New York City Investment Fund Supports Biotech, Cleantech, and Now “Fintech” Startups

5/9/11Follow @arleneweintraub

On May 2, six startups that are developing new technology tools for the financial services industry started a 12-week program of mentorship, networking, and seed funding from New York City Investment Fund, a 15-year-old fund founded by Henry Kravis, founding partner of Kohlberg Kravis Roberts & Co.

The companies and their products will be in stealth mode until July, but NYC Investment Fund’s CEO, Maria Gotsch, is clearly elated that the program is off the ground. “These companies have interesting solutions to issues the financial sector has,” says Gotsch, who refers to the new market for financial technology tools as “fintech.”

The New York City Investment Fund is an affiliate of the nonprofit Partnership for New York City, and its mission is to create jobs by diversifying New York City’s economy. Initially, 67 private and corporate investors provided $1 million a piece to the fund as interest-free loans or charitable contributions. A second round of fundraising brought the total value of the fund to $115 million. “The deal was we will preserve the capital, make enough money to pay our expenses, and if we make any returns, they come back to the fund,” Gotsch explains. “It’s an evergreen fund.”

Lately, the NYC Investment Fund has been focusing on sectors that don’t get much attention—or much funding—from venture capitalists in New York City. Fintech, biotech, and cleantech top the list. The fund isn’t just doling out money to struggling startups in those industries, however. Its staff of 12 also arranges networking events and educational programs for entrepreneurs, and matches them up with mentors who can advise them throughout the process of launching their companies.

About two years ago, Gotsch and her staff doubled down their efforts to fill what they saw as a gaping hole in the New York venture capital scene: Startups in the digital media space were raking in the dough, while other technologies were still starving for capital. “We decided a year and a half ago to stop investing in digital media—it doesn’t need more money,” Gotsch says.

The first new program the fund launched to address an underfunded sector was Bioaccelerate, a competition in which scientists who have developments they want to commercialize compete for $250,000 each in seed money. “What we’re funding is proof-of-concept research,” Gotsch says. The money might be used, for example, to test new devices or drugs in large animals, such as pigs or monkeys. Such tests are vital for attracting the interest of venture capitalists, but funding from sources such as the National Institutes of Health is scarce.

The first Bioaccelerate prizes were handed out last May to six scientists, whose inventions ranged from a handheld device to test for infectious diseases to a cancer drug being repurposed as a treatment for cardiomyopathy. The winners were matched up with mentors, who are now helping them prepare to transform their inventions into companies.

The winners of the second Bioaccelerate contest will be announced by the end of this month. (Watch Xconomy New York for complete profiles of the winners.)

The new fintech program is based on many of the same principals that have made Bioaccelerate a success, Gotsch says. The idea is to recruit … Next Page »

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