It wasn’t long ago that “seed” or “Series A” were the dominant way startups in Buffalo were describing the earliest shares they sold to investors in return for equity in the company.
And while that’s still common, a new trend has emerged here in the past few months that had rarely been seen before.
Three startups have closed lately on funding blocks they are describing as “pre-seed rounds,” their way of defining investments that are supporting their expansion to new markets.
They include the $1.6 million round closed by HELIXintel, the $415,000-and-counting round underway at Braid Babes and the $700,000 round closed by Ognomy. They’re not the first pre-seed rounds Business First has reported in the past few years, but the size of the rounds and their proximity makes them a definite pattern.
For help explaining the trend, we turned to Lauren DeLuca, a Western New York native who is a founder and managing partner at Chicago-based Motivate Venture Partner. Motivate participated in the HELIXintel pre-seed round. DeLuca’s comments have been lightly edited for grammar and clarity. This is what he said:
“There’s noticeable round size and price inflation across all stages of venture capital now, driven by massive exit valuations, more paths to liquidity and an abundance of (assets under management) looking to be deployed. Every mid- and late-stage fund I know is shopping earlier now. One of the most extreme examples is Tiger Management, a $30 billion-plus hedge fund and notable public market investor, which led a $3 million seed round recently.
"The only way to guarantee an allocation in the hottest startups is to invest early, before they’re obvious winners, so I suspect this trend will continue. Plus, VC remains the best-performing asset class so as limited partners continue to pour more money into the space, managers will aggressively deploy it and the cycle continues.
"Buffalo is unquestionably on the VC map but so are other smaller non-coastal cities. It’s less of a comment on Buffalo and more so reflects the competitive dynamics of VC in today’s environment.”
Familiar faces named to board at Upstate Capital Association of New York
Christina Orsi, University at Buffalo associate vice president for economic development, and David Brown, managing partner of Rochester-based Impellent Ventures, are among the new board members of the Upstate Capital Association of New York.
Orsi oversees an apparatus with a number of programs aimed at local startups including UB’s Innovation Seed Fund and its new Incubator @ CBLS facility on the Buffalo Niagara Medical Campus. Brown’s firm has been an active investor in Buffalo startups, backing 3AM Innovations and KickFurther.
Upstate Capital seeks to connect investors to opportunities across New York state.
