Rochester’s innovation puzzle

The Rochester region produces more patents per capita than most of its peer cities and wins tens of millions in competitive federal research grant dollars each year. But a new NextCorps report says that innovation has not translated into a surge of high-growth startups, venture capital investments, or new jobs.

Jim Senall, president of NextCorps, shared that message last week at a quarterly meeting of the Finger Lakes Regional Economic Development Council. Attendees took the information better than he expected, he says, and the conversation continued after the meeting. (FLREDC has representatives from nine counties, including economic development officials.)

“Historically, we have talked about ourselves as this innovation place forever,” Senall says. “Has anyone looked lately?”

In asking that question, Senall means to focus on the fact that, while there are plenty of startups being formed (NextCorps helps roughly 100 businesses a year), the Rochester area hasn’t seen these fledgling ventures scale for growth. Nor has venture capital poured into the region—a longstanding challenge.

To bring change, Senall believes that entrepreneurship and innovation need to become an explicit part of the region’s economic strategy. Buffalo’s regional economic development strategy, by contrast, has entrepreneurship as a core pillar.

“The two institutions in this town that really drive high-tech startup growth are NextCorps and Excell (Partners),” says Theresa Mazzullo. A NextCorps director and CEO emeritus of Excell Partners, she also is a member of the regional council. “As a region, we really need to fortify those two entities and make sure that they have the necessary resources and the bandwidth to really take on this task of realizing the potential that exists in our region with all the talent that we have.”

The State of Innovation report found that the region is a leader in research and development and intellectual property. Rochester-area inventors are granted 700 to 800 patents annually. Ranked by the total number of patents, Rochester outperforms most peers, including some larger metros. The report compares the area with Buffalo, Syracuse, Cleveland, Columbus and Pittsburgh.

During the 2021-2025 period, Xerox received the most patents (569), followed by the University of Rochester (150). Businesses like LSI Solutions, Kyocera, Taiwan Semiconductor Manufacturing Co., Sony Semiconductor are also on the list of patents granted to local inventors.

The report also cites census data showing that 1,100 to 1,200 new businesses with at least one employee are formed each year in the Rochester region. On a per-capita basis, Rochester outperforms all peer metro areas in new business formation. (The data does not identify the markets in which these businesses operate.)

The region also stands out when it comes to Small Business Innovation Research and Small Business Technology Transfer grants. Both federal programs are highly competitive, and the report suggests that they validate the quality of research. These grants are often sources of early-stage technology funding.

Rochester-area startups and small businesses win 35 to 45 SBIR/STTR grants each year, totaling $20 million to $25 million annually for early-stage technology commercialization, the report states. It is an outperformer in this category as well.

“Every time you look at the stats, you’re blown away by them,” says Mazzullo. “We should be (the) Silicon Valley of the East. We really should.”

Excell and NextCorps have been successful at incubating, grooming and providing seed capital to companies. According to the NextCorps Impact Report, released a month ago, the nonprofit helped 992 companies in the 2018-2025 period.

Excell Technology Ventures, an offshoot of Excell Partners, at year-end 2024 (the latest data publicly available) had more than $80 million under management with individual investments ranging from $250,000 to $1.5 million. That is just one aspect of the efforts to help young firms. Luminate NY, an accelerator administered by NextCorps, has been successful with businesses in the optics, photonics and imaging industries; and Excell has nurtured life science companies in addition to several other sectors. URochester and Rochester Institute of Technology have also helped commercialize ideas.

In 2019, Jonathan Gruber, Ford Professor of Economics at the Massachusetts Institute of Technology, and Simon Johnson, the Kurtz Professor of Entrepreneurship at Massachusetts Institute of Technology and a former chief economist at the International Monetary Fund, brought attention to Rochester.

The co-authors of “Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream,” placed Rochester at the top of a list of potential tech hubs. It was followed by Pittsburgh and the Syracuse/Utica area. Buffalo ranked No. 15. (The book, heralded by community and business leaders as a blueprint for the future, targeted cities other than obvious growth hubs. The authors identified 102 cities in 36 states that could be next-generation tech hubs.)

