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Launch NY's seed fund fueling startups

Launch New York's seed fund, which helps startups get off the ground, is coming off a big year.

In 2018, the fund invested more than $760,000 in 13 new investments and 11 follow-on investments. Since 2016, the fund invested nearly $1.6 million in 35 companies, 14 of which were in Western New York.

Marnie LaVigne, Launch New York's president and CEO, said the fund will announce expanded capitalization soon, but she wasn't ready to share details just yet. Launch New York is a nonprofit organization serving 27 counties in upstate New York.

LaVigne said Launch New York's support for startups goes well beyond dollars, to providing mentorship that helps companies develop. "Our goal isn't strictly to provide funding," she said. "Our goal is to help make these companies investment ready."

LaVigne talked about how the seed fund has grown and her view of the startup culture in the Buffalo Niagara region:

Q: How would you size up the seed fund's 2018 results?

A: We went into introducing a seed fund [in 2016] with the idea that there is a ton of demand, and essentially you've seen us ramping up. I'll really give credit to supporters of the fund itself.

Obviously the Ralph C. Wilson Jr. Foundation allowed us to take off and ramp that fund. So 2018 was a culmination of just start to walk and then jog and then run. And I guess we're looking a lot like a sprint at this point.

Q: What is Launch NY's niche for supporting startups?

A: Our niche is really getting companies ready for approaching the investment community, business plan competitions — we're that first step.

It is incredibly brisk activity, in the fact that, we set aside six half-hour intake calls every single week and those slots have been full for a couple of months. At any given time, we're mentoring more than 250 companies. Then those companies are eligible after three months to apply to the seed fund.

Q: What is a typical investment by the fund?

A: We talk about a range of $25,000 to $100,000. The reality is, our standard first investment is a maximum of $50,000, and then we will do follow-on [funding]. So we have a number of companies in whom we've put $75,000 or $100,000.

But we also have sort of a  starter amount of money that's less than $50,000. We've done as little as $12,500 to $25,000.  The reason we do that is if we have a company that we feel needs to get a couple of key steps done and they can actually make that happen with that amount of money. And we can also sort of set the stage for them to get a step done and come back for, say, another $25,000.

That can also involve co-investors. So you have people kind of rallying around, 'Hey we believe in your idea, but we would like to see you make you make this progress,' and then we can do what we call traunching those dollars.

In fact, it's hard to believe, but having too much money can actually be a bit of a curse, and can cause companies sometimes to not sharpen the pencil, to not be as careful in how they're proceeding.

Everything you do when you're a startup, the market's giving you feedback on how your idea might be accepted or not. In fact, if you really believe in your idea and have plenty of money to do it, a lot of times you're not listening to the marketplace, and you may end up producing a product, and spending a lot to do it, and it doesn't go anywhere.

There's a fine balance that Western New York is trying to establish. We don't want to make it so challenging that you just say, "Fine, I'll let my idea die on the vine," or "I'm going to more fertile grounds."

Marnie LaVigne, shown presenting an award at the 2014 43North competition. (News file photo)

Q: Do you feel like startup activity in the region has picked up?

A: There's no question there is more activity, there is more visibility. Where I think we're continuing to be challenged as a community is the culture here is still more conservative.

So there's excitement about entrepreneurship, and competitions like 43North and 76West [a clean energy competition]. … As much as those are really important, at the end of the day, to become a naturally occurring entrepreneurial hotbed, you have to have a culture that embraces risk tolerance.We have shown that the pace of investment prior to the Launch New York seed fund shows that risk aversion. As much as we need to have all those groups growing in the region, that are growing angel funds, that are growing venture capital funds, they are only part of the answer.

We ultimately need to connect with the time, treasure and talent among people who embrace innovation and risk.

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