Buffalo has come a long way in its support of a high-tech innovation economy in recent years.
But there’s still plenty of work ahead to ensure that promising early-stage companies can secure financing, grow their businesses and ultimately create well-paying jobs that benefit the entire economy.
That was the consensus Nov. 17 when a panel of investors and entrepreneurs met to discuss startup companies in Western New York. The event was part of the Buffalo Business First “Industry Roundtable” series, sponsored by Hodgson Russ LLP and held at the law firm’s downtown headquarters.
“The sea change, especially in the past two years, has been just unbelievable,” said Kevin Christner, an active angel investor. “You can definitely feel a difference in the way people think about the entrepreneurial community, about the way people feel they can be successful here.”
Investors said the documented uptick in financing rounds in recent years is no accident: There are more and bigger deals being sought by entrepreneurs than in the past.
“Going back 10 years, all you ever saw was a seed round investment” in Buffalo, said David Colligan, a local attorney and founding member of the Buffalo Angels group. “People put money in but generally (the rounds) would cap out at around a million dollars and a lot of times about half that. Now Round A investments are quite common in Buffalo.”
Attorney Scott Friedman talked about a continuing shift in attitudes and expectations across the region since his first involvement in the entrepreneurial community as an investor more than 20 years ago.
“The innovations that are happening at the university, at Roswell Park medical campus – I’ve never seen anything like it and I think it’s a great time to be here in Western New York,” he said.
Let’s talk about the health of Buffalo’s entrepreneurial community.
JACK McGOWAN, executive director, Western New York Venture Association
We don’t have metrics on the health necessarily, but just anecdotally, at the end of the 43North competition this year, it really struck me how far we’ve evolved. Twenty years ago it was the Western New York Venture Association and we probably averaged about 25 people in the room. The expansion of the interest from the community and from other people and organizations and new money coming in to fund these initiatives was very striking. So we’re certainly on a great trajectory and we’re getting a lot more broad momentum from the general community now.
ADRIAN DAYTON, CEO, ClearView Social
I moved to Buffalo 11 years ago when my father was chief of surgery at a Kaleida hospital. I came out for law school. Almost everybody that I met, when I told them I moved here from out west, their answer to me was: What did you move here for? It was like they were dumbfounded that anyone would choose to move to Buffalo. I don’t hear that anymore. When I launched my startup three years ago and had to raise money, I went out west, I went to New York City. I had a number of meetings and it was far easier for me to raise money here in Buffalo than anywhere else. And I think a big part of it was because there is not a high volume of entrepreneurs trying to find money here. The angel investors don’t have a million options if you’re trying to pitch them like they do in other cities. So I had far more success raising it here than anywhere else. I don’t really know how Buffalo compares to other communities, but I’ve found it incredibly welcoming and fairly easy to raise money.
KEVIN CHRISTNER, principal, Richmond Capital Partners
I’ve been doing this for five years and the sea change, especially in the past two years, has been unbelievable. You can definitely feel a difference in the way people think about the entrepreneurial community, about the way people feel they can be successful here. There’s not a day that goes by, or a week that goes by really, where I don’t get a call from someone saying, “Hey, will you just meet with this guy? He’s looking to move back from Boston, New York, San Francisco. People really want to move back here now, and that was not the case three years ago.
DAVID COLLIGAN, Colligan Law LLP
I’m one of the 25 people who were at the Western New York Venture Association 10 or 15 years ago. And really, to use kind of a national standard for how Buffalo is doing, there’s a book by Victor Hwang called “Rainforest.” Rainforest is where you have startups popping up all over the place, serial entrepreneurs switching jobs, and every available space is filled in the startup ecosystem. Jack and I worked on starting the Buffalo Angels; that was about 10 years ago. At that time, Buffalo was a desert for entrepreneurs and startups. About five years later, Marnie and I worked on starting Launch New York. At that point, I called it semi-arid. Now I would call it temperate, meaning there are things growing. It’s not green shoots; it’s actually growth occurring within our ecosystem. So using that kind of national standard, we’re a ways away from Rainforest, but we’re well on our way to a positive and growing ecosystem.
