Somak Chattopadhyay, managing partner, writes on behalf of the team at Armory Square Ventures. Armory Square Ventures is a seed and early stage venture fund focused on creating opportunities and jobs for those living in Upstate New York. It is headquartered in Skaneateles.
Being an entrepreneur in Central New York can at times be a vexing and lonely vocation. Our region already boasts engaged and knowledgeable investors coupled with a burgeoning startup ecosystem. There are a slew of talented and committed individuals at organizations like Upstate Capital, 43North and Genius NY, who have corralled talent, capital and resources at an impressive clip over the past decades. But we still don’t have the density or range of capital sources at play in tech hubs like Silicon Valley, Boston or New York City. As a result, founders in our region must work twice as hard to find half the funding, and find they need to compete with better connected counterparts in larger metros throughout the process.
That is why we are thrilled to hear the news that a new biotech venture fund is being launched here in Central New York. Called Upstate Biotech Ventures, the investment vehicle based in the CNY region will draw upon resources in the healthcare space. The sector is one of the top three drawing the most venture investment nationwide, trailing only energy and transportation. We still have significant room to grow in our region as far as seeding these opportunities are concerned, especially at the earliest stages—which is why my team and I are delighted to hear about the new commitment.
For health-tech founders, funding challenges can be particularly acute. Where B2B software companies, for instance, occasionally can bootstrap their way from inception to initial public offering (IPO), health-tech startups invariably require outside funding due to the higher upfront costs. Whether working in diagnostics, devices, hardware tools or significant scientific advances, biotech founders benefit enormously from having early backers who believe in their vision at the idea stage — before prototyping or beta testing.
Somak Chattopadhyay founded Armory Square Ventures in 2014 to find diamonds in the rough among secondary cities and markets. (Photo courtesy of Armory Square Ventures).Photo courtesy of Armory Square Ventures
I spoke to Alex Zapesochny, the founder and CEO of Clerio, a medical device company that my firm, Armory Square Ventures, first invested in back in 2014. The company has raised $60 million across several funding rounds and has matured greatly over the years, iterating and pivoting constantly to expand its product lines. Zapesochny is a pioneer in corrective vision technology. In starting his journey, he acknowledged that he benefited greatly from the infrastructure around the University of Rochester. Yet, in his view, there are a slew of obstacles that remain for founders like him. He anticipates the accelerator will be beneficial for those like him who can demonstrate resilience and high ambition.
“Everyone talks about the Valley of Death, but we don’t necessarily realize how problematic it is,” Zapesochny said. “I’m constantly meeting new or aspiring CEOs, like one who reached out to me this week, a well-known surgeon who wants to spin out a company. And the big issue is always, how does one get those initial dollars to start translating the work we’ve done to the next level?”
Since the start of the pandemic, our region has benefited from a significant uptick in venture investment overall, but much of that increase can be attributed to later-stage rounds when companies are safer bets from a risk perspective. It’s at the earlier pre-seed and seed stages, however, that investors have an opportunity to shepherd founders across (or around) that dreaded Valley of Death.
This problem is hardly unique to Central New York. Skyrocketing interest rates have dried up capital across the broader tech industry, and even artificial intelligence founders are having a harder time raising money than they were in 2021. But the hardest climb will always be for founders working in hardware-centric spheres like medtech.
The launch of Upstate Biotech Ventures is a great first step in addressing the early-stage funding gap. As we’ve seen with Genius NY in the drone space, a concerted effort to seed innovation in a hardware-first market can spur job growth while producing generous returns. Nick Querques, director of New Ventures at the SUNY Research Foundation, noted that Upstate Biotech Ventures will build a portfolio of 12 to 15 companies, with the aim of raising more capital down the road.
We are excited to see our colleagues at Excell Partners, Upstate Medical and SUNY Research Foundation collaborate on this initiative. With luck, other SUNY campuses will follow suit in providing their brightest students and researchers with opportunities to commercialize their findings. The funds mark a critical step forward for researchers and industry leaders invigorated by biotechnology advancements in our region, and we welcome the long-term impacts the investment will seed for life science-based inquiry in the years ahead.