Robert J. Martin spent the better part of two decades helping fledgling companies find the

funding they so desperately needed.

Now, as chief operating officer of Buffalo Bio Blower, a fledgling manufacturer of air

sterilization systems, Martin is seeing first-hand just how hard the search for funding can

be.

&#8220It&#8217s very competitive,&#8221 said Martin, the former president of nonprofit

business consultant Insyte Consulting. &#8220It&#8217s very difficult to get true seed

capital.&#8221

That&#8217s especially true in upstate New York, where the flow of venture capital is just

a trickle compared with hot spots like the Silicon Valley and Boston, Mass. Half of the $28

billion in venture capital funding in 2008 went to firms in California; another 12 percent

went to companies in Boston. Just 0.3 percent of that essential funding found its way to

companies in upstate New York, according to the annual PWC MoneyTree survey.

&#8220We really don&#8217t have a whole lot of venture capital in New York,&#8221 said

Judith J. Albers, the chief operating officer at Excell Partners, a Rochester venture capital

firm.

The sputtering economy isn&#8217t helping matters either, cutting deeply into the pool of

available venture capital and giving investors the upper hand in their negotiations with

entrepreneurs.

&#8220It&#8217s a buyer&#8217s market,&#8221 Albers said. &#8220Venture capitalists get to

look at hundreds of opportunities, and they get to pick the cream of the crop.&#8221

So intense is the competition that more than half of the funding proposals made to venture

capital firms are rejected after an initial review that takes about 20 minutes, Albers said.

And while New York City is home to a number of venture firms, accounting for about 4

percent of all venture capital funding, more than $9 of every $10 those downstate firms invest

go to companies in other states.

Part of the reason for that is because those firms prefer to invest in companies that are

in more advanced stages of their development, Albers said. Part of it is because the firms

believe they are finding more attractive investment opportunities elsewhere.

That&#8217s where Albers and other venture capitalists and business development officials

would like to see the state step in to make more money available to help fund an investment

pool targeting cash-starved companies that are trying to turn a good idea into a good

business.

Gov. David A. Paterson took a step in that direction when he heeded the pleas from the

venture capital community and proposed $25 million in funding for a statewide venture capital

fund in his budget proposal. But with Paterson on shaky political ground and the state facing

a growing deficit, the prospects for that funding are uncertain.

Still, Albers believes the additional state funding would be a good start in helping

entrepreneurs turn their ideas or inventions into businesses that eventually could create jobs

and spur the stagnant upstate economy.

In a state where $4.5 billion is spent on research and development initiatives aimed at

making new scientific discoveries that could turn into new commercial products down the road,

Albers said the shortage of venture capital often ends up driving those fledgling firms out of

New York.

&#8220It&#8217s unbelievable. We spend $4.5 billion annually on academic research, and we

don&#8217t do anything with it. We&#8217re not exploiting this,&#8221 she said. &#8220Who

doesn&#8217t get it? Can I say the word, &#8216Albany?&#8217 &#8221

&#8220Enough already with research and development,&#8221 Albers said as she addressed a

group of entrepreneurs at the University at Buffalo&#8217s Technology Incubator. &#8220We need

to take 1 percent of that and put it into companies like yours. ... Let&#8217s put some

money into commercializing. That&#8217s what creates jobs and revenues.&#8221

Robert Genco, UB&#8217s vice provost and the director of its Office of Science, Technology

Transfer and Economic Outreach, said a more robust supply of capital for fledgling companies

would help the state attract promising businesses.

&#8220If you have the dollars, you can attract the entrepreneurs,&#8221 he said.

Still, Genco and Albers both stressed that venture capital takes patience, and a

willingness to accept failure, since half of all early-stage investments fail and an

additional 30 percent end up just breaking even.

&#8220You&#8217re only going to have one or two home runs, and a lot of failures, but

that&#8217s OK,&#8221 Genco said. &#8220I think the community has to allow for that.&#8221

Albers thinks the state funds should be funneled through venture capital firms operating in

the state, much like the existing program to invest state pension money in New York

businesses.

&#8220The funds need to be run with a for-profit mentality so they become evergreen and are

self-sustaining,&#8221 she said.