MARNIE LaVIGNE, CEO, Launch
New York
I’ll pick up on David’s mention of Rainforest. Ours is the only organization serving the 27 western counties in New York state with pro bono mentoring combined with access to that all-important capital everybody has been talking about. It is extremely timely that we’re talking here today because we actually just completed and released a Rainforest study of the 27 counties. So what were the key findings? In a nutshell, if you look at the Rainforest, it basically will qualify your region in one of three categories or on this continuum, if you will, from seed, cultivate and nurture. And the reality isthat we have made tremendous progress. The progress, though, still pins us between the seed and the cultivate stages. Not surprisingly, there still is a lack of capital for the various stages of growth. The other piece is that we lack serial entrepreneurs. The whole idea of an ecosystem and the Rainforest is that it should become naturally occurring. So I’m very pleased that we’re starting to see the private sector step up – both from the corporate side, the investor side – looking for returns, but also from the philanthropic side.
SCOTT FRIEDMAN, chairman/CEO, Lippes Mathias Wexler Friedman LLP
Twenty-some years ago I found myself getting involved in early-stage entrepreneurship with a neurosurgeon because his work was on the cutting edge of innovating new medical devices. What’s interesting about that is that a lot of the medical-device startups came from places like California or Boston or Minnesota, not an awful lot here in Western New York and Buffalo. Fast-forward to today and the world has changed. It’s just an exciting time and place to be in Western New York. The innovations that are happening at the university, at Roswell Park medical campus – I’ve never seen anything like it and I think it’s a great time to be here in Western New York.
RACHEL JACKSON, CEO, Rachel’s Remedy
In my previous life as a lawyer, I did mainly corporate law. And most of my clients were from out of town, so we had small clients from the Buffalo area. There was virtually no startup life that we saw or even tried to tap into. So we always focused on out-of-town corporations and new companies. And now the landscape is just so completely different. I’m trying to convince my brother, who was my law partner, to move back here because there is so much opportunity. From my point of view as a new company, it’s the perfect place to have a startup, minus the investment part, but we’ll talk about that.
WAYNE BACON, CEO, Garwood Medical Devices
I found myself happily retired in 2007 when I sold my company to Praxair. A few years ago, a young guy approached me and asked me to help back him with some of his concepts, which is what I’ve done. And what I have found after relaunching my career three years ago is that the community is very receptive. Frankly, think the stock market and the bond market have helped people with reaching into their pockets because there really aren’t a lot of good places right now for a good return. I found the community very receptive when we went out to raise money. We did a Series A starting in early May. At the end of September it was oversubscribed. The last guy was upset because he couldn’t put money in.
Is the deal flow, the kind of opportunities that you’re seeing to invest in startups, any different than in previous years?
KEVIN CHRISTNER, Richmond Capital Partners
There’s really two metrics that I would look at: A is the number of deals and B is the deal size. And I think what’s pretty telling right now is that there are a lot of deal sizes that are up. Obviously Wayne has been very successful raising money. ACV raised $5 million. There are a couple other companies out there that are in the process of very significant raises in that ballpark that are going to get done. The question will be: In the next two years, how many of those larger deals are going to get done? You’re not going to grow to a $200 (million)-$300 million company without five times $15 million coming in.
JACK McGOWAN, Western New York Venture Association
I think deal flow is up; it’s not exploding but it is up. I think there is a bit of a bifurcation in that you do have some larger deals that got done, and I think the real differentiator there is they’re led by somebody with solid business experience that enables them to do a bigger deal. Those are tougher deals to do so they’re kind of earlier in the pipeline. There was a big increase in that a couple years ago as we got the formation of Z80 Labs and things like Startup Grind. As Kevin said, the thing that’s pretty exciting is that some bigger deals got done. And the enabler there is they’ve got a strong team or CEO who has the confidence of potential investors and the ability to raise that money.
DAVID COLLIGAN, Colligan Law LLP
To give you some perspective on it, going back, say, 10 years, all you ever saw was an occasional seed investment. Seed investments have a lot of definitions, but generally they’d cap out around a million dollars and a lot of times it’s about half that. Now Round A investments are quite common in Buffalo. I can name a half-dozen quickly, and I hear new ones all the time. I can never remember a year where a half-dozen Round A investments were made in Buffalo’s startup community. And I’ll bet my number is low by half.
