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Long Island tech startups use $1M in funding to attract $24M in venture capital 

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October 18-20, 2023 / Tucson, AZ
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The Story

Two Long Island investment funds took a chance in 2014-15 on 10 technology startups, giving them a total of $1 million.

Since then, the startups have raised $24 million from venture capitalists, government agencies and other businesses.

That ability to attract capital is an encouraging sign that companies can be built from inventions created at the Island’s big research laboratories.

Still, finance experts cautioned the startups face daunting challenges. They could spend years and millions of dollars developing products that never produce a financial windfall.

The Accelerate Long Island Seed Fund and the Long Island Emerging Technologies Fund started separately several years apart and then formed an alliance to back new companies. These businesses are in health care, energy and advanced materials — industries where Cold Spring Harbor Laboratory, Brookhaven National Laboratory and others conduct research.

The funds have “done a nice job of attracting seed-level funding to a market that has great potential for startup development but does not have an ecosystem that naturally attracts that type of funding,” said David Silverman, a partner at PricewaterhouseCoopers. “The funds have helped to fill that funding void.”

The increased focus on creating companies from local research projects comes as business executives and politicians seek to replace the well-paying jobs lost at defense contractors such as Northrop Grumman Corp. and at Wall Street brokerages. 

For startups to have a measurable effect, many more of them need to be established, because only a few will live to adolescence, according to Silverman and other experts.

The Accelerate Long Island Seed Fund consisted of $500,000 from Empire State Development, the state’s primary business-aid agency. The Emerging Technologies Fund was made up of $250,000 each from venture capital firms Jove Equity Partners in Setauket and Topspin in Roslyn Heights.

By the end of 2015, the funds had put $100,000 into each of the 10 startups.

Codagenix Inc., a vaccine developer in Farmingdale, has attracted the most additional capital: $11.6 million from venture capitalists and the federal government.

However, those investment dollars wouldn’t have come to Codagenix had it not first received backing from the Accelerate Long Island and Emerging Technologies funds.

“They provided critical funding to do an expensive study of our flu vaccine in animals,” recalled J. Robert Coleman, the company’s chief operating officer and co-founder. “The results from this study provided proof of concept that encouraged the future investments.”

Codagenix uses technology from Stony Brook University.

Traverse Biosciences Inc. in Stony Brook has raised $2.5 million, the third most among the startups in the Accelerate Long Island/Emerging Technologies portfolio.


The funds’ investment “came at a pivotal time for my company and others, when we were at the earliest stage of life . . . Without their investments, these companies would not exist,” said Joseph Scaduto, Traverse CEO and co-founder.

His business is using chemical compounds licensed from Stony Brook University to develop a drug to treat gum disease in dogs. It also is working on an anti-aging skin cream and a drug to treat acute respiratory distress syndrome.

Scaduto started Traverse in 2013 after 13 years at the university’s Center for Biotechnology, where his duties included helping researchers become entrepreneurs.

“I became increasingly frustrated with the lack of startup companies emerging from Stony Brook, and I thought, ‘I’m going to start a company,’ ” he recalled.

A similar frustration led Mark Lesko, then-Brookhaven Town supervisor, to propose Accelerate Long Island Inc., an organization designed to help finance startups with ties to local research labs, and to educate aspiring tech entrepreneurs.

The nonprofit won the state grant that became the Accelerate Long Island Seed Fund.

The organization is supported financially by its founders: Hofstra University, Northwell Health, Stony Brook, Cold Spring Harbor and Brookhaven National labs, and the Long Island Association, the region’s largest business group.

That eight of the 10 companies backed by the Accelerate Long Island and Emerging Technologies funds have raised more money shows Nassau and Suffolk counties have startups worth investing in, Lesko said.

“The most important thing we have done is prove that there are investment-grade companies coming out of Long Island’s research institutions. . . . We didn’t have that 20 to 25 years ago,” said Lesko, now Hofstra’s vice president for economic development.

Still, he and others cautioned against declaring victory.

Two of the startups haven’t raised additional money, and one of them has stopped developing its product.

“We need to have a success story,” Lesko said. “It doesn’t have to be the next Facebook. We just need a good, profitable company that’s employing a lot of people to come out of this whole effort.”


