Upstate New York

Regional Entrepreneurship Action Plan

ExEcutivE SummARy

prepared by

Introduction
This Executive Summary outlines the Regional Entrepreneurship Action Plan (REAP or Plan) for LaunchNY, a newly formed 501(c)(3) with initial offices in Ithaca and Buffalo, New York. Operating as a venture development organization (VDO), LaunchNY will drive new, high potential company formation while building the regions entrepreneurial ecosystem.
the region, home to 3.9 million people, is comprised of 27 counties in the western end of New york state, including Buffalo, Rochester, Syracuse, ithaca, and contiguous rural areas (the Region). the Plan is the result of a unique public/ private partnership that included funding and intensive efforts from federal, state, and local government leaders; national and local foundations; regional economic development organizations; and private industry and individuals. With over $700,000 of funding provided primarily by the u.S. Economic Development Administration (EDA), local and regional foundations, regional economic development organizations, and private industry, the Region entered into a partnership with JumpStart inc., a vDO located in cleveland, Ohio. At the time, JumpStart initiated similar projects in other upper midwest regions with funding from the EDA, the John S. and James L. Knight Foundation, and the Surdna Foundation. LaunchNy and the Plan are the result of over 12 months of intensive effort, representing the culmination of the initial phase of the project. the partners have now begun the second phase of the project: capitalizing LaunchNy. JumpStartthrough its JumpStart America initiativeand LaunchNy are now actively seeking to raise $10 million to fund the first two to three years of the LaunchNy budget. With these resources, LaunchNy will be able to provide entrepreneurs with the resources they need to transform their ideas into successful, high growth companies, and engage in a range of activities to catalyze the Regions entrepreneurial ecosystem development. JumpStart America will assume primary responsibility for raising $5 million from national foundations and other sources located outside the Region. LaunchNy, through its board and advisors, will assume primary responsibility for raising $5 million of matching funds.

NORTH COUNTRY

ROCHESTER BUFFALO

SYRACUSE

FINGER LAKES

CENTRAL NEW YORK

ITHACA BINGHAMTON

MOHAWK VALLEY

CAPITAL DISTRICT

WESTERN NEW YORK SOUTHERN TIER

MID-HUDSON LONG ISLAND

NEW YORK CITY

upstate New New york Regional Entrepreneurship Action Plan Executive Summary 1

The Opportunity and Challenge

Entrepreneurship is the Key. High potential startups are the answer to the following questions: i) How will
the united States create the 25 million jobs necessary over the next 10 years to recover from the recession and firmly establish itself as the worlds leading economic engine in the 21st century; and ii) How will regions create the fast growing and competitive economies necessary for long term growth and success? Recent studies show that over the last three decades, companies less than five years old created 44 million jobs and accounted for all net new jobs during that period. Furthermore, startups are more likely to create the technology and knowledge-intensive jobs that attract and retain an educated workforce. Startups are also more likely to keep their enterprises in the regions where they originated. in short, to achieve long term economic success, regions must invest in and establish a high performance entrepreneurial ecosystem.

Regional Assets. the bad news is it can take decades to establish the comprehensive array of assets, resources,
practices, systems, and culture necessary for an entrepreneurial ecosystem to thrive. the good news is the Region has a substantial foundation of valuable assets. the Regions universities spend approximately $1.5 billion each year on research: about $400 million each in Western New york and in the Finger Lakes, about $100 million in central New york, and over $600 million in the Southern tier. the Region benefits from a legacy of corporate innovation practiced by companies such as Kodak, xerox, and Bausch & Lomb, and is home to significant advanced manufacturing capabilities and technologies. Educational attainment is also substantially higher than the national average. Not surprisingly, these assets translate into a credible volume of historical deal flow.

Needed Resources. unfortunately, many of these opportunities fail to advance because the Region lacks
the investment capital and expert assistance necessary to transform this deal flow into fast growing companies. Entrepreneurs, investors, and others active in the Regions entrepreneurial ecosystem acknowledge two realities that stunt startup growth: i) Entrepreneurs cannot find the capital and expertise they need to cross the valley of Deaththe period that begins when the entrepreneur runs out of friends and family money, and ends when the company becomes a quality investment for angel investors, venture capitalists, or other for-profit investors; and ii) theres a scarcity of smart money, investors who combine money with intensive mentoring, advisory services, and network building provided by experienced, successful entrepreneurs. As with many regions, the lack of these resources is a matter of degree. the Region benefits from the efforts of a number of quality organizations that provide capital and expert assistance to entrepreneurs. in many cases though, they simply lack the resources to serve the volume of opportunities. in other cases, they lack the expertise and experience provided by smart money investors.

