Record shattered

In the first seven years of Business First closely counting startup deals in Buffalo, locally based companies never raised more than a collective $260 million.

Then came 2021.

Area startups smashed their previous pace of funding last year, with 35 companies raising more than $530 million.

That is partly a reflection of an international trend – ‘broken record’ funding headlines have become their own form of broken record – and partly a sign that Buffalo successfully has hitched its economic wagon to this generation’s economic tidal wave.

It’s happening. Growth-stage tech companies are becoming one of the dominant forces in Buffalo’s economy. That’s an exciting proposition after more than a half-century of stagnancy and decline – an opportunity to create activity that brings new talent and new investors here.

It also comes with challenges that could define the nature of the community. Can Buffalo be a place that unlocks tech for all of its residents – a place that offers opportunity for poverty-stricken neighborhoods instead of simply pricing them out of real estate? Also, tech gave us the noxious societal impact of Silicon Valley social media companies; the shameful behavior of executives at places like WeWork and Uber; the pure deceit of Elizabeth Holmes and Theranos. Can Buffalo be a place where companies have progressive missions and cultures?

There are groups and individuals in the community grappling with these questions. The resulting strategies need to work. If tech represents the future in Buffalo, then it’s not enough to celebrate topline regional growth.

Buffalo is nibbling at the national edges of tech relevance on the back of its breadth. Silicon Valley venture capitalist Rohit Gupta told Business First that he finds a long supply of reasonably priced deals here, and his Future Communities Capital fund has invested in local startups Ognomy and HELIXintel.

The 35 startups on the list are fanned throughout the region, from Seneca One Tower to the suburbs, and supported by everyone from local angels to coastal venture capital firms.

The breadth has been hard-earned after years of work that included not just entrepreneurs but public sector and philanthropic support and civic-minded individuals.

The funded companies sit alongside plenty of other validation nodes.

• The region’s first software unicorn, ACV Auctions, executed a successful initial public offering in 2021. Two of ACV’s co-founders, Jack Greco and Dan Magnsuzewski, have become active angel investors in local startups.

• The 43North business competition returned last year – at least three of the winning companies also raised significant seed rounds from private investors as they enter 2022. The ACV windfall helped to support the creation of the 43North Foundation that will use proceeds of successful exits to reinvest into Buffalo’s technology economy.

• After establishing Buffalo as its East Coast operations hub in 2020, Odoo plans to take a second floor at Seneca One Tower and build an engineering team here while doubling its overall Buffalo headcount to more than 200 employees.

• One of the region’s most successful tech entrepreneurs, Ashok Subramanian, declared Buffalo as the headquarters of his new startup last year (though Subramanian himself still lives in Manhattan). That company, Centivo, has already raised more than $100 million in venture capital.

• Atlanta-based Rural Sourcing chose Buffalo for a software development hub in 2021.

• HiOperator opened its headquarters building on two floors of the Roblin Building.

Perhaps the most encouraging sign is the volume of companies moving into Series A and B funding rounds.

Kickfurther announced its $5.9 million seed-plus round in April. HELIXintel closed its $1.7 million pre-seed round in May. Verivend raised its $2.5 million seed round in October. Circuit Clinical ($7.5 million) and Kangarootime ($6 million) also closed table-setting rounds in 2021.

Each of these were exciting moments for the companies and their stakeholders. But more importantly, they foreshadowed the ambitious notions of their leaders who want to build big companies in Buffalo in the years to come.

It’s worth pointing out that Business First has expanded its definition of what belongs on this list over the years. Jerry, which raised more than $100 million last year, and Torch Labs, which raised $25 million, are headquartered elsewhere but have significant presences and key employees in Buffalo. Squire, which raised $60 million in venture capital, chose San Francisco as its official corporate headquarters this year but has a growing team and several investors in Buffalo. It’s fair to point out the numbers would be considerably lower without these companies on the list.

From the snowy hillocks of Orchard Park hails John Jahnke, the CEO of Tackle.io, which became a software unicorn this year. Tackle’s headquarters is technically in Boise, where its co-founders reside, but it emphasizes remote work. Jahnke leads the company’s biggest cluster in Buffalo. Greco, the ACV co-founder, is also an investor.

Jahnke has become an angel investor in Buffalo as well. He has written checks to both Circuit Clinical and Verivend in the last year.

One of the most notable projects in Western New York startup-land is Viridi Parente, which closed on $94.65 million in December, supported by billionaire Tom Golisano, National Grid’s investment arm, corporate partners and local investors.

Viridi Parente CEO Jon Williams said his company’s validated lithium ion battery technology represents the future of the energy industry, where sustainably generated electricity will require much more storage capacity. Viridi Parente can install electric drive systems on vehicles; help storage electricity in parking lots to discharge the coming wave of vehicles; and put systems on buildings to store and use excess electricity on the grid. If all goes well over the next 12 months, Williams said Viridi Parente’s growth will be “exponential,” not “incremental.”

The next wave of growth-stage tech companies is already on the way. More than half of the companies on the list raised less than $2 million in preparation for bigger rounds.

The University at Buffalo’s Cultivator accelerator program, introduced in 2021, is onboarding startups and supporting them not just with mentorship but also convertible debt funding. Launch NY continues to be an active funder and mentor to startups throughout central and Western New York. The same goes for the Western New York Impact Investment Fund, which is seeing a payoff for its early support of CleanFiber and Viridi Parente. Varia Ventures, led by Scott Friedman and Andrea Vossler, backed three local startups this year: Viridi Parente, MimiVax and Ellicottville Greens.

After a pandemic-induced delay, 43North is welcoming eight new winners into its portfolio. Several business executives are considering formalizing their investment efforts under a specific brand – you could say a new wave of Buffalo-focused startup investment entities is heading toward the shore. Anecdotally, many of the companies on the list plan to announce bigger rounds in the first or second quarters of 2022.

There was a time when you could walk into a single room and name every important personality in Buffalo’s startup ecosystem. There was a time when you could fit every notable organization and project into one annual roundup story. There was a time when it was fair to wonder whether, and if, any of this was going to work.

Those memories grow small in the rearview.

Startups that raised in 2022

* UB earmarked $100,000 to these startups through its Cultivator accelerator, but they have only received tranches of the funding thus far.

Check out previous recaps from 2020, 2019, 2018, 2017, 2016, 2015 and 2014.