MARNIE LaVIGNE, Launch New York
I think we can pick up on the ecosystem growth discussion. We just had to say that there is absolutely an acceleration of very early deals. Look at some of the new programs. Startup Weekend has become an engine of new ideas and new startups, the Blackstone LaunchPad. So to the point made earlier, as well, the talent around those deals is something that we really have to work with. Are they investment ready? That’s a phrase we’ve started to use a lot. And certainly Launch New York is all about how do we actually make those deals investment ready, particularly for our community who is still risk-averse. So many times we’re lacking that seed capital to do a proven concept because, appropriately though, many investors really want to have a little bit more traction. There’s a desire to see some actual revenues. I was just talking to a venture capitalist in the region the other day and discussing a particular deal, and the person said to me, “Yes, we’re interested, but understand there are many more deals that we can look at these days.”
WAYNE BACON, Garwood Medical Devices
I just think the whole community has kind of circled the wagons and is protecting and encouraging the entrepreneurial community. And it helps raise money when you have these assets backing you up; it adds credibility.
Is there a particular kind of startup that does well here, especially in the early stages?
ADRIAN DAYTON, ClearView Social
I think the point that Marnie is making – she hit the nail on the head when she said if companies can’t show revenues, to the investment market here, they’re not willing to invest in anything for revenues two to three years down the road. With medical devices, there’s experience, there’s a track record of those being done, but do we really have any BDC product that’s been created here? We don’t have an Uber in Buffalo; we don’t have a product like that that’s been created that I know of that’s been highly successful. So again, there’s work to be done there still.
RACHEL JACKSON, Rachel’s Remedy
We have a medical device and we have FDA clearance and we have revenues. And what I’m hearing, we’re doing a C round right now. So what I’m hearing from a lot of the investors is that OK, yes, this is great. We have amazing community support, we have amazing support from Launch New York, from Marnie, from Z80, from Jack – from all these great organizations. But what I’m hearing over and over again is OK, but you’re not really at the venture stage yet.
Wayne, how different is it growing a biomedical startup from running your own manufacturing company in Buffalo?
WAYNE BACON, Garwood Medical Devices
I would echo a lot of Rachel’s comments but I have to tell you, I think it is the most creative thing I’ve ever done. You take something from zero to a functioning business. And then, of course, we have yet to launch our first product, we have yet to get our first FDA clearance. I think it’s been rewarding.
KEVIN CHRISTNER, Richmond Capital Partners
Just to answer your question about why more biomedical deals get done: Follow the wealth. The wealth is in the hands of physicians. People tend to invest in things that they understand, so people are willing to take a risk on a biomedical device that they understand, perhaps not some hotshot Internet company for people who basically use email and that’s the extent of the technological stuff that they’re using.
MARNIE LaVIGNE, Launch New York
I would say Launch New York, though, is seeing very diverse fields. Probably 30 percent of our companies are in the IT arena – it could be in the medical space, it could be in the manufacturing space. But given that we’re over several metro areas in Upstate New York, we do see that there is more biomedical activity in startups in the Western New York area.
Scott, your investments definitely skew toward engineering – biomedical companies.
SCOTT FRIEDMAN, Lippes Mathias Wexler Friedman LLP
I see so many different opportunities. As Marnie points out, some very interesting companies that are not revenue positive and some, frankly, that are maybe even a long way from positive. But we’re in conversations currently about going public, notwithstanding that. There are so many interesting companies right now, including in the technology space. So I feel like the ecosystem has developed where we can get smart people who understand trends and opportunities and support those people with manufacturers, money, leadership.
So what does this all look like 10 years from now?
DAVID COLLIGAN, Colligan Law LLP
I would say that it’s going to get a lot younger, that this table will be populated with people younger than the group that’s here right now. And the reason is there are entrepreneurship programs in high school in Western New York now, in college in Western New York now and in professional school in Western New York now that didn’t exist 20 years ago or 10 years ago. So we’re going to graduate those kids. They’re going to be looking for careers in entrepreneurship as opposed to careers in business and finance and things that we were taught to go after when we were in school.
Do you think the region can support the next stages of this growth?
MARNIE LaVIGNE, Launch New York
I would say that we would have much more of a robust pipeline, both in the capital and the talent. Not a week goes by that I don’t meet with someone who’s coming from a typical larger corporation-type background.What does that mean, to get involved? That’s exactly the kind of talent pipeline that we need to have ready, but one of the factors of a healthy rainforest is to have a culture that supports entrepreneurship. And I think that in 10 years we need to see a culture that really embraces taking a risk, that embraces the lessons learned from failed startups that then pivot and turn into a success story. And that that will help attract those individuals who traditionally are coming out of the educational system thinking they want to go work for a large corporation but suddenly now can actually have real paying opportunities in the startup arena.