upstate New New york Regional Entrepreneurship Action Plan Executive Summary

LaunchNYThe Solution
to help a greater number of these high value opportunities transform into successful companiesand help the Region build or attract complementary resources to create and grow a thriving entrepreneurial ecosystemLaunchNy will provide two essential categories of support: investing and Facilitating. As an investor, LaunchNy will provide a select group of High Potential Startups with a combination of investment capital and intensive expert assistance. this pairing will prepare companies to achieve the technical and commercial milestones essential to attracting follow-on investment and customers. For purposes of LaunchNys investment activities, the term High Potential Startups refers to companies that are too early in their commercial development to attract investment capital from most mainstream angel or venture capital investorsin other words, companies located in the valley of Death. As a facilitator, LaunchNy will identify deal flow, promote entrepreneurs and entrepreneurship, create and strengthen formal and informal connections among regional assets, capture and share data and related analyses, serve as an information resource for in-region entrepreneurs, and help complementary resource providers secure the financial support necessary to generate and sustain their efforts to transform the regional ecosystem. With these actions, LaunchNy will catalyze the development of the regional ecosystem while increasing the breadth and depth of resources available to entrepreneurs.

Investing.

LaunchNy will invest in High Potential Startups with the following characteristics: a protectable idea or

technology, a large potential market, a clear value proposition, and the core of a qualified management team. LaunchNy anticipates it will invest in and provide assistance to approximately eight High Potential Startups each year at an average of $200,000-$250,000 per investment. through a dedicated team of experienced venture partners, entrepreneurs, and technical experts, LaunchNy will provide hundreds of hours of assistance to each of its portfolio companies, as well as significant time to other high quality entrepreneurial opportunities. the LaunchNy team will know what it takes to start and grow new companies. the following diagram illustrates LaunchNys investment process (phase names have been modified for clarity):

upstate New New york Regional Entrepreneurship Action Plan Executive Summary

Facilitating, Connecting, Catalyzing.

LaunchNy will also provide a variety of programs and shared services

to: i) increase collaborations and connections among entrepreneurial assistance providers; ii) improve and streamline the entrepreneurs pursuit of valuable assistance; and iii) catalyze the development of the entrepreneurial ecosystem. the following are examples of services that LaunchNy will make available to entrepreneurs, collaborators, and the ecosystem: talent acquisition, inclusion programming, marketing/promotion, deal flow generation, diligence, metrics collection and analysis, intake and cRm systems, and fundraising support to sustain regional entrepreneurship resources. By sharing these services and systems, LaunchNy hopes to reduce the Regions overall cost and increase the resources that can be directly invested in startups.

IdeaCrossing. to accelerate expansion of the entrepreneurial network and the creation of productive connections and
collaborations, LaunchNy will facilitate the customization and rollout of ideacrossing (www.ideacrossing.org), JumpStarts online community that connects entrepreneurs with the resources necessary to turn innovative ideas into viable businesses. ideacrossing offers LaunchNy, its regional partners, and their marketing partners the following services: i) a promotional vehicle to generate awareness and connect regional marketing partners websites; ii) a mechanism to connect entrepreneurs, investors, service providers, and mentors; iii) private workspaces that entrepreneurs can use to collaborate with their networks of mentors, investors, service providers, business partners, and others; iv) a low cost, online means for many participants in the entrepreneurial ecosystem to find and engage with each other in a manner consistent with their relationship; and v) a cost effective mechanism to reach rural entrepreneurial teams and enable them to collaborate. ideacrossing will provide the Region with a customized landing page and online activity reports. LaunchNy will work with JumpStart, regional collaborators, and regional marketing partners to reach targeted markets using a combination of traditional marketing and ideacrossings unique capabilities.

