The Erie County Industrial Development Agency is gearing up to get back into the venture capital business.
The agency is finalizing plans to create a $1 million venture capital fund aimed at helping early-stage businesses get hard-to-find funding as their companies evolve from an idea to an operating business with products or services to sell.
“There is a gap in the capital markets here,” said agency CEO Steven W. Weathers.. “We’re trying to bridge that gap.”
The IDA had a venture capital fund from 1996 to 2008 that made $9 million in investments in 34 deals that yielded a $20 million return, said Theresa M. Carpenter, the IDA’s assistant treasurer.
While that fund had success with investments in companies such as Synacor, a Buffalo Internet content provider, and Gemcor, a West Seneca company that makes automatic riveting machines for aircraft assembly, it made its last investment in 2008 during the administration of then-County Executive Joel A. Giambra.
But Mark C. Poloncarz, the current county executive, has been pushing for the IDA to get back into venture capital, arguing that it would give the development agency another way of helping local businesses grow. “We should be looking at this as one tool, not the be-all, end-all,” he said.
IDA board member Edward A. Rath III, a county legislator, said the new venture capital fund, which will be put up for the IDA board’s approval at its Aug. 19 meeting, would come at a particularly good time, given the 43North business plan competition that has narrowed its field to 113 semifinalists.
While just 11 of those semifinalists will win one of the $5 million in total prizes available through the competition, part of Gov. Andrew M. Cuomo’s Buffalo Billion economic-development initiative, the 102 companies that don’t win will still be looking for funding.
“What happens to the other 102?” Rath asked. “We want to capture some of that.”
Buffalo Mayor Byron W. Brown recommended that the IDA hold meetings to explain the venture capital fund to women- and minority-owned businesses.
The IDA has put together a 17-member advisory board, made up of venture capitalists, attorneys, bankers and government officials to oversee the fund and recommend potential investments, which then would have to be approved by the IDA board. Weathers said he envisions that this Bridge Capital Fund will partner with other angel and venture capital investors.
“When this comes to us, it won’t be an idea on a napkin,” he said. “It will have been flushed out.”