Norma Jean Nowak knows firsthand how hard it can be to turn a scientific breakthrough into a profitable business – and she hopes the programs that are part of Gov. Andrew Cuomo’s promised “Buffalo Billion” will make the path a little easier for those who follow.
The goal, she said, is to create a village within the Buffalo Niagara region where startups can easily get the management and business development support they need, along with access to the capital that’s so essential to survival in the days before the sales start rolling in.
“We need to make the path to success easier,” Nowak said.
She hopes the initiatives announced last week as part of the governor’s Buffalo Billion will provide the more of the support and resources that will make it easier for fledgling life sciences companies to make it through those challenging first few years.
The plan envisions a Buffalo Science Productivity and Research Catalyzer that will help turn innovative developments in life sciences to the market, from supporting research to helping those researchers acquire needed patents and turning them into businesses.
It also proposes a Buffalo Breakthrough Business Challenge, which would try to jumpstart the region’s sluggish entrepreneurial sector by sponsoring a competition that would reward the best business plans with as much as $500,000 in funding, along with space in an incubator, access to mentors, and introductions to a network of venture capitalists.
“We don’t have enough entrepreneurs, and we need to change that,” said Howard Zemsky, the co-chairman of the Western New York Economic Development Council, which came up with the plan after more than a year of work. “In some respects, this is our Achilles heel.”
A big part of the problem is the struggle that local entrepreneurs have finding the money they need to raise from angel investors and venture capitalists after they’ve tapped out their own bank accounts and gotten all the funding they can from friends and family.
That’s why the business challenge is a good idea. It would provide valuable funding for promising startups, and if the contest gets enough notice, it could even attract entrepreneurs from far and wide, turning into a magnet for innovative ideas.
But it doesn’t go far enough. Make it a great idea by going big. Really big.
Set aside, say, $25 million to $50 million for a regional venture capital fund. That would be enough to fund equity or debt investments in 100 fledgling companies at $500,000 apiece, or take stakes in 50 companies at $1 million. Work in concert with other local venture capital firms, from Summer Street Capital Partners to Rand Capital.
That’s the kind of self-perpetuating program that would catch the eyes of entrepreneurs, and help give the Buffalo Niagara region a national reputation as a place where, if your idea is good enough, you can go to get a nice package of startup funding and support.
Sure, it’s a high-risk venture. If 100 startups were to get funding, many would flop. A significant failure rate is hard for public officials to swallow, given the scrutiny that rightly comes with how tax money is spent. But that’s the way early stage investing works. There almost always are a lot more losers than winners.
But the region still could be a big winner if a heaping handful of those investments take off, like Empire Genomics or Buffalo-based Internet content provider Synacor have, generating dozens — or even hundreds — of jobs and repaying that stake many times over.
And remember, $50 million is what the state is pledging to give Albany Molecular Research to open a $250 million drug discovery research and development center that would employ 250 people. That’s a whopping $200,000 in incentives for every new job Albany Molecular will bring to the Buffalo Niagara Medical Campus.
The Albany Molecular deal is a way to give an anchor tenant instant momentum and give some scale to the life sciences initiative. But the plan behind the Buffalo Billion is more about patience and developing programs that will lay the groundwork to make the region a better place for advanced manufacturing, life sciences and tourism down the road.
A significant venture capital fund would fit right in with that vision: Plant seeds today that could blossom years from now.
“It takes more than money to start a company,” said Daniel Penberthy, executive vice president of Rand Capital Corp., a Buffalo venture capital firm. “We need to find the right opportunities, with the best management team that is the best opportunity for the resources — the people, technology and money — we have in our area.”
Look at what happened with Empire Genomics. Nowak founded the company six years ago based on research conducted at Roswell Park Cancer Institute. Today, the company is on solid footing. It turned profitable last year and has built a customer base that numbers more than 1,000. If all goes according to plan, the company expects to hire another 50 people over the next five years, which would more than quadruple its current workforce of about a dozen.
But getting to this point wasn’t easy. The company, which has developed tests to help determine whether a certain drug or medical treatment will help an individual patient, opened its doors in 2006, just a year before the Great Recession hit.
The downturn made it much harder for fledgling companies like Empire Genomics to raise capital, so it worked with Roswell Park and the University at Buffalo to find ways to reduce its costs. It took advantage of state programs, like the Division of Science, Technology and Innovation, which has provided the company with about $150,000 for research partnerships with UB professors.
Through it all, Empire Genomics still was able to raise about $2 million from investors, which helped it keep the lights on while it worked to bring its tests to market. Now, it’s trying to raise $3 million more.
Yet it was still a scramble. “This was all done on the fly, on a very ad hoc basis,” Nowak said.
The plan behind the Buffalo Billion could lower some of the hurdles Nowak and Empire Genomics faced.
“The path will be clearer and easier to travel,” she said.
A substantial, well-managed venture capital fund from the Buffalo Billion would clear the way for even more opportunity.