During his presentation last week, Senall reminded attendees of the book.

“I wanted to kind of anchor it back to that to say, ‘Look, it’s not us telling it, because I know no one believes anyone locally that says anything. It’s got to be an expert from outside,’” he notes.

Gruber visited Rochester in 2019 to participate in a panel discussion. When he spoke with the Beacon at the time, Gruber noted that while the conditions for growth were favorable, the area still had a tough time competing with cities like Boston and San Francisco.

“To compete with these cities, Rochester needs to demonstrate an enormous commitment to scientific advance that will bring the best scientists and an influx of capital to finance new businesses,” he said. “And that means a dedicated, enormous financial commitment to science in the city.”

Matt Hurlbutt, president and CEO of Greater Rochester Enterprise, says innovation is especially important to next-generation companies across industries. URochester and Luminate NY’s success play an important role in positioning the region.

“That’s really one of our key talk tracks, as we talk about companies that are not just considering the region for an investment today, but also how they work with our colleges, universities, and the outstanding people that we have here, the PhDs, the technicians, and the engineers to continue to advance technologies that will lead to more growth,” Hurlbutt says.

Entrepreneurship advocates agree that it will take a commitment to raise the region’s profile. The report identifies two gaps. One is the failure to move startups through the growth and scale-up stages to generate wealth and significant jobs. The second is a perception gap. “Innovation & Entrepreneurship is not yet viewed as a core pillar by community leaders, despite national data and local anecdotal evidence that shows it’s the #1 driver of growth,” the report states.

According to the report, startups in the Rochester region are closing only approximately 15 to 25 venture capital deals annually, totaling $40 million to $100 million.

Rochester lags nearly all peer metros studied in total annual venture capital investments. On a per-capita basis, it is dead last. From 2021 to 2025, Columbus had $3.9 billion in venture capital investment and Pittsburgh had $3 billion. Rochester had $394 million.

Senall says the gap between Rochester and other cities is not new.

“The surprising part to me was when you do it on a per-capita basis for venture capital that we’re actually less than Buffalo and Syracuse,” Senall says. “That was the shocking number to me—like, holy cow, it’s not good. They’re not good either, but we’re even worse than them.”

Adds Senall: “You don’t know where you’re going to catch the next big win. So, we just have to ramp up the amount of activity that’s happening here, get these things funded. Get them scaled up quickly.”

The report identifies three factors for lagging growth and scale-up beyond capital: lack of experienced startup founders and senior staff; limited access to industry experts; and difficulties in securing first customers for proof of market or product.

“(The report) just solidifies very, very effectively (that) the data to support the research is there, but we are weak in scaling and in commercializing,” Mazzullo says. “We get (startups) to a certain point, and then we don’t have the dollars for them to really go to that next level that is going to take them or take us as well to the promised land.

“It’s a combination of, you know, not having enough access to capital and venture capital in the region—that is huge—and then you also need mentorship,” she adds. “We need more serial entrepreneurs who have been there, done that, and who come back and keep that cycle going, and at the same time are mentors to the other people.”

The report is pointed in its assessment of how Rochester views innovation and entrepreneurship.

“Rochester community and business leaders don’t all rally around innovation and entrepreneurship as a North Star. The general community lacks a culture of entrepreneurship,” it states.

“We need to have sort of a little reality check,” says Mazzullo. “I think too, too many people are tied to the legacy that we’ve had here in our town.”

While Rochester’s traditional Big Three were important, she believes the region needs to look ahead.

“They were awesome, and they really put Rochester on the map, but it’s going to be new companies and the high-tech companies that are really going to be the future of our region,” Mazzullo says. “We really need to just sort of look forward and not look backward.”

Ryne Raffaelle, vice president of research at Rochester Institute of Technology, like Senall and Mazzullo points to the region’s many strengths as an innovation hub. Rochester has “a strong startup culture, (an) entrepreneurial community,” he says, “It’s not just patents, but it’s how many patents are getting licensed and are getting used in small, medium, and large companies. We’ve got that in spades. In many ways, we’re doing very well.”

