The availability of capital to fund startups is vital to nurturing and developing these companies in the Finger Lakes region. Available capital was a key ingredient in the legendary economic development of Silicon Valley in California and other regions of the U.S. Locate Finger Lakes looks at how the innovative companies being developed here are beginning to attract the capital investment necessary to create long-term, sustainable growth.

Thirteen companies in the Finger Lakes region completed investment deals in the third quarter of 2019, second only to the Hudson Valley region.

That’s according to Upstate Capital Association of New York, which connects investors with Upstate NY-based companies seeking funding.

The organization was created to help entrepreneurs navigate one of the biggest challenges they face: raising capital.

The goal is to develop more high-growth, venture-backed companies in Upstate NY, and to assist established companies with strategic growth and planning.

Among the Finger Lakes-area companies that have recently received private capital investment are Ithaca-based Ursa Space Systems, a geospatial data and analytics provider, and Rochester-based firms CloudCheckr, a cloud management platform provider and Vaccinex, a clinical-stage biotechnology company.

Connecting companies and investors

Noa Simons, Executive Director of Upstate Capital Association of NY

Upstate Capital’s mission is grounded in the belief that businesses are built on relationships.

“Upstate Capital is the nexus for connecting the investment community across Upstate New York,” said Executive Director Noa Simons. “Over the last three years, I have witnessed a significant increase in the amount of early stage capital available to companies, both from investors in the region, and coming from outside, primarily through personal relationships.”

Simons joined Upstate Capital Association of New York in 2016. She frequently travels the state, meeting with businesses, investors and other stakeholders in what she calls “the innovation economy.”

The association’s membership is comprised of 350 individuals representing 135 organizations, including businesses, capital providers, professional advisors such as attorneys and accountants, and support organizations such as government agencies and universities.

Upstate Capital hosts several events throughout the year that bring investors and companies together. Many of them also give entrepreneurs and startups the opportunity to pitch investors.

One of those events, the Future of Food, was recently held at DeFisher Fruit Farms in Williamson, Wayne County. It showcased the investment and innovation occurring in New York’s multibillion-dollar food and agriculture industry, a key sector of the Finger Lakes economy.

“We look to those sectors that are actively receiving private investment and are important industries in New York,” said Simons. “We like to feature both the investors and entrepreneurs who are actively working in those spaces.”

Increasing access to capital Upstate

Upstate Capital received the 2019 MedTech Ecosystem Partner of the Year award for its efforts to advance New York’s biotech and medical technology sectors

Upstate Capital Association of New York, formerly named Upstate Venture Association of New York, was founded in 2003, Simons described, “by a combination of private equity investors who wanted to do deals together, and innovation ecosystem champions who wanted to attract more venture capital to the region.”

Those founders are Dennis DeLeo, co-founder of Rochester-based venture capital firm Trillium Group and president of the Venture Jobs Foundation; Gary Hull, president of Buffalo-based Harborside Capital Resources, a mergers and acquisition advisory firm; David Kocen, managing director of investment firm Bluehenge Capital Partners; and Monty Estes, a Rochester-based attorney who specialized in developing emerging technology companies in New York. Estes passed away in 2018.

Upstate Capital was one of the leaders in bringing together a coalition of partners—including universities, business incubators and private investors—to help the region’s emerging companies gain greater access to capital.

“It was one of the first private efforts at championing interregional collaboration around private investment Upstate,” said Simons.

An investor and entrepreneur at the helm

Simons, 40, is an investor and entrepreneur herself.

Before joining Upstate Capital, she helped launch the Hudson Valley Startup Fund which provides seed funding to high-growth businesses in that region. She also co-founded Community Compost Company, a food waste recycling business. It collects food scraps otherwise destined for landfills, composts them, and then sells the finished compost to farmers, gardeners and landscapers.

Previously, she spent 15 years working in the family office of a Boston-based venture capitalist. One of her major projects was starting a cleantech venture capital fund in China. Cleantech businesses offer products and services that minimize negative effects on the environment. The sector includes growth industries such as solar, wind and biofuel.

More investors are looking Upstate

Upstate Capital tracks deal flow across the region and sees positive trends in private investment.

Simons said more institutional venture capitalists from outside Upstate NY are paying attention to the region, and additional funds are being created.

Earlier this year, Syracuse-based Armory Square Ventures raised a second fund of $31 million for its investment efforts in Ithaca, Syracuse, Rochester and Buffalo.

The increased deal activity can be attributed in part, Simons said, to New York State’s efforts to put more public dollars on the table.

“Empire State Development has made a very concerted effort over the last several years to provide capital and resources to the innovation economy,” said Simons. “I think we’re starting to see some of the fruits of those efforts on the private capital side.”

One of those state-funded programs is Luminate NY, considered to be the world’s largest business accelerator for optics, photonics and imaging startups. Luminate is administered by Rochester-based NextCorps.

The state has also launched GROW-NY, a business competition and development program for high-growth food and agriculture startups. Geneva NY-based RealEats was named the $1 million grand prize winner of the inaugural 2019 competition. RealEats is a food-tech company offering healthy meals made with locally-sourced ingredients from Finger Lakes farms. GROW-NY is administered by Cornell University’s Center for Regional Economic Advancement.

Additionally, the New York State Energy Research and Development Authority (NYSERDA) has created a new Co-Investment Fund to grow the state’s clean energy sector. NYSERDA will provide $1 for every $2 of private capital invested in those companies.

“When public government entities can de-risk some of these early stage technologies, that’s very attractive to private investors,” Simons said.

There is also more competition in the global economy, which is good news for Upstate NY entrepreneurs.

“From a macro perspective, we have a really robust economy with a lot of liquid capital to put to work all across the country and the world,” Simons added. “Investors have to compete harder for deals, which means they have to look further afield and be willing to consider deals they wouldn’t have thought of before.”

Investors are customers

Simons advises early stage entrepreneurs to think of investors as customers when developing their plans and pitches.

“Investors are a different kind of customer, but they are customers,” said Simons. “If they’re a financial investor, the thing they are typically buying is growth. If they’re a strategic investor, maybe it’s a strategically-important piece of technology.”

Researching potential investors is an often overlooked step in the entrepreneurial journey, she added. Publicly-available websites like Crunchbase, for example, provide helpful portfolio information.

“Find out what investors have invested in before, what they’ve written about, what they’re thinking about,” Simons said. “It can save a lot of time and resources to do that research in advance.”

Working across the capital spectrum

Startup companies need seed and early stage capital to commercialize new technologies and grow. But Upstate Capital Association of New York works across all investment stages, including support for established enterprises who may be seeking late stage capital, or pursuing a merger, acquisition or buyout.

Its November 21 event, Selling Equity: How to Sell Part (or All) of Your Business, is for those considering the use of outside capital to fund strategic initiatives, including growth and succession planning.

Upstate Capital is putting Upstate NY on the radar of more private investors, as well as entrepreneurs looking for the right place to launch and grow their companies.

“It’s more economical to build your company Upstate,” Simons said. “Rents are lower, the cost of talent is lower, and we have a rich talent pool shaped by legacy industries and incredible educational institutions. Pairing great economics and great talent at reasonable prices makes it a no-brainer for people who are serious about building companies here.”

Krista Gleason is a contributor to the Locate Finger Lakes Business Journal. She is a freelance writer and owner of Gleason Writes in the beautiful Finger Lakes.