Report: Upstate losing out on business-startup capital
April 26, 2011
Press & Sun Bulletin
New York has $4.5 billion in annual research and development funds coming in and the second-highest number of doctorate degrees and patents in the country, according to a study from Rochester-based economic development group Excell Partners.
When it comes to venture capital, however, a recent PricewaterhouseCoopers report showed just 0.2 percent of the $21 billion invested nationwide last year was sent to the upstate region.
That number is "pathetically low," said Assemblywoman Donna Lupardo, D-Endwell.
"What's wrong with this picture? For all intents and purposes, we ought to be in really great shape," Lupardo said. "What's missing? We don't have any seed capital. We don't have any money."
Figuring out how to entice venture capital firms -- groups that invest in innovative companies and collect equity -- to keep their money in New York is part of Lupardo's job as chairwoman of the Legislative Commission on Science and Technology.
According to the 2009 report by Excell Partners, such firms based in New York invested just 9 percent of their capital within state boundaries, with 40 percent sent to Silicon Valley.
"One of the challenges upstate is there is not a lot of cross-pollination among entrepreneurs," said Chuck Schwerin, CEO of Broome County-based Sonostics, a biotechnology startup. "There have been some attempts to do that in New York City, where there are meet-ups where young entrepreneurs come together and talk about issues they have in common, but that hasn't really been the case upstate."
Sonostics, which commercialized a technology to convert the sound of muscle contractions into absolute force, got its start in 2008 and has sought venture capital, but Schwerin said the company likely won't receive that funding until it proves sustainable.
The company grew out of Binghamton University's bioengineering department and made use of a university program designed to partner with innovative startups.
That program -- administered by the Office of Entrepreneurship and Innovation Partnerships -- is part of a growing trend at research universities and something that Lupardo sees playing a key role in the future.