RACHEL JACKSON, Rachel’s Remedy
I think we’re also going to see more incubators, more shared workspace that will go along with the younger environment we’re going to have. More women, because of all the focus on STEM in schools, we need more women in this room. And I just see companies like Johnson & Johnson or larger companies having an incubator here now like they do in Boston and like they do in really big cities because there is so much entrepreneurship.
JACK McGOWAN, Western New York Venture Association
I think a big factor is going to be if we have some successes. If we have some big wins, it creates a lot of rich people in the community who made their money in these new industries and they’re going to go on to the next thing in their position to invest. Building institutions and incubators and things are good and important, but let’s get back to the private sector. Successful companies that then beget other startups and other successful companies is the key. If we can get a few big hits, we’ll be in a lot better shape.
ADRIAN DAYTON, ClearView Social
That’s a great point. We can be a powerhouse in a few sectors where we get a few big wins. And this can be seen as a great option for certain types of startups to come and thrive because we have a very well-educated populous here; we have great institutions. We don’t want to be the next Silicon Valley; that’s just not in the cards for us geographically. But we still can create some amazing success here if we make Buffalo appear to be an amazing city.
SCOTT FRIEDMAN, Lippes Mathias Wexler Friedman LLP
I think that No. 1, 10 years from now Buffalo will become more of a destination for entrepreneur-ship and will attract businesses here instead of exporting opportunities to other places. And No. 2, I think Rachel and people like Rachel will 10 years from now go into a local coffee shop and explain what they’re doing and will walk out of that coffee shop 20 minutes later with investments – and committed investments. I think people are going to continue to learn about great opportunities, great people, and there will be money here through those successes. And much like Silicon Valley, I think deals will get done faster and easier.
WAYNE BACON, Garwood Medical Devices
The average age will drop. But slightly contrary to that is, I think – and I’m an example of this – is where there is probably a very significant untapped resource in the community. There may be some person who thought they were retired and he or she may grasp what you’re doing and understand it and want to help you drive it.
Adrian recently told me he texted Ashok (Subramanian) with a question about compensation and Ashok called him just minutes later. And he’s become obviously a very active mentor.
ADRIAN DAYTON, ClearView Social
When you have someone like Ashok, who sold a company for $200 million, I sent him an email and said, “Hey, could I talk to you about compensation?” And I was hoping in the next two weeks he would carve out two minutes to talk to me, and he called me right away. It’s awesome to have those kinds of mentors. George Chamoun from Synacor, Eric Reich from Campus Labs – I mean, these are massively successful entrepreneurs who have had huge exits who are willing to help even very young starting companies. And that’s awesome. To have that type of a resource as a mentor is a pretty great thing here in Buffalo. So hopefully we’ll see more of that.
Most famously successful entrepreneurial ecosystems have a very dedicated higher-educational partner. Is UB the kind of partner that this community needs?
SCOTT FRIEDMAN, Lippes Mathias Wexler Friedman LLP
I’m going to jump in on that, having earlier this year been appointed by the governor to the UB Council. I think everyone is increasingly focused on collaborating inside the university and outside the university to create a resource for Western New York. I think their role is going to only continue to accelerate in the weeks and months and years to come.
WAYNE BACON, Garwood Medical Devices
We have an incredibly close relationship with UB. We have exclusive licenses on three UB patents. One of the things that I think encourages professors to participate beyond the science is that if a patent is licensed that they help write, they get 40 percent of whatever revenue the university gets. That can be a very significant stream of royalties. I can’t say enough about our relationship that we’ve gotten from the state and UB.
MARNIE LaVIGNE, Launch New York
In terms of investment, it is a trend now that universities are becoming limited partners in venture funds. For example, Syracuse University put $5 million into a venture fund. University of Rochester, the alums for the MBA program and management school, raised venture funds so the students could get experience running a fund. This is something that we really haven’t done here in Western New York.
RACHEL JACKSON, Rachel’s Remedy
We’ve been talking with the university about a clinical trial at Children’s Hospital. So we’re hopefully going to be moving forward with that and work really closely with them. And it will be for us a lot more credible if it’s university-backed instead of us backing the trial.
