Newtek Capital, a New York City-based venture capital company that focuses on funding fledgling technology firms, is opening an office in Buffalo.
The Buffalo office, located in the Olympic Towers on Pearl Street, is Newtek's sixth regional business development center.
Newtek's strategy is to look for technology companies in areas that are underserved by venture capital firms and are located outside the high-tech hotbeds of the Silicon Valley in California or New York City's Silicon Alley.
"We view the opportunities in Buffalo as far exceeding the opportunities in overpicked areas like the Silicon Valley and Silicon Alley," said Barry Sloane, a former Smith Barney managing director who is Newtek's chairman and chief executive officer.
Newtek prefers to invest $300,000 to $3 million to acquire a controlling interest or a significant ownership stake in young technology firms that have high growth rates. "We do not like to make pure bets on technology," said Sloane, a 1981 University at Buffalo graduate. "We prefer to invest in people and ideas and in businesses that already have some core and some substance."
The opening of the Newtek office will help ease a shortage of venture capital in Western New York that economic development officials have said is making it harder for fledgling companies to get the money they need to build and expand their businesses.
Indeed, Sloane said the scarcity of venture capital in the Buffalo area was one of the main reasons why Newtek decided to open its office here. "It's beautiful. There's very little venture capital in the area," he said. "We believe there is a tremendous opportunity to make early and mid-stage investments in the region."
But the region slowly is beginning to attract more venture capital funding. The region now is home to Seed Capital Partners, whose backers include executives from Microsoft and Yahoo! Another locally-based firm, Summer Street Capital Partners, is wrapping up $100 million in fund-raising. Backed partly from state retirement program funds, Summer Street focuses mainly on second-stage investments in New York companies.
And the granddaddy of Buffalo venture capital firms, Rand Capital Corp., recently saw its assets double to $18 million when its investment in an Ithaca technology company panned out. That windfall will give Rand more money to invest in other companies, officials said.
Newtek has opened business development centers in five other cities, including New York City and East Meadow, N.Y., as well as New Orleans, Miami Beach and Milwaukee. The company has raised more than $119 million in capital since 1998 and has invested in 19 companies, including nine that it controls.
The Buffalo office will be run in conjunction with one of Newtek's partners, Advanced Internet Design & Application, a Web development services firm. Newtek owns a 50 percent stake in AIDA.