Dan Magnuszewski is a software engineer who knows open-source programming. He's also an amateur auto mechanic who knows how to make a Porsche go.
Zelalem Gemmeda is a restaurateur who knows how to make the flatbread injera. She's also an Ethiopian refugee who knows how to survive.
Both made their dreams come true in Buffalo.
In the nurturing embrace of entrepreneur-friendly and economically resurgent Western New York, Magnuszewski and Gemmeda launched successful startups.
Gemmeda, who arrived in Buffalo in 2005, opened a restaurant, Abyssinia Ethiopian Cuisine, in the West Side Bazaar in 2013—a venture that earned her the entrepreneur of the year award from the Westminster Economic Development Initiative in 2015.
Magnuszewski, an Erie County native and University at Buffalo graduate who is entrepreneur in residence at Launch NY, co-founded CoworkBuffalo in 2012. CoworkBuffalo, Magnuszewki’s first entrepreneurial venture, offers leasable desk space, a shared work environment, and “delicious snacks (and) reliable & fast wifi” to professionals in lone-wolf jobs who prefer the group energy of an office setting to the isolation of working at home. More recently, Magnuszewski co-founded ACV Auctions, a mobile auction platform for the wholesale auto industry for which he currently serves as chief technology officer.
The success stories of Manuszewski and Gemmeda may be vastly different, but they work in concert to tell a compelling tale: Buffalo’s reputation as a place where entrepreneurs from Erie County to Ethiopia can make their ideas work is on the rise.
A recent urban resurgence
Buffalo has become a destination for innovative minds because of the city’s affordability, accessibility, education, green space, vibrant neighborhoods such as Larkinville, relatively inexpensive real estate, and entrepreneurial support systems such Launch NY and 43North —nonprofit organizations that provide startups with guidance, funding, and connections to expert resources.
“We're also seeing support for startups and entrepreneurship coming from government and universities like we have never seen before,” Magnuszewki says. “In addition to that, the low cost of living makes it easier to bootstrap or keep a startup's burn rate low, while maintaining a decent quality of life.”
Western New York’s resurgence as a haven for entrepreneurs hasn’t always been a foregone conclusion. A 2011 “Upstate New York Regional Analysis” by Cleveland State University noted that Buffalo had “significant challenges to overcome” to be a leader in innovation and entrepreneurship.
Although Upstate New York was, until the year 2000, doing well by many economic measures, it lost its footing during the recession, the study showed. A "distinct lack of venture capital” in the region, which then could claim only 11 early-stage professional capital investment firms, four private equity firms and three revolving loan funds and micro-enterprise companies, meant slow growth.
Using patent data as an indicator of innovation, the Cleveland State study found there were only 12,000 patents granted or applied for between 2006 and 2010 in Upstate New York. And only 15 percent of these had an assignee from Upstate New York, indicating that businesses within the region were not among the major drivers of local patents.
Since then, however, Governor Andrew Cuomo’s Buffalo Billion project and a confluence of other factors—some relatively new, others as old as Buffalo itself—have conspired to turn things around in Western New York.
Entrepreneurs and other observers say Buffalo offers competitive tax rates, an education and support system that includes SUNY-Buffalo’s Center for Entrepreneurial Leadership, and the energy of a resurgent urban area.
"In the past five years, Buffalo has seen a surge of interest in entrepreneurship with frequent pitch contests and weekly programs and workshops,” says Marnie LaVigne, president and CEO of Launch NY, a Buffalo-based organization that serves high-growth potential startups in the 27 westernmost counties of New York State.
It's all about place
The reasons for that are pretty simple, according to Jennifer S. Vey, fellow and co-director of the Bass Initiative on Innovation and Placemaking at the Brookings Institution in Washington, D.C.
“Older industrial cities like Buffalo can be attractive to entrepreneurs in part because they are far more affordable than ‘hotter’ market cities like Boston, NYC, or San Francisco. Moreover, these older cities often have assets and amenities – colleges and universities, great neighborhoods, a creative culture – that make them viable places to grow a business and good communities in which to live and work,” she says.
Though Buffalo’s Office of Strategic Planning doesn’t keep statistics broken down to show entrepreneurship’s impact on the local economy, there are indications that the city is benefiting from its growing reputation as a great place for startups. According to Census data, the number of college graduates between the ages of 25 and 34 grew by 34 percent in Buffalo from 2000 to 2012.
There’s also anecdotal evidence that entrepreneurs such as Magnuszewski create a considerable number of jobs in Buffalo. His ACV Auctions has raised a total of $21M in venture capital and now employs over 75 employees.
What’s happening in Western New York's economic development is “driven bottom-up” rather than dictated top-down by Albany, according to Bruce Katz of the Brookings Institution's Metropolitan Policy Program. In a June 2012 address at the University at Buffalo, Katz noted a clear signal that the state is “open for business.”
A Brookings assessment of Western New York’s market position, assets, and investment options showed that the Buffalo economy’s rebound from the Great Recession ranks third overall among the top 100 metros in the country. Buffalo is an innovation hub—thanks in no small part to SUNY-Buffalo, which Brookings calls “a research and development powerhouse.”
Also critical to the Western New York economy is its proximity to Canada. The “Golden Horseshoe” anchored by Buffalo and Toronto is North America’s fastest-growing global metropolis, according to Katz.
And, finally, Katz says, Buffalo “the place” has many critical physical assets for economic growth, including the Central Business District, the Larkin District and the Buffalo-Niagara Medical Campus.
An entrepreneurial ecosystem
In addition to Launch NY and 43North, the area boasts other effective entrepreneurial incubators such as Bright Buffalo Niagara, whose participants have gone on to raise more than $40M in funding.
According to the website https://startup.ny.gov, the region has most notably become a hub for advanced materials processing, energy, and—thanks in large part to metro area attractions including Niagara Falls—tourism.
Consisting of the Buffalo-Niagara metropolitan area, the five-county Western New York region covers 4,974 square miles and has a population of 1.4 million.
Some outsiders looking in see in the Buffalo area a “ ‘wow factor’ that few other cities in the Rust Belt region can offer,” writes Michael C. DeAloia, the “Tech Czar” for the Cleveland Plain-Dealer. “Buffalo,” DeAloia writes, “will be a solid competitor in the global entrepreneurial landscape.”
According to 26-year-old Ace Callwood, who moved his nascent business to the city at the very end of 2015, Buffalo is “a no-brainer.”
Callwood, co-founder and CEO of painless1099.com, a smart-bank account that automates finances for freelancers, launched his startup in Virginia, where he attended college. But soon Callwood moved his nascent company—“five guys, a girlfriend and two puppies,” as he recalls it—to the uncommonly friendly startup climes of Buffalo, 480 miles to the north. The lure? A Western New York-based tech accelerator called 43North, which is said to be the world’s largest startup competition.
But Buffalo offers entrepreneurs something intangible, too, says Callwood.
“I think Buffalonians love Buffalo, which helps,” Callwood said. “It just is like a really prideful and super-engaging kind of community. And that above all is a huge piece of making an entrepreneurial ecosystem go.”