DAVID COLLIGAN, Colligan Law LLP
I think UB has evolved from where they were. There was clearly a problem in Buffalo once upon a time and there was very little interaction, and I think that all changed when they opened up a campus on the medical campus. That was the sign that they were going to re-insert themselves into the community, as opposed to living in an ivory tower. And I think it’s been all good since then and it’s evolving rapidly.
KEVIN CHRISTNER, Richmond Capital Partners
There’s a lot of people looking at their stock portfolios and saying, “How long can this really go on?” We need the foundations to look at those portfolios to say, “Are we even going to get the 5 percent returns that we need just to meet our minimum giving thresholds over the next 10 years?” If you go into a local venture fund, the odds are that you’ll probably get a higher return than 5 percent. And not only that, it’s meeting part of your mission to help grow the economy.
WAYNE BACON, Garwood Medical Devices
I’m treasurer of the Kaleida Foundation board, and we recently gave a very smart doctor a $700,000 grant that helped him get a $7 million grant. We’re on kind of a discovery adventure with the Kaleida Foundation. It’s my drive to have the foundation set up a plan whereby when we give grants, we should expect something in return.
DAVID COLLIGAN, Colligan Law LLP
To that end, Wayne, there is a program in Buffalo through the Community Foundation called “impact investing” and they’re trying to bring together a lot of foundations to make a contribution, exactly what Kevin is talking about. Not in the 5 percent they give away but the 95 percent that they invest, and taking a portion of that 95 percent and putting it into a venture capital fund. The conclusion that we drew at the time was that we were moving faster than they were moving. But I know somebody on the committee who I talked to last week and he said it’s going to be rolled out in the next couple months. So exactly what Kevin is saying should happen is going to happen.
Dave is a trustee for the Ralph Wilson Foundation. Can you clue us in on conversations that have been had on that? Is entrepreneurship part of that?
DAVID COLLIGAN, Colligan Law LLP
The Wilson Foundation stepped up in both Detroit and Buffalo and supported entrepreneurship. Launch New York got $2.5 million. I think there’s a lot of support for entrepreneurship on the board of the Wilson Foundation. We’ll be looking at short-term investments, not long-term investments like impact investing.
JACK McGOWAN, Western New York Venture Association
UB has expanded what they do a lot. They’ve really expanded how they work with the SUNY population in terms of educating them on entrepreneurship. UB is obviously the single-largest entity that’s developing intellectual property. That’s the basis for some exciting companies. I would think focusing our resources there to get these technologies developed and the companies that are then attracted to outside funding would be appropriate. But asking UB to act like a venture fund and invest in other entities to me doesn’t seem to be the best use of their funds.
ADRIAN DAYTON, ClearView Social
When we started ClearView Social, we didn’t have real revenues yet. So the only place we could get money was from the SCP fund, the venture fund that came through Z80, basically. We had to put up kind of friends and family money and they matched those funds. So it was great that they gave us money, but it didn’t come with any advice or mentorship; there was no help for us in growing our business. So I think that 43North is facing kind of a similar challenge. They have all this money to give out, but they don’t really have a good plan for mentoring and shepherding through the people receiving that money. I think that’s why money that comes from the private sector is going to come with much better mentorship, because it’s going to be built in because people who are actually opening their wallets want to make sure that the best things happen with those dollars.
KEVIN CHRISTNER, Richmond Capital Partners
You’ll be happy to know that I think 43North has identified that as an issue.
MARNIE LaVIGNE, Launch New York
Launch New York is built exactly around that. So in addition to having nearly 20 entrepreneurs in residence from very diverse backgrounds across our whole service territory who provide mentoring to all of our clients, at any time there are over 100 active companies working with us. But we did receive federal funding to allow us to tap into a venture network of 2,000 people through the Innovation Center of the Rockies. A lot of serial entrepreneurs unfortunately leave Western New York to go to warmer climates; they retire and leave. But I think what we need to see in 10 years is people staying and we need to have that mentorship available at your fingertips.
