When Rochester venture capital firm Impact Capital raised its first fund, none of the 11 companies that ended getting investment were from the Capital Region.
Impact Capital founder Thomas Bonadio — who’s also founder/senior counsel at the accounting firm The Bonadio Group — is looking to change that with the firm’s second fund.
“We think there’s some good companies out there. I mean, if you look at upstate New York, there are more universities, more patents than anywhere else in the country except Silicon Valley,” he said. “The only reason we don’t have that type of robust incubator environment here is we don’t have the money.”
The new fund, known as “Impact Capital 2,” is now accepting applications from companies across upstate New York seeking funding. It is working towards raising a total of $15 million to distribute. Fundraising is still open for about 14 months and the firm is seeking a state matching grant to meet the goal.
The second fund will most likely invest in five to six deals, so the investors will be picky, Bonadio said. The fund is for companies raising Series B or C rounds but is open to a variety of products.
“Unfortunately, there aren’t very many like us. There’s not a lot of capital up here. It’s just really good for us because we get to pick and choose. And we can make pretty good deals with the money we have,” he said.
Impact Capital’s selection process begins with online application screenings and written pitch submissions. Then, companies that pass the screening are invited to a “Shark Tank”-style meeting. Impact Capital investors will be placed on the boards of winning businesses to help leadership teams meet goals.
The first fund, launched in 2018, received over 1,000 applications for $21 million. The fund was distributed over about four years.
A notable graduate of that first fund is fiber internet provider Greenlight Networks — which also got a major investment from Tom Golisano. It sold a controlling interest to a private equity firm about three years after Impact Capital invested.
Bonadio said the success of Impact Capital’s first fund illustrated the key pieces that its investors are looking for. Here’s what Capital Region companies need to know to score an investment from Impact Capital.
Experienced management team
Bonadio said the investors look to see if the leaders of a company have done this before.
“We want experienced honest, reliable management. People who have probably done it before, people who know how to bob and weave through the bad times, because they will have bad times. Really, probably our No. 1 checkmark is: Do we have faith in this management team?” he said.
Product with growth potential
Investors with Impact Capital want to see products that can have a big impact. When the firm invested in Greenlight Networks, the company continued to expand as the popularity of fiber internet grew.
“They have to have a product that’s got the potential to grow. We’re looking right now at things that are in the energy field, we’re looking at health care — so products that could really expand tremendously,” Bonadio said.
Sales to show for it
Bonadio and his fellow investors aren’t just looking for the next great idea — they’re looking for the idea that’s resonating with customers. Take Greenlight Networks, for example.
“They were in a product that was in high demand. The product was proficient and people really liked it. Literally, they couldn’t make it fast enough because everybody wanted it,” Bonadio said. “They basically went into Spectrum’s areas and had great demand.”