He agrees, however, that “we probably don’t value (entrepreneurship) as highly as we should as a community.”

“Because it is one of those things … it’s like a hidden driver of the economy,” says Raffaelle, who also is a NextCorps board member. “People look at Micron, and ‘Oh, there’s a driver of the economy.’ But you look at some programs like Luminate, for example, all these small businesses from all these corners of the globe, all coming and setting up shop in Rochester, and that’s bringing a lot of intellectual and technological talent to our region. You never know how that’s going to play out over time.”

NextCorps has seen increased demand for its services over the last several years, Senall says. The organization is expanding to meet that demand.

The State of Innovation report says that the region needs to increase the rate of high-growth startups by 10x and translate patents into commercial enterprises. Proposed solutions in this category include launching a venture studio that pairs innovations with founders and funding from the start, and a regional innovation alliance to coordinate among key players, including NextCorps and Excell, and share connections.

Hurlbutt points to GRE’s annual report where the organization highlights innovation, including patents and the area’s STEM prowess.

“Sometimes I think we need to, to a degree, slow down and help people understand how those things connect,” he says. “The patents, the innovation are important, and that helps us create more companies, more investment, and also lead to next-generation capabilities that play out across the world, and we see that, but I think we need to be a little bit more vocal on that point.”

The other area of focus is addressing the scale-up bottleneck related to talent and connections. The suggestion here is to create a network of experienced executives and bring industry experts back to the region. A business ambassador network could provide mentorship and industry connections, and could even serve as pilot customers while building a group of student venture fellows, increasing access to a talent pipeline.

Fixing the funding bottleneck, according to the report, requires relationship building. Hosting venture capital conferences, connecting with more than 100 out-of-market funders, and expanding angel investor groups are just some ways to improve deal flow.

Raffaelle notes that alumni from Ivy League schools such as Harvard University and MIT invest in spinoffs from their alma mater. While URochester and RIT invest in securing patents, they don’t have similar alumni investing funds.

“We do not have the alumni investing funds that you’re going to see associated with the schools in Boston or that are in Silicon Valley,” Raffaelle says. “We don’t have quite that heritage yet.”

To augment a culture of entrepreneurship, the report advocates embedding innovation and entrepreneurship as a core element of all regional economic growth efforts, driving more private-sector dollars toward both, and publicizing startup wins broadly.

Finally, the report says that to create jobs and wealth efficiently, the ecosystem needs a way to measure growth and track pipeline performance. An AI-driven startup database could help build a tracking system to monitor local tech startup metrics and key performance indicators.

Ultimately, it will take more than one agency to increase momentum. Senall views it as a community-driven, collective effort.

“It could be the regional council, the business leadership of our community. If they all bought in and said, ‘Yeah, let’s focus on fixing this,’ that would be huge,” he says. “And then, even broader than that, the general business community, beyond the 20 people around that table, that would be even better.”

Neighboring Buffalo has been successful at making entrepreneurship part of its economic development strategy. In its 2023 strategic plan, for instance, the Western New York Regional Economic Development Council listed innovation as one of four strategic pillars. The other three are placemaking, workforce and tradable sectors. FLREDC’s core focus areas are workforce development, quality of life, industry growth and built environment.

“I don’t like complaining about what Buffalo has, or what somebody else has, and that we don’t have, (but) obviously they’ve had the Buffalo Billion, and the Buffalo Billion Two, and then 43North has been funded at twice as much as the Luminates of the world,” Senall says.

The difference, he believes, is the explicit focus on regrowing Buffalo. Excitement around new companies and jobs is evident.

“I’m ready for us to start being more explicit about Rochester,” Senall says.

“We always get criticized that we don’t tell our story well enough,” he says. “We get people from Arizona, they come here, and they’re like, ‘We had no idea.’ We get people from all over the country. It is, unfortunately, (a) best-kept secret.”

Smriti Jacob is Rochester Beacon managing editor.

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