As most in the entrepreneurial ecosystem know, Launch NY is a nonprofit venture development organization which identifies, supports, and invests in companies with potential for high-growth and high-impact in our region, specifically the 27 westernmost counties in Upstate New York. Its further mission is to catalyze the entrepreneurial culture to drive job and wealth creation. (It is also a major supporter of UpstartNY.org.)
Launch NY’s main channel for initial investments in regional companies is its nonprofit seed fund, which is built on donations and grants. According to Alex Killian, Launch NY’s investment associate, the seed fund has already invested $1.8 million in 38 companies. That makes it the most active seed-stage fund in New York state since its inception in 2016.
But, Killian adds, Launch NY had requests “for over 30 times that amount.” While some local startups have had success with follow-on and co-investors bringing more money in, there are still many unmet needs in terms of capital funds.
To answer that need, in February, 2019, Launch NY announced the founding of its Investor Network and since then has been methodically on-boarding accredited investors through its online platform—it’s now up to over 130, and hopes to get to a thousand within the next three to five years.
One of the models for the Investor Network was OurCrowd, a hugely successful equity crowdfunding platform for investing in global startups that was started as an “affinity play,” giving more people with like interests access to investment opportunities.
In conjunction with Launch NY, the Investor Network will work to mitigate several challenges that their client and portfolio companies consistently experience, including, of course, access to capital.
One of the challenges is the lack of experienced investors, those with the savvy to lead deals. “After their initial money in, startups need follow-on money—later seed round or series A funding. They’re having trouble finding it here ‘in-region.’ Of the 38 companies Launch NY has funded, none have left … but we’re seeing some companies that are not in our portfolio dying on the vine or leaving to try and raise capital in bigger cities,” said Killian.
Granted, some of the entrepreneurs are inexperienced as well, and this is where the Investor Network will deepen the roots of Launch NY’s successful formula. “In addition to lacking risk capital, some entrepreneurs engaging in WNY might also be lacking key roles like co-founders, mentors, and employees,” said Killian. “In addition to fundraising, Launch NY offers mentorship, assigns them to our entrepreneurs-in-residence, who provide probono mentoring to startups to help them work through things like their business model and customer discovery.”
To accomplish the dual goals of increasing opportunities for people to invest locally and enhancing entrepreneurs’ access to capital and expertise, Launch NY realized that it needed to further bolster the startups here and line up some more likely investors.
“The best way to think about the Investor Network is as an ‘open angel group,’” explained Killian. “We know who our ‘usual suspects’ are in terms of investors in the region. There’s a great community.”
“We also noticed other investors—both locals and expats—participating in some startups, but not taking part in local events. They may have been invited one time by a friend, which is how people usually get into an investment. When we saw that happening, we realized that people want to get involved. And we can be the ones to lead the deals and provide access for the investors,” he said.
The way it works is simple: Starting at the digital platform’s current landing page, potential investors fill out a short form. After providing their contact information, they self-check that they are an accredited investor, and identify their specific areas of investment interest (e.g., healthcare IT companies in Rochester, advanced manufacturing startups in Buffalo). This won’t preclude them from searching to see all available opportunities, once the network is fully operational.
“This will also provide a way for angels to ‘meet’ and discuss investments and deals digitally,” said Killian. “They’ll be able to get off the sidelines, provide capital and other resources, like talent, since as we’ve noted, there’s not enough in the region yet.”
One way that Launch NY will promote the Investor Network is through its partnership with Buffalo Homecoming, an annual program for expats. During the three-day event, invitation-only participants “reconnect with their hometown and experience its renaissance,” meeting with local movers and shakers, including entrepreneurs, and attending events like seminars and tours.
With the rise of awareness of entrepreneurial endeavors in the region, the potential for the Investor Network expands beyond its stated intention, said Killian. “Eventually, it could be a marketplace for other things as well,” he said. “While startups are our focus now, we might start including, say, real estate deals. We will have this ready group of accredited investors who are interested in this area.”
“One of the things that is so exciting about startups, entrepreneurs, and entrepreneurial businesses is that they’re great job creators,” attested Killian. “The Network will help keep them, and all those potential jobs, here.”