Economic Inclusion and Diversity

LaunchNy is committed to inclusion and diversity in its staffing, operations, programming, outreach, and processes. Based on proven inclusion practices and programming implemented by JumpStart, LaunchNy will deploy its resources in a manner designed to ensure it identifies and provides support to as many High Potential Startups as possible, including those owned or run by women and minority entrepreneurs, or located in distressed inner city areas. LaunchNy will engage in specific outreach and engagement activities provided by a diverse network of experienced, trusted entrepreneurs. inclusion efforts will not materially alter the investment criteria that LaunchNy uses to provide capital or assistance to entrepreneurs, but will help ensure that all women and minority entrepreneurs involved in High Potential Startups are aware of the opportunities, encouraged to participate, have access to resources, and are supported effectively as they apply for services or investment from LaunchNy or its collaborators. JumpStart will continue to advise LaunchNy as it begins to implement its inclusion practices and programs.

upstate New New york Regional Entrepreneurship Action Plan Executive Summary

Returns and Evergreen Fund

LaunchNy is a nonprofit venture development organization. its role and objectives are more ambitious and complex than those of a traditional for-profit fund. LaunchNys role is to fill a gapto provide funding and support for valley of Death opportunities that are generally insufficiently developed to attract for-profit investors. these companies are months and sometimes years away from achieving the technical and commercial results required by for-profit investors. Given the inherent risk in valley of Death investing, it is unlikelyLaunchNy will generate a traditional return in five to seven years as targeted by venture and angel investors. the risk and LaunchNys decision to limit its investments to two rounds make it unlikely to see a return in less than eight to 10 years. LaunchNy must therefore rely on philanthropic, governmental, and related contributions to fund its investments and operations. yet, LaunchNy does generate a return for its funders. LaunchNys return and its primary measure of progress in moving companies from idea to market is follow-on funding. As described below in metrics, LaunchNy will measure success on the basis of the amount of follow-on funding attracted and revenue generated by portfolio companies, as well as other companies that received substantial assistance. the ratio of follow-on funding to LaunchNys investment is known as the leverage ratio. LaunchNy expects to generate a leverage ratio of 3x by its third anniversary and at least 10x by its 10th anniversary.

Metrics
LaunchNy will measure its performance against a well-defined set of process and outcome metrics. Examples of process metrics are traffic to LaunchNys website or attendance at outreach events. these provide a first level productivity measure of marketing and promotional efforts. LaunchNy will also track process metrics such as the number of companies that receive assistance, the time required to move a company from first contact to investment, and the time required for a portfolio company to attract a follow-on investment. LaunchNy will track the effectiveness of its marketing and outreach efforts in securing participation from women and minority entrepreneurs, and will also measure portfolio companies against specific value-creating milestones, and monitor cash flow against the Plan. Follow-on funding and new revenue by portfolio companies are two of the most important outcome metrics. LaunchNy will target a leverage ratio of one-to-two times the total funds expended during the first three years of operation, five times by the end of the fifth year, and in excess of ten times by the tenth year. LaunchNy will annually publish its targets, results, and overall economic impact. the vDO will retain an independent expert to prepare an Annual Economic impact Report. LaunchNy will continuously monitor its performance and adjust its programs and assistance in accordance with results and emerging market needs.

upstate New New york Regional Entrepreneurship Action Plan Executive Summary

Projections
to ensure that LaunchNy achieves its goals, LaunchNy must ultimately secure funds to sustain its efforts beyond the initial 28-month period, and possibly for as long as 10+ years. LaunchNy must therefore establish long term funding relationships with a variety of sources, which will require a productive development effort sustained throughout the organizations existence. this development group will also assist complementary resource providers in their fundraising efforts. initially, LaunchNy, with JumpStarts assistance, must raise a total of $10 million to fund the first 28 months of operation. JumpStart will use its best efforts to secure up to $5 million from public, private, and national philanthropic organizations located outside the Region. JumpStart will work with regional leadership to raise the remainder from in-region public, private, and philanthropic sources. the $10 million budget breaks down into these major categories: i) investments; ii) programs and services for entrepreneurs; and iii) management and fundraising. the following is a summary of LaunchNys budget over the first 28 months of operations:

MONTHS 1-12 investment programs & services management & fundraising $2.01M $0.92M $0.48M

MONTHS 13-24 $3.44M $0.95M $0.5M

MONTHS 25-28 $1.23M $0.32M $0.16M

TOTAL $6.68M $2.19M $1.14M

% OF TOTAL 67% 22% 11%

TOTAL

$3.41M

$4.89M

$1.71M

$10.01M

100%

Next Steps
LaunchNy has recruited a board, formed a nonprofit corporation, and filed to obtain 501(c)(3) status. the board has retained an interim cEO, and together with many of the original Governing Board members, they are actively raising the funds required to initiate operations. JumpStart is also engaging with national philanthropic organizations who are candidates to contribute half of the $10 million to fund LaunchNys first 28 months of operations. LaunchNy has also initiated a national search for a cEO.

upstate New New york Regional Entrepreneurship Action Plan Executive Summary