Startup deal flow continued to thrum in Buffalo in 2020, despite the generally brutal year for the economy.
Call it a combination of high-quality entrepreneurs seeking support, investment entities that saw their portfolios recover quickly after the market collapse and tech’s relatively favorable position amid the economic destruction wrought by Covid-19.
Business First counted 23 local startups that raised a total of $205.7 million this year, the third straight year that deal volume surpassed the $200 million mark.
That falls short of last year’s numbers, when 26 companies raised about $258 million. But, of course, a direct comparison between the two years is impossible.
By contrast, Business First counted five deals totaling $3.3 million when this exercise began five years ago. Granted, we’ve become more adept at finding and describing startup investments, but it’s obvious to everyone involved that the startup economy is a much more active place these days.
More good news: Buffalo’s breakout tech unicorn, ACV Auctions, survived the lean early months of the pandemic and is on course to go public in 2021. How much will the company raise on the public markets? Will the people who become wealthy, or wealthier, from its success redeploy the capital into the community in a meaningful way? Will employees use lessons from ACV to start their own companies? These are the kinds of storylines everyone will be watching.
In the meantime, everything that happened in Buffalo this year confirmed the city’s fledgling status as an operational hub for growing tech companies. Fast-growing Belgium startup Odoo announced plans to make Buffalo its eastern U.S. headquarters. Kyklo announced it would move its home base from Bangkok to Buffalo. HiOperator, once based in the Bay Area but now with an expansive workforce here, continues to look for suitable real estate to house the company in downtown Buffalo. Ashok Subramanian, the co-founder of Liazon Corp., brought his surging startup Centivo back to his hometown with an office in Cheektowaga, where it projects fast growth. Nearly half of Squire Technologies’ employees work out of Buffalo – and stakeholders such as 43North and Endeavor WNY are hoping they remain attractive to that company as it prepares to embark on a significant growth binge.
The leaders of these companies say that Buffalo has available talent, a low cost of living, urban culture and amenities, and a tech community with a sense of communal direction. It all dovetails nicely with the talking points by community champions and regional marketing entities, who say Buffalo is poised to take advantage of the skyrocketing costs of real estate and talent in existing North American tech hubs. And there, rising in the middle of the city, is Doug Jemal’s Seneca One Tower transformation, an attempt to squash corporations, startups, housing, retail and restaurant amenities into one tech-oriented cluster.
So tech is still a trend in Buffalo, and one that could not be killed by the stiff winds of Covid-19. But there is also a certain amount of systemic strain. 43North’s future as a state-funded entity remains unclear, and its business competition brought to Buffalo many of its most promising startups. Many private local investors have significant stakes in real estate and hospitality, leading to questions about their continued appetite to throw extra change at early-stage entrepreneurs. Regional and state governments face funding shortfalls that could manifest in unpredictable ways, creating negative ripples. Local philanthropic groups – which have played a major role in supporting entrepreneurial programs in recent years – are overrun by cash-needy causes. Which is all to say that startups in Buffalo are at the mercy of headwinds that are very real, and potentially very threatening.
One of the most promising undercurrents of the year was the number of completed deals, in many cases going toward companies that are poised to do bigger investments in short order. Founders came from unexpected places – Ellicottville Greens’ Gabe Bialkowski from the startup scene in Los Angeles; Azuna Fresh’s Scott Dancy from the staffing and energy industries; UDDA’s co-founding team from the manufacturing and restaurant industries; and Jeca Energy Bars’ Ree Dolnick from Roswell Park Comprehensive Cancer Center.
Many of the smaller deals this year were supported by Launch NY’s various investment deals or extremely active angel investor Jack Greco, two sources of capital dedicated to preparing firms for bigger raises in the future. The University at Buffalo made its first equity investment in Buffalo Automation. 3AM Innovations’ previously unreported series round was supported by Impellent Ventures, Taurex LLC, TechNexus, Urban Us and Launch NY.
Various venture capital firms got a taste of investing in a startup with a strong base in Buffalo, including Felicis Ventures backing of Kyklo and Iconiq Capital in Squire.
Many successful leaders have poured time and money into Buffalo’s startup scene over the past decade, and their continued passion for the cause is the single best reason to believe that momentum will continue. At the upper echelons of Buffalo’s executive class, the priorities have become highly streamlined: to build a work-live-play cluster in downtown Buffalo that favors tech firms, and to play up the natural cost advantages of operating from here. You might call it one big investment, and after all these years, you might finally say the project is too big to fail.
This is not an exhaustive list, and it involves a good deal of subjectivity. One particular gray area is when to include companies that haven’t specifically identified Buffalo as their headquarters. In the cases of Squire and Centivo, for instance, executive teams live elsewhere, but Buffalo is their most significant concentration of workers. Another ambiguous area is whether to include companies that have closed on smaller segments of bigger rounds – this publication generally favors counting the entire amount in the year that it closed.
Check out previous recaps from 2019, 2018, 2017,2016, 2015 and 2014.
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