On the first Wednesday of every month, the Hudson Valley Startup Fund (HVSF) meets at Marist College in Poughkeepsie to discuss potential companies to invest in. At the end of each session, the angel investors listen to two 30-minute pitches from two local startups. HVSF—which includes member investors from six Hudson Valley counties, including Westchester—welcomes companies of any industry to present. The group does, however, screen for two prerequisites: First, the founder or business must be based in the Valley. Second, the startup must be in high-growth mode.
What’s their process? Once the angel investors identify a regional startup with potential, the fund’s management team then performs due diligence on the company. So far, only one presenter has passed the fund’s rigorous appraisal process. Jean Claude Frajmund scored $175,000 in funding from HVSF earlier this summer for his Newburgh-based company, Eco Shrimp Garden, an indoor urban farm focused on producing sustainable, local, and fresh shrimp.
DiMarco says Frajmund’s presentation enlightened the members about how the multi-billion dollar shrimping industry imports tons of seafood from Southeast Asia, and how its traditional harvesting methods lead to environmental- and public-health dangers.
“One of our early investors, Tim Dean, really wanted us to accomplish more than a return on investment,” says Tony DiMarco, a founding member and one of five co-managers at HVSF. “So our investments are really about establishing a culture of entrepreneurship in the Hudson Valley.”
When DiMarco was director of strategic initiatives at Marist College, launching a campus incubator was among his pet projects. By 2014, the endeavor had introduced him to dozens of local entrepreneurs in dire need of funding. But the only two angel-investor networks based in the Hudson Valley had shuttered during the Great Recession.
“It was clear we needed an angel group to come together,” says DiMarco, a former IBM employee and software entrepreneur. Before its launch, the Hudson Valley was the only region in the state without an angel network or fund.
Chad Gomes of Hudson Valley Startup Fund (left), presents an investment check to Jean Claude Frajmund of Eco Shrimp Garden at the HVSF office in Kingston.
So DiMarco went north to meet with Sam Ticknor, executive director of the Upstate Venture Association of New York (UVANY). Ticknor introduced him to Dick Frederick and Joe Richardson of Eastern New York Angels (ENYA). The Albany angels invest in early stage tech companies in the Capital region, and had already built a shining track record with seven recent investments, including Colonie-based thermoelectrics company ThermoAura.
“We really liked the ENYA fund approach,” says DiMarco. Why reinvent the wheel when we can leverage a proven, successful model?”
He then connected with Silicon Alley heavyweight David Rose, who’s considered the godfather of angel investing in New York City. DiMarco’s network of entrepreneurial advocates encouraged him to host a series of events throughout the fall of 2014. “We organized information sessions in each county just to develop a list of interested investors,” DiMarco recalls.
DiMarco says once the first 10 investors committed to the fund, momentum soon followed. The 44-member network has drawn a mix of talent from across the valley, ranging from food to tech. The management team includes Johnny Lehane, a former AOL staffer, and Noa Simon, former partner at TD Growth Capital.
HVSF’s membership also includes Westchester resident John Cohn, managing director of Diamond Capital Advisors, a global firm focused on mergers & acquisitions. Before joining HVSF, Cohn played an active role in empowering local entrepreneurs. He is a member of the Westchester Business Executives (a nonprofit that aims to support local small businesses by exchanging ideas). He also serves on the Economic Development Task Force at the Westchester County Association, where he is a Partner in the Accelerator Network.
“We have some members with a wide-range of expertise, so the collective intelligence from our 44 investors is a powerful thing,” says DiMarco. “It’s not just about the money. We like to take a strong advisory role and hold a board seat at the companies we invest in.”
DiMarco shares that oftentimes, founders are eager to pitch but simply aren’t ripe for presenting. He offers entrepreneurs some advice: “Have your important points ready and be prepared to answer tough questions. Be wary if your pitch doesn’t mention your team or founder’s story because those are the keys we look for.”
But he assures fledgling entrepreneurs that they shouldn’t lose hope. HVSF, for example, has launched an Advocate Program to consult companies who need more guidance. “An advocate will help them identify where they have gaps,” explains DiMarco. “We want them to have their best foot forward. That mentoring and advisory role is really important to us.”
At present, the HVSF has three companies in due diligence and expects to make at least two more investments by end of year.