Somak Chattopadhyay has witnessed high energy and enthusiasm among startups in Rochester and across upstate. His firm, Armory Square Ventures, recently helped Jorsek, a local knowledge management software firm, raise $2.7 million.
The round, led by ASV and joined by Greycroft and Drake Ventures, is expected to help Jorsek ramp up sales and marketing efforts. The financing was significant in that it marked the first time Greycroft, a national private equity firm, invested in Upstate New York.
In his travels to Rochester, Chattopadhyay, who lives in Skaneateles, has discovered ambitious and inventive entrepreneurs. He expects the area’s strengths to shine through new ventures, and is actively looking at other investments in the upstate region. The Beacon asked Chattopadhyay a few questions.
ROCHESTER BEACON: Why did you decide to invest in Jorsek? How did the deal come about?
SOMAK CHATTOPADHYAY: Patrick Bosek, Jorsek’s CEO, attended our Winter Holiday BBQ earlier this year. We invited entrepreneurs from across Upstate New York. Among the attendees was Joe Nieman, founder of our portfolio company, ACV Auctions. Joe gave a brief talk at this event about founding and scaling his company in Upstate New York. He noted to our attendees how ACV Auctions benefited greatly from venture capitalists who helped him scale his business. Joe also highlighted how important it is to build companies in Upstate New York at a time when most venture capitalists seek to finance startups elsewhere, and that Armory Square Ventures has a unique investment thesis and approach to helping companies.
Patrick and I had subsequent conversations about the team’s aspirations for Jorsek in the future. We believe Jorsek is transforming the knowledge management industry through a cloud-based platform in much the same way Salesforce transformed the customer relationship management industry in the 1990s. See our press release here for more information on why we invested in Jorsek. There are already clear indicators Jorsek will be a successful long-term business and has venture scale potential.
We led Jorsek’s first institutional round and were joined by Greycroft and Drake Ventures. The round marks Greycroft’s first investment in the region.
ROCHESTER BEACON: Your firm has invested in at least two Rochester firms. Are you looking at others? What have you discovered so far about early-stage firms in Rochester?
CHATTOPADHYAY: In addition to Jorsek, we are investors in Clerio, an innovator in laser-based vision correction technologies. The company is led by Mike Totterman, Alex Zapesochny (publisher and co-founder of the Rochester Beacon) and Sasha Latypova. The three founders built two other successful companies in the health care sector in Rochester. We are fortunate to be investors in Jorsek and Clerio and looking actively at other startups in the region.
We have discovered that in Rochester and across Upstate New York, there are ambitious, industrious and inventive startup entrepreneurs that will thrive in years to come. The region has typically been understated about its strengths.
Living in Rochester and across Upstate New York has meant the chance, for instance, to buy a home you like but can also afford; getting access to excellent schools; and the opportunity to participate in a collaborative startup and research community. In short, the city offers a great quality of life and those measures are becoming increasingly important as more families are priced out of New York City, San Francisco and Boston. It’s also a very short plane ride to any major city on the East Coast, which makes it very easily accessible to larger tech hubs.
As young people have migrated outside of major cities, there has been a natural rise in startup activity. We see that trend across Upstate New York and expect it will continue. At events and conferences in Rochester but also in Buffalo, Syracuse and Ithaca, there is now an influx of young entrepreneurs from other cities and they are eager to participate in the region and make it their home. They provide a major boost to the local ecosystem and Rochester is at the center of that evolution.
ROCHESTER BEACON: If you were to describe Rochester to another venture capital investor outside the area who hasn’t invested here, what would you say?
CHATTOPADHYAY: Rochester benefits from talent and expertise that flows from multiple communities. As a result, we foresee cross-pollinating ideas and teams will become a distinct strength for the Rochester area. It is just an hour flight from most major cities in the Northeast. The city already has a rich industrial history and world-class universities including RIT and the University of Rochester. The city has been home to multiple companies that have generated billions in exits in the software and technology sectors.
MIT economics professor Jonathan Gruber recently ranked Rochester as a top emerging hub in the country to watch, out of 102 metropolitan areas in the U.S. Other Upstate New York metro areas such as Syracuse, Binghamton/Ithaca, Buffalo and Albany also ranked in the top 20 cities of Gruber’s tech hub index. The ranking is based on city statistical data, including the population’s age, education level and quality-of-life metrics such as housing prices. That is significant.
ROCHESTER BEACON: Rochester has often lamented the lack of early-stage funding. Is that true? What stands in our way to help launch fledgling companies? How can we overcome that?
CHATTOPADHYAY: There is no question that the vast majority of VC dollars have historically flowed to regions like Silicon Valley, Boston, and NYC. However, this trend is changing. More VCs are starting to realize that great companies are being built outside of the major coastal cities. VC funding in regions in Upstate New York has increased exponentially in the past few years, especially at the later stages. There is a unique opportunity for Armory Square Ventures to lead more rounds and connect great companies to talent and follow-on capital in other regions.
Let me add that there is an energy and enthusiasm at the moment around startups upstate. Demographic trends also lean in our favor. At Armory Square, we remain firm in our belief that the best is yet to come.
Smriti Jacob is Rochester Beacon managing editor.