Event Recap: 2023 Investor Outlooks

Beginning with breakfast and networking, Upstate New York investors and community members gathered on February 2nd at the Saturn Club in Buffalo. 

Kevin Quinn, Senior Vice President and Chief Commercial Banking Officer of Five Star Bank, helped kick off the event. He has been in commercial banking for over 25 years. His firm, Five Star Bank, has a lot of interest in innovation. They are investors in local venture and private equity funds and are actively engaging with entrepreneurial support organizations to build their knowledge and connections in this space. 

The panel of investors followed, including Randy Bianchi of Lakelet Capital, Somak Chattopadhyay of Armory Square Ventures, Trevor Messerly of Hamilton Lane, and the conversation moderator, Kelsey Thomas of Withum Holdings. The conversation provided a forum to highlight different perspectives from key Upstate Capital stakeholders and discuss their outlooks for 2023. Some observations on market dynamics highlighted the current challenges and opportunities regarding capital availability and investor sentiments from both venture capital and private equity perspectives. 

The review on valuations was mixed. From Somak’s perspective, many companies are seeing lower valuations. Public market valuations for tech companies have gone down, reducing investor appetite for high-priced software companies. “In this choppy market, people are getting back to business fundamentals,” Somak said, referring to profitability over growth for early-stage companies. Trevor commented that the market is responding to the higher cost of capital by changing the risk-return spectrum. “Today, Hamilton Lane can generate the same return in a deal that they would have expected a year or two ago, but with significantly less risk.”

“Good businesses get high multiples,” Randy said. He elaborated that people are creative with structuring deals, with earnout agreements and contingent cashflows being used as levers to get deals done. He also mentioned that due to the higher cost of debt from rising interest rates, strategic buyers seeking add-ons are more popular in the lower middle market. For people fundraising this year, businesses with great unit economics continue to do well and raise capital easily. For some businesses, though, sales cycles need to be examined closely. “Can you assume the same conversion and close rates from your customers, compared to a year ago?” is one of the questions Lakelet Capital is asking in their due diligence process. 

One shared challenge for investors is the availability of talent for staffing companies. The job market remains strong with low unemployment across the board, making competition fierce for team members at all levels of organizations. One shift amongst companies and investors is human resources becoming a strategic area of focus rather than simply an operational necessity. 

The 2023 Investor Perspectives event was sponsored by Colligan Law, Armory Square Ventures, Western NY Impact Fund, and Five Star Bank. 

Upstate Capital is supported throughout the year by organizations active in both the venture capital and private equity investor ecosystems in New York. 

  • Venture Capital sponsors include New York Ventures, NYSERDA, the SUNY Research Foundation, and GENIUS New York. 
  • Private Equity sponsors include KeyBank, The Bonadio Group, Hamilton Lane, Bluehenge Capital, PeopleEase, Baldwin Risk Partners, Withum, Schwartz Heslin Group and Lakelet Capital. 

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