ADRIAN DAYTON, ClearView Social
Talking about mentorship – when I joined Z80, they said, “Oh, yeah, you can talk to Jordan Levy. You can talk to Ron Schreiber whenever you want.” Having someone’s ear to ask a question when you need them is nice, but it’s not the same thing as a formal mentorship where someone can actually help you look at your financials, help you build on a strategy, help you figure out what are the steps that you need to get through in the next 12 months. It’s great to hear that’s being addressed, because we kind of just had to figure it out for ourselves when we started.
RACHEL JACKSON, Rachel’s Remedy
Luckily I got involved with Marnie and Launch really early. Now we are working with someone from Launch who is helping us. Before that, it was more operations-based help that we were getting. There are probably things we would not have done or would have done differently had someone who was a real mentor been there and said, “You know what? This isn’t the best use of your money right now.”
ADRIAN DAYTON, ClearView Social
One of the organizations that I got involved with, that’s not really connected to any of the startup groups, is the EO group, the Entrepreneurs’ Organization. EO is a global program and your company has to have at least $200,000 in revenue. It’s a group that just grows companies to their first million dollars in revenue. Every quarter you have a full learning day where you tackle driving growth in the company, people, process, strategy and cash. There is a whole program that helps you make sure you’re not missing any fundamentals. And it’s not expensive. It’s like $800 for a year.
JACK McGOWAN, Western New York Venture Association
I’ve said a few times at events where I’d love to see the Buffalo Club crowd get together with the Startup Grind crowd, and add to that the UB Center of Excellence crowd and have them working together. The programs are great and entrepreneurs in residence are great and mentors are great, but their time is limited and they have multiple people they’re working with.
Do you think there is a certain subconscious parochialism happening now?
JACK McGOWAN, Western New York Venture Association
I think one of the beauties of 43North is that we’re filling Shea’s (Perforning Arts Center), people in the community are excited about learning about these startups and entrepreneurship. And the same thing with trying to recruit members for angel investors: It’s a matter of being able to bring them in and have them feel comfortable and get interested. And it’s going to take time, but the more we can facilitate those interactions and collaborations, the better it’s going to be.
MARNIE LaVIGNE, Launch New York
The corporate participation is crucial. And frankly, it has been missing. So in fact, we’re in the midst of the critical path program, the lifetime accelerator approach. And it’s been so powerful to pull in the corporate participation, people who are doing business development, they may be head of R&D. And that requires in many cases a virtual interaction. So that kind of engagement early on is vital and we really have not been taking advantage of it. So virtual interaction is something that we have to start to get used to. Fostering those connections and then keeping them going and building and nurturing relationships, just like the Rainforest says, is a heavy lift but it’s one that we have to take on.
KEVIN CHRISTNER, Richmond Capital Partners
The general business community culture has significantly improved in the last five years where people are no longer in these silos and they don’t want to talk to each other and they want to do their own little thing. There’s definitely way more interaction, assistance, people just having a discussion.
I’m interested in a pro and con characterization of 43North as it’s started to really play itself out.
DAVID COLLIGAN, Colligan Law LLP
It absolutely has changed people’s perception of Buffalo mostly from the inside, but from the outside there’s a change. One of our clients was a 43North winner, and I can tell you that they got not quite a round A but it was a big seed round, like one and a half million dollars. And one of the investors in that was Mark Cuban. I point that out because there’s no way that Mark Cuban would have ever invested in Buffalo three years ago. So 43North is a dividing line between national recognition and local recognition.
ADRIAN DAYTON, ClearView Social
I think that there’s some massive benefits of it and maybe the biggest benefits are going to be the PR. I’m thrilled that we have this money to do this, but because it’s not coming from the private sector, it’s not really being judged in the same way. I think it’s a great thing for our community from a PR standpoint, but I think if you look at it as just a pure investment, it’s going to be hard to judge it in that standard.
KEVIN CHRISTNER, Richmond Capital Partners
I was very skeptical of 43North at first, and after the first year I thought I was really right about it. After the second year, I said, “OK, this might be going in the right direction.” And after this year, you see the quality of companies is significantly up; the quality of applications is significantly up. So you can call me a believer now. I think there is a lot of money that’s been spent on other initiatives that’s been incredibly poorly spent, and if we would have spent more of that money on 43North, I think we’re going to have a much better dollar-for-dollar result.
