Local venture investors know the Buffalo entrepreneurship ecosystem is blossoming. In the high-growth area, venture capital firms and private investors are watching the rise of dozens of tech-, education- and medical-based companies begin to take flight.
But in the still-early stages of Western New York’s renaissance, investors and community business experts say that while it’s evident certain sectors are growing more quickly locally, largely facilitated by local universities and state funding through the Buffalo Billions project, better data are needed to assess trends and quantify by exactly how much Buffalo’s entrepreneurial ecosystem is growing.
“Western New York is not at the point of using best practices,” Launch NY president and CEO Marnie LaVigne says. “Our region still really needs to make sure we’re doing a good, accurate, consistent job measuring impact and using data to decide how to go forward. We need that evaluation consistently.”
Launch NY is a Buffalo-based venture development organization that provides support and investment in high-growth or high-impact companies. LaVigne says that venture capital firms can provide data independently, and portfolio companies report numbers in hiring growth and value, but so far, investors are reliant on those independently reported numbers to assess the local business ecosystem.
There are several agencies that provide some data and conduct surveys, in addition to providing support for Western and Central New York startups. One firm, Upstate Venture Capital, connects startups with investors and resources, with a focus on Central, Western, and Upstate New York, and the Southern Tier, and provides mentorship and visibility campaign assistance. In 2016, they worked with Rochester firm CGR to conduct a survey of Upstate New York CEOs in order to understand the economic footprint of high-growth businesses across the region.
In 2016, they found that:
• The 115 companies who responded span nearly 50 industries; more than half are less than six years old; 90 percent have national/global market aspirations. Based on CGR’s experience, these survey respondents likely represent 5-10 percent of all high-growth companies across Upstate N.Y.
• Three out of four respondents indicated that 80 percent of their employees hold college degrees.
• 70 percent of the total employee base (3,300 full-time employees) are based in New York state.
• 40 percent of companies reported average annual pay per worker was more than $75,000; 75 percent said it was over $40,000
• Respondents forecast about 85 jobs will be created per company within the next five years, which would equal nearly 9,600 jobs created collectively.
The survey concludes that an investment in capital is still needed – about $155,000 per job and $1.2 billion overall, and that high-growth entrepreneurship is found across New York state and doesn’t necessarily conform to narrow sectors – the most successful companies leverage different technologies across multiple sectors.
Access to college-educated talent is another need expressed in the UVC survey.
“Upstate has more than 100 colleges and universities educating half a million students from all over the world. Most graduates leave the region for larger metro areas because they are unaware of opportunities right down the road. Finding a way to make these firms visible to college students is necessary for building a stronger economy,” says UVC CEO Nasir Ali. “We are thrilled with the survey results showing the vibrancy of Upstate’s entrepreneurial community and eager to see how the findings will shape the ecosystem in the years to come.”
Upstate Venture Capital works with Pitchbook, a Seattle, Wash.-based company that delivers data, research, and technology covering the private capital markets, including venture capital and private equity to gather and share its data. UVC will release the findings of its 2017 survey next month.
Still, local investors and venture development organizations are relying on feel, or word-of-mouth, to quantify development of high-growth startups in different sectors. LaVigne says LaunchNY sees it in the interest from private investors, who want to jump on board with different projects earlier and with more money to invest.
“I would say that interest in investing is high,” Lavigne says, adding that data on smaller deals or individual investor deals is difficult to find because it’s not available publically – at least not right away. “Knowledge of many new businesses is growing. But I think the biggest opportunity for Buffalo is to bring along a local investor base while pulling in expats who know the industries. We really feel like Buffalo has gotten a lot of visibility. A lot of people want to invest but are not sure. It feels like we’ve gotten a lot more participation.”
LaVigne adds that in less than a decade, Buffalo went from having about a dozen active angel investors to more than 60 today.
Dottie Gallagher-Cohen, CEO of the Buffalo Niagara Partnership, says that, even without firm numbers, she can see the growth in Buffalo’s entrepreneurial ecosystem. But the Partnership doesn’t have enough data to compare it to other cities of Buffalo’s size.
“We don’t have that comparative lens,” Gallagher-Cohen says. “There’s no way to judge that. But compared to where we were, even five short years ago, there’s a world of difference.”
Gallagher-Cohen adds that the University at Buffalo’s medical campus and incubator space, 43North, and venture capital firms like Z80 Labs have brought the area’s entrepreneurial culture out of the shadows. “People are taking chances now that they wouldn’t have five years ago,” she says. “We hope there’s more of it.”
Leading sectors in job growth and hiring, Gallagher-Cohen said, are arts and entertainment, tourism, real estate, and finance.
“One thing that excites me, entrepreneurship is the new economy,” LaVigne says. “It’s available to everybody. High-growth is not about making money, it’s about impacting lives. At the end of the day, what will change the world and create jobs is entrepreneurship.”