Empire State Development officials said a $50 million state venture capital fund will stimulate private venture capital among startups that lack funding, primarily in upstate New York.
“Upstate [New York] is a priority and historically has been underserved as compared to New York City where there’s so much investment in digital media,” said Steve Cohen, deputy commissioner for small business. “The fund will address not just geographic gaps, but gaps that exist in early stages of development. [The venture fund] is focused on closing some of the gaps and stimulating additional funding.”
The New York State Innovation Venture Capital Fund was created as part of a plan to incentivize startups to stay and build their businesses in the state.
Last year saw a significant drop in venture capital investments in upstate New York, a region defined as everything north of Manhattan. There were just 33 investments totaling $39.3 million, down more than 65 percent from the previous year. In comparison, venture capitalists invested more than $5 billion in New York City metro area startups in 2014.
“This is signaling to the private sector to take a position in these viable high-growth companies,” Cohen said. “We know they’re out there upstate.”
The NYSIVC Fund will have two segments: One promises to help start-up companies associated with New York’s universities commercialize their products with small pre-seed investments of up to $100,000. Officials claim the second segment will invest directly in early-stage companies with co-investments of $100,000 to $5 million.
All investments by the NYSIVC Fund require at least a one-to-one match from private sources at the time of investment. It is looking to stimulate investment by working alongside the private sector, Cohen said.
The fund is expected to leverage at least $100 million in private capital to support high growth areas including nanotechnology, clean technology, biotechnology and information technology.
Brian Keil is serving as the managing director. He said the fund is currently active as he evaluates investment opportunities.
Most of the investments are expected to be seed stage of less than $750,000. Keil expects to invest $300,000 to $500,000 in 20 to 25 startups.
Adam Spence, assistant secretary for economic development and innovation, said the investments will take ideas out of the labs of the state’s public and private universities to create businesses.
“We want to find that great research and give it the funding and support needed to get it out of the lab and additional funding to take it to the next level,” Spence said. “There’s more to be done and we know those opportunities are there coming out of our great institutions.”
Several local companies are looking to take advantage of the fund. They include ThermoAura, a Colonie nanomaterials startup that came out of Rensselaer Polytechnic Institute in Troy. Richard Frederick, an Albany area angel investor, previously said he has been working with the state to make co-investments in the company.