. Magnuszewski told them about his plans to leave Z80 for his own startup venture, ACV Auctions, a Web-based platform for wholesale auctions.
“We told Dan that when he raises money, we’d like to participate in some way,” Russo said.
More than a year later, the group contributed to ACV’s $1 million seed round in 2015, which preceded the $1 million prize it won during the 43North business competition in October.
The group also provided financial backing to the company that became Thimble, which sends subscribers monthly do-it-yourself kits to build electronic toys such as robots and drones. Thimble’s recent crowdfunding campaign blew by its $25,000 goal and raised more than $260,000.
The SelectOne group has invested only small sums in those companies compared to the metrics of a traditional venture capital round. Russo said the scale of its investments could change in the future.
“It’s about being able to see companies that have a product or a service that’s revolutionary and solves a problem and then betting on it,” he said. “Our group believes we can provide hands-on support to the businesses we invest in.”
The group includes SelectOne’s three partners, John Baldo, Ron Faso and Russo; Kerl, who is COO; and Paul Cody and Ryan Kagels, who are president and vice president of finance, respectively, at Counsel Financial.
At the very least, venture capital is a growing matter of curiosity for established business professionals in Buffalo. They view it as a way to stay plugged into a high-potential segment of the local economy and, in some cases, to give back in a way other than philanthropy.
They’re also finding it a new pathway toward their passion of building businesses, from the products to the commercialization and marketing strategies.
“I used to think the whole world revolved around steel-roof vents,” said Lipke, who stepped down as CEO of publicly traded Gibraltar Industries in December 2014. “Now I’m finding there’s a whole new wave of technologies coming to the forefront.”