RACHEL JACKSON, Rachel’s Remedy
I see more benefits than just the PR and the great buzz. And I love the bringing the companies to Buffalo; I hope they stay. I wish the requirement was that they had to stay longer. But I also am seeing relationships building with UB, with the medical school, with some of these companies that will hopefully be really lasting and successful relationships. And that makes such a huge impact on every level of entrepreneurship and our economy and our health care. I was a semifinalist two years in a row. I just see that there are a lot of benefits that spread further than just the PR and the buzz.
WAYNE BACON, Garwood Medical Devices
It really is an equity play. So the state gets 5 percent of each of these winners. I’ve had conversations with 43North and I think they need to re-examine how they calculate what they get, because it really needs a rational application of math and finance. There’s not enough benefit beyond the money.
KEVIN CHRISTNER, Richmond Capital Partners
I tried to explain that to them, like, 15 times, and I think they finally understand what the issue is.
MARNIE LaVIGNE, Launch New York
I think the momentum we’ve built and the visibility we have, we’ve got to grow that. We still have a long way to go. So one initiative, one silver bullet, is never the answer to anything we’re trying to do in this community. So I’m hopeful that everybody around this table is looking at where do we go after the five-year commitment for the Buffalo Billion is over.
I’m wondering if the Buffalo community is literate enough about equity investment ?
KEVIN CHRISTNER, Richmond Capital Partners
I think the entrepreneurs understand it very well because they typically have an intelligent attorney, an intelligent accountant who has some experience with this. People who don’t understand it are the employees. I saw a company attempt to hire an engineer from Fisher-Price making $110,000, $120,000 a year. At the startup they were going to pay him $90,000 and give him a nice piece of equity. The guy did the math and said, “OK, yeah, that makes a lot of sense to me.” And he went home and talked to his wife and came back the next day and said, “I can’t accept the job.” He’s the very rare exception who understood it. Ninety-five percent of the people don’t want to talk about equity, they want to talk about how much cash they can get. Ninety-five percent of the people in Silicon Valley say, “Why don’t you just pay me a dollar a year and give me more equity?”
ADRIAN DAYTON, ClearView Social
When I was launching ClearView Social, I had some money to hire someone to build the software. I was saying, “I will give you $100,000 a year.” And I would have given him 10 percent, maybe I would have even given him 20 percent of the company, if I could have found someone. And multiple times they said to me, “You know, people in Buffalo, we would rather have more security than more money or more equity.” They don’t see this expected value of being part of a startup as being very large. There aren’t a lot of people who their friend just bought a giant boat with what they made from their startup. We need those stories so that people see that you can really generate a fortune if you build a great company and you can be part of that.
MARNIE LaVIGNE, Launch New York
I do think, and maybe it’s just an example, that we do have people who have really never taken on equity capital and we have investors who have not gone into these kinds of deals before. Maybe they were part of another group. One of our key findings and recommendations from the Rainforest Canvas is that we absolutely have to be training and educating both entrepreneurs and investors.
RACHEL JACKSON, Rachel’s Remedy
I know so many entrepreneurs and investors who have no idea what the notes are, what the equity is. I have had investors who have invested and have just said, “No, I have to have equity.” And I will say, “It’s a better deal for you. You’re going to get a discount, you’re going to get interest, you’re going to get terms that the big investors are going to get if you do the note.” “No, I don’t really get it; I don’t want to do it.” And they’re sophisticated members of our community.
WAYNE BACON, Garwood Medical Devices
I think risk is a big deal. It’s a big deal for the investors and it’s a bigger deal for the potential employee who hasn’t made an exit before and they need to educate the kids and they need to put food on the table. And that’s a very difficult thing to get around. We were unsuccessful in courting an employee from out of state who actually we continue to hire as a consultant. Brilliant guy, but his wife wouldn’t move; there was just no way around that. And going back to the investor side, it’s very sobering to take money from investors, particularly when you know them or they’re in the community.
KEVIN CHRISTNER, Richmond Capital Partners
You need those people who are willing to live in a shoebox and eat ramen noodles and just have enough money to pay their student loans, because those are going to be the motivated people who are in the office 14 hours a day making your company successful. Because if it doesn’t work, they’re still going to be living in the shoebox and eating ramen noodles.
DAVID COLLIGAN, Colligan Law LLP
If (I) could do one thing to boost entrepreneurial efforts here, I would clone 100 serial entrepreneurs. That’s what everybody is talking about is we need more serial entrepreneurs.