For years, entrepreneurs throughout the Buffalo Niagara region have been complaining about how hard it is to get the financing they need to take their ideas for promising new products through the cash-gobbling development stage and bring it to market.
John Seman, who stepped in last month as chief executive officer of the new Launch New York initiative to provide advice and financing to budding companies across upstate, is hoping to give a boost to those entrepreneurs.
With $1.2 million in place — half from the federal government, funneled through the Western New York Regional Economic Development Council, and additional funds from the John R. Oishei and Margaret L. Wendt foundations — Launch New York plans to open its main office in Buffalo, along with another regional office in Ithaca.
Seman spoke about the initiative and what he hopes to accomplish.
Q: What is Launch New York all about?
A: The mission of Launch NY is really to try to provide education, mentoring and initial financing for high-growth startup companies across the 27 counties of Western New York.
Q: The program is modeled after the Jumpstart program in Ohio. What do you hope to take from that program?
A: They are very much engaged in these startup organizations in their early days, as they start to put together their business plans and formulate the market opportunity they have. They look to help them build a business plan, to help them understand their customers and their competitors. Many times start-up companies have good technology, but might not be as well-versed in other fields, such as financial management or marketing communications or building business plans that would appeal to the second round of financing.
What’s unique about the Jumpstart model and what we hope to replicate is that we want to be deeper in the process of helping the entrepreneurs in the beginning, so it’s not just an hourly session but its hundreds of hours to support companies and help them navigate what Jumpstart calls “the valley of death.” That’s the area between where you have an idea that you’re trying to get it to the market and you need the support and guidance to put together a good business model that can grow.
Q: Is this targeted at any particular industries?
A: It’s not focused on any sectors. It’s open. It’s looking for these high-growth, high-potential organizations that might have peak sales in the $30 million range in a five-to-10-year period and are participating in $500 million to $1 billion markets.
Q: How is Launch NY different from what other groups that now try to support entrepreneurs are doing?
A: What Launch NY offers is a combination of the support for the entrepreneur from a managerial perspective, as well as the initial seed financing. What you have most often is groups that are providing some services to entrepreneurs, and then some groups that are providing funding to entrepreneurs, sometimes friends and families, sometimes angel investors, sometimes venture capital firms. The model is to bring those two pieces together, the management support as well as the financing.
Often if you have a company that gets financing and you have people on your board, the board might meet maybe four times a year for two to four hours. That’s sometimes the extent of the guidance and support the company gets from the people who are providing the money. This idea is to be much more ingrained and involved with the entrepreneurs and the company as it tries to grow.
Q: How much money do you have to work with?
A: Right now it’s $1.2 million but we’re looking to get up to $5 million by the end of 2013. The $1.2 million in existing funding can only be used to provide management support and other mentoring services, but we are seeking other funds that can be used for financing.
Q: Is this just a Western New York initiative, or does it extend beyond?
A: It covers the 27 western-most counties in New York.
Q: What kind of investments do you hope to make?
A: We hope to invest in six to eight companies a year in the $250,000 range.
Q: How will these investments be structured? Will they be loans? Will they be equity positions?
A: Probably convertible debt or equity.
Q: How do expect to find investments? Do you plan to work with upstate venture capital firms?
A: There’s going to be some grass-roots outreach to entrepreneurs across the western region, interacting with the venture capital firms. In some early discussions with some venture capital firms, they like the model because they’re hoping this will queue up companies that will be in a better position for them. If we can do the initial seed funding, we can pass them along for the second round and get them prepared for the venture round of funding.
Q: Is the lack of funding a real weakness in Western New York?
A: There are more deals than dollars.
Q: What will you be doing in the Buffalo office?
A: Here in Buffalo, we’ll have the headquarters, with finance and marketing. What we’re going to have in the regions is the mentors and the entrepreneurs in residence. Throughout the region will be the people who will interact directly with the companies. We’d like to have regional offices in Rochester, Syracuse, Binghamton and Batavia.
Q: How can entrepreneurs contact Launch NY?
A: Email is the best way: firstname.lastname@example.org.