Startups on the rise: Investment, mentorship and 43North help attract the young and ambitious

It's an undersized sector that the region has sought to cultivate, through a mix of investment, mentorship and opportunities like the 43North business plan competition.

A robust startup economy can pay dividends. Investors – often from outside the region – are drawn to promising business ideas and pour in dollars. Growing startups create jobs and create a spinoff effect, from business services they need to buy.

And if a startup is sold or goes public – think ACV Auctions – the founders can use their newfound wealth and launch more ventures, and start the cycle over again.

It's a model that proponents of the startup economy want to see take hold here. In some cases, the companies are homegrown. But the region has also attracted tech firms that have either moved or expanded here.

Here's a look at four companies that are growing in Buffalo. They have identified advantages they found here – a lower cost of living, an ample supply of talent, to name two – that they say enables them to operate here, instead of in a tech hotbed like Silicon Valley: 

Centivo

Last year, the digital health plan moved its headquarters to Buffalo from New York City. Perhaps that shouldn't have been a surprise.

Centivo's co-founder and CEO, Ashok Subramanian, is a local native, and the company already had a robust operations center in Cheektowaga. Plus, Subramanian had a track record here through Liazon, an employee benefits exchange operator he formerly led.

Subramanian has said the Buffalo area has a good talent pool, work ethic and education system – all of which make the region a good place to expand. Centivo has added office space at the University at Buffalo's Gateway Building on the Buffalo Niagara Medical Campus.

And Centivo has the funds to support its ambitions. The company recently raised $51 million from investors, on top of the $34 million it raised in 2020.

This year, Centivo has its sights set on expanding into an additional U.S. markets. The need to support that growth is helping fuel its hiring in places like the Buffalo area.

Centivo has 216 employees, 63 of whom are based in the Buffalo area.

Rural Sourcing

The Atlanta-based firm prefers to expand into cities that are outside of the nation's tech hotbeds. Late last year, Rural Sourcing opened a location in Buffalo.

The company markets itself to clients as an alternative to using offshore providers for software development, or relying on expensive on-site consultants.

Rural Sourcing is starting out in the HANSA coworking building and plans to move into a permanent downtown home sometime this year.

In recruiting, Rural Sourcing aims to hire people from all kinds of backgrounds – whether college-trained or not – and offers a workplace culture where employees can be themselves, said Natascha Thomas, the Buffalo development center director.

"We promote a work life-balance which is not common in the tech industry at all," Thomas said.

The company likes the results it has seen operating outside the traditional tech markets. At the same time it disclosed its plans for Buffalo, the company announced it would also open a location in Baton Rouge, La.

Rural Sourcing aims to grow to 150 employees within three years in Buffalo.

AML RightSource

The Cleveland-based company, which helps banks and other companies spot illicit transactions, has established a strong foothold in Buffalo and plans to get bigger here.

Last year, AML moved its Buffalo operations to the 27th floor of Seneca One tower from Larkinville. The firm has found a good talent pool to hire from, said Frank Ewing, the CEO.

"Everything that we thought Buffalo was and could be, has turned out to be true," Ewing said.

Through a series of acquisitions, AML RightSource has broadened the tech-enabled services it offers to clients. 

Ewing said it's an exciting time for the company to be downtown, with developments like more people moving into apartments and new a grocery store opening up.

"I think the more people see things happening, the more risks people are willing to take, and it just creates this energy on its own, and we can be part of that," Ewing said.

Ewing, who is a Utica native, splits his time between Cleveland and Buffalo. He graduated from the University at Buffalo's law school, and began his career working for HSBC in what is now Seneca One tower.

AML RightSource has about 150 employees in Buffalo.

Kangarootime

Scott Wayman brought his child care software business to Buffalo from California after winning $500,000 in prize money in the 2017 43North competition. Long after his one-year obligation expired, he has kept the business here.

The startup recently raised $6 million from investors. The capital came from a fund led by Buffalo native Lauren DeLuca, but included investors who didn't have ties to the region.

"I think it proves that there are great companies being built in Buffalo and that the talent stack here in Buffalo continues to grow and mature as the ecosystem grows," Wayman said.

The $6 million in investment included $300,000 in follow-on funding from 43North, a vote of confidence in how his company has performed here.

The new funding will help Kangarootime staff up as the business itself scales up.

As consolidation continues in the child care industry, Kangarootime's software is well suited to those clients' needs to manage multiple locations, he said.

Kangarootime has 39 employees, about 25 of whom are based in Buffalo. He's aiming to grow the company's job total to 100 by the end of 2022.