Share this article

print logo

As 43North focuses more on jobs, 2017 winner is here 'for the long run'

Minutes after her company won the $1 million grand prize in Thursday's 43North business plan competition, Bethany Deshpande wanted to make one thing clear:

She and SomaDetect have no plans to just spend their required year in Buffalo and then pack up their dairy production device business and head back home to New Brunswick. She - and SomaDetect - intend to stick around.

"We absolutely do," she said. "It makes sense for our company to be positioned in Buffalo and to be here for the long run."

If there was one thing that was clear from this week's 43North finals, it is that the contest's judges were putting more of a focus on jobs and how a prize-winning company might create them in Buffalo if their startup manages to turn into a thriving business.

With SomaDetect, it's all about the cows, and there are plenty of them around here.

There are 1 million dairy cows in New York - as many as in all of Canada, Deshpande said. And Buffalo isn't far from other U.S. dairy centers. Those are all key potential markets for the device SomaDetect plans to launch next year to help farmers use light scattering technology to gauge the quality of a cow's milk at every milking. It also alerts farmers immediately to any impurities or potential illnesses within a particular cow's milk.

If all goes well, SomaDetect will launch a pilot program that will ramp up from 10 farmers to 50 farmers next year, before it starts selling its devices commercially. It hopes to hire 25 people in Buffalo next year - ranging from engineers, developers, on-site technicians and support staff - and maybe another 35 in 2019.

Those promises are far from a guarantee. Most startups fail, and many of the survivors see only modest success. But every now and then, a startup thrives, and the jobs follow.

That's happening with ACV Auctions, the Buffalo online auto auction business that won 43North's $1 million grand prize in 2015. It is the only true home run from among the competition's winners so far. ACV has created more than 100 jobs already, most in Buffalo, and plans to hire another 100 in the coming months after raising more than $20 million in additional capital to expand its business into new cities.

So far, 43North's winners have created a little more than 100 jobs. Many of the companies that won have returned home after their mandatory one-year stay. Yet organizers say it's a mistake to only measure 43North's success that way. Just as important is its role in encouraging entrepreneurs to start businesses in a region that badly lagged behind the nation in new business creation and creating an environment that can attract investment to those fledgling firms.

Invention to detect illness in dairy cows wins $1 million 43North prize

On that front, 43North has been much more successful, encouraging cooperation with local entities that can help young companies, reaching out to students to encourage them to think about starting businesses, and getting venture capitalists to start thinking about potential investments in Buffalo. Venture investments here jumped from $6 million in 2014, when 43North was getting off the ground, to more than $120 million last year, said John Gavigan, the contest's executive director.

"I know that 10 or 15 years from now, it will be about how many jobs are created," said William Maggio, 43North's chairman. "But equally important is spurring entrepreneurship and making students and young people today think that they can start their own businesses and don't need to move away to be successful."

As 43North has tried to attract more advanced startups by making its application process more stringent this year and last, more of the focus is shifting to job creation. That was especially apparent with the seven judges in this year's competition.

"As they zeroed in, it became an issue of, prove to me what you're going to create in Buffalo," Maggio said. "That's the big thing we were looking at."

But before a startup can create jobs, it has to become a successful business.

So picking startups that have the best chance to grow into successful companies is the first priority. If the business falls flat, there won't be any jobs for Buffalo no matter how committed the founders are to the region, said 43North judge David Jakubowski, a Facebook executive who grew up in Williamsville.

"It starts with, 'Do we think it can be big?' " Jakubowski said. "Then it's 'How can it help Buffalo.'"

The 43North rules only bind a company to Buffalo for one year, which makes it fairly easy for entrepreneurs, especially young ones without family ties, to come and go.

Requiring winners to stay longer might give the startups more time to grow local roots, but it also could convince other promising startups not to apply. And besides, even if a company leaves Buffalo and goes on to become something big, the region - and 43North - still would get a payback because the 5 percent ownership stake it gets in each winning company would become much more valuable, Jakubowski said.

"This, to me, is a win-win," he said. "You are not going to create an entrepreneurial climate by clamping down on entrepreneurs."

Many of this year's contestants made a point of emphasizing that they weren't planning to take the money and run.

"We moved here from the Silicon Valley, not because of incentives, but because we believe this is the best place to build our business," said Oke Okaro, the CEO of Burner Fitness, a $500,000 winner with an online platform that allows users to develop customized training and wellness programs. Four of the company's top managers are Niagara University graduates or students, and one of them, Chief Technology Officer Leo Schultz, persuadedOkaro to move the startup to Buffalo because of its lower costs.

Femi Secrets, another $500,000 winner that makes disposable feminine hygiene panties, talked about onshoring its production of its Pretty Panty from China to Buffalo. The company's current supplier can't keep up with demand, and its costs of producing in China have doubled during the company's short life, said CEO Daviellie M. Jackson.

"We need Buffalo as much as Buffalo needs us," she said.

Judge Virginia Giddings, a healthcare industry executive, was skeptical that Femi Secrets could manufacture in Buffalo and still handle the pressure for ever-lower prices from buyers at Target and Walmart, which account for two-thirds of its sales.

"Is it even viable?" Giddings asked.

Jackson insisted it was, since the company still would buy its materials overseas and merely do assembly, packaging and distribution from Buffalo.

Kangarootime, a California tech startup that won $500,000 and is developing a software suite for daycare centers and pre-schools, promised that it's not looking to take the money and run after a year.

"It's not a one-year pledge," said CEO Scott Wayman, who said the company could add 35 people in Buffalo next year. "We plan to be here for a long time."

Others were less specific about their Buffalo plans. Squire, which took home the contest's $650,000 runner-up prize, impressed judges with its online barbershop scheduling and payment app. The judges saw it as a business that could quickly grow and even expand into the women's hair salon market without the need to raise huge amounts of new money.

But Squire's promises for jobs were vague, only saying that it would need to build its sales and support staff as it grew. Unlike other winners, its New York City-based founders made no pledges to stick around. And as a highly mobile tech business, there's no natural magnet in Buffalo to keep it here.

That was what worried judge Bonin Bough, a Cleveland-based marketing executive, about Suncayr, the $500,000 winner from Ontario that makes $1 stickers that turn purple to warn users that their sunscreen isn't working anymore.

A startup that prints inexpensive stickers could easily get snapped up by a big sunscreen maker, like Neutrogena. And if that happened, anything that the company had established in Buffalo would likely be shifted to one of the new owner's existing factories.

"One of the things I'm concerned about is jobs," Bough said. "There is no way on planet earth a company like Neutrogena is going to say we're going to partner with you and keep the jobs in Buffalo."

There are no comments - be the first to comment