Venture capitalists Leo Guthart and Steve Winick of Topspin agreed, saying the Emerging Technologies Fund, for which they provided half the money, “is not yet a success because none of these companies, thus far, have had a financial exit” where investors get back their initial investment plus a profit.

“On the other hand, we view near-term success as getting viable companies going, and the fact that significant additional monies have been raised indicates to us that there is interest in investing in these companies because of their future potential,” Guthart and Winick said in an email responding to questions from Newsday.

The other half of the Emerging Technologies Fund, Jove Equity, is led by David L. Calone.

“When I came up with the idea for the fund, the whole point was to give these companies, from our research labs, their first burst of capital to get out into the world,” he said in an interview.

Calone also said he’d like to see a second Emerging Technologies Fund started, with tens of millions of dollars to invest.

The track record of the Accelerate Long Island and Emerging Technologies funds led New York State last year to provide $3 million for a new fund, Accelerate New York Seed Fund.

The new fund has made two investments so far. Calone, Guthart, Winick and Lesko are participating in the fund, to varying degrees.

“It’s important that we keep doing this,” said Calone, who sits on the 13-member investment committee for the Accelerate New York Fund. “Not all of the companies are going to make it, but we need to get a few of them to grow in revenue and employees.”

Accelerate New York has more money to invest than its predecessor funds, $2.4 million from the state after management fees are deducted, and serves a larger geography, 14 counties in downstate New York.

Long Island will receive a minimum of $480,000 and a maximum of $1.2 million from the fund, according to Peter Donnelly, the fund’s managing director and Stony Brook’s director of technology commercialization. The fund will invest in 20 to 25 startups over the next few years.

Every $1 from the state is matched by at least $1 from private investors.

Donnelly said business executive Anthony Iacovone, who lives in Huntington, has put money into one Accelerate New York deal and has committed to looking at others. Topspin officials also said they will consider investing alongside the new fund.

“We want to grow to the next level in terms of having an impact” on the economy, Donnelly said.

Accelerate New York has invested in two startups so far, both in Manhattan: PainQx, which is developing pain-management software, and Bioharmony Therapeutics Inc., which is working on an antidote to infections caused by multidrug-resistant bacteria.

The next investment these businesses secure could include more state dollars.

For instance, software developer Envisagenics Inc. received its first outside money from the Accelerate Long Island and Emerging Technologies funds in 2015. The startup, begun in Huntington and now based in Manhattan, is creating a tool to help drugmakers better analyze genetic information to treat genetic diseases. The technology was invented at Cold Spring Harbor Lab.

Envisagenics recently got $500,000 from the $100 million New York State Innovation Venture Capital Fund, alongside about $2 million from five venture capital firms.

State money often can serve as “a catalyst” for private investors to take a chance on a startup, said Brian Keil, managing director of the state innovation fund. “We can bring money off the sidelines, make investors feel more comfortable because they aren’t the only checkbook at the table.”

That’s particularly true with startups trying to turn biotech innovations into commercial products, “an unattractive area for venture capitalists because the risk is high, the costs are great and success is less certain” compared with software and mobile apps, said Scott Shane, a professor of entrepreneurial studies at Case Western Reserve University in Cleveland and an investor.

“The private sector won’t fund biotech and life sciences startups alone,” he said. “If the government didn’t fund them, they probably wouldn’t happen.”

SynchroPET Inc. used $100,000 from the Accelerate Long Island and Emerging Technology funds to hire its first employee and buy parts for a prototype of its scanning device. The device, which uses technology from Brookhaven National Lab, can be used to monitor the reaction of mice and rats to drugs under development.

“Ten years ago it would have been impossible for SynchroPET to exist because the funding wasn’t available,” said Marc Alessi, CEO and co-founder of SynchroPET.

The Stony Brook-based startup plans to begin selling its scanning device to researchers next year. It only needs to sell 11 each year to turn a profit, he said.

“It feels impossible when you are just starting a company. Everyone says, ‘You cannot do it,’ ” said Alessi, a former Democratic state assemblyman from Shoreham. “But programs, like these local investment funds, help you over that hump.”


Source: Tech startups use $1M in funding to attract $24M in venture capital | Newsday

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