For the last three years I have had the pleasure of writing this editorial for Business First as part of their startup edition; reflecting on the growth and progress of the startup ecosystem in Western New York. Each year it seems there are new challenges, but also new opportunities – cause for celebration, optimism…and uncertainty. This year is proving no different.

Since 2014 Buffalo startups have raised over $1.6 billion, according to Buffalo Business First. For the last five years that number has exceeded $200 million annually (with over $500 million in 2021). This is new money invested in Western New York, and its impact on the local economy is undeniable. Whether 2023 will hit this same watermark, however, remains unknown. Inflation, continuing COVID supply chain challenges, and rapidly rising interest rates have created strong economic headwinds that are impacting most aspects of the U.S. economy. The startup community is no exception.

Over the last year quarterly capital invested fell more than 60% and deal count was down 25% according to reports from PitchBook. Startups raising money from investors are now expected to extend capital runways to 24 months before their next raise. Founders are being asked to do more, with less. A couple of bright spots perhaps are that early-stage seed investments have not yet seen the same impact, and investors are still holding on to a significant amount of dry powder.

The recent collapse of Silicon Valley Bank (“SVB”) has thrown yet another wrinkle into venture capital markets. While all SVB depositors were guaranteed that their balances would be protected under the FDIC, its collapse will surely have consequences. The bank was a cornerstone of the venture capital community, providing venture debt to startups and credit facilities to general partners at venture funds to expedite transactions. The potential absence of those facilities could further slow an already descending level of venture activity –and Buffalo is not immune.

It seems likely that 2023 will present a new challenge for Western New York startups, and the tenacity and strength of what has been built will no doubt be tested. But we’ve been tested before – and we’ve pulled through by relying on Buffalo’s greatest asset: our community.

While there will be challenges, there will also be opportunities. Adversity presents moments for new innovations, ventures and growth. Western New York is better poised now than it has been in decades to take advantage of those opportunities with a lower cost of doing business and higher quality of life compared to higher-profile ecosystems. And now, after nearly a decade, we also have a vibrant startup ecosystem with multiple success stories.

“Growth begets growth” is what many of us were told 10 years ago – that, if Buffalo could get a few wins, they would exponentially impact the community and result in further growth. Looking back, it is clear that this is happening. There are more support organizations than ever for entrepreneurs. LaunchNY and the Western New York Impact Investment fund have continued to invest in young startups. The UB iHUB Cultivator program is deploying early seed funding and accelerating the growth of young startups with programming and support through Blackstone Launchpad and the Entrepreneurship Law Center. At the same time, NY Ventures announced a $30 million dollar pre-seed matching fund program earlier this year. 43North continues its success and BootSector has taken up the mantel of organizing grassroots efforts for entrepreneurs. Companies are being founded, growing and succeeding through this collective effort.

There are certainly reasons to be concerned about 2023, but there is also much to be optimistic about. Our startup ecosystem has come so far, with so many people contributing. There’s a lot to be proud of and a lot of work to still do. Our success certainly cannot be taken for granted, but there is no denying how far we’ve come. Colligan Law is proud to play an important role in our startup community – and we look forward to continuing to fuel its momentum. Our firm is built on a spirit of entrepreneurship; it embodies who we are.