A promising startup company that grew out of a project by three UB engineering students has new capital for growth, thanks in part to the School of Law’s Entrepreneurship Law Center Clinic (e-Law Clinic).
The e-Law Clinic represented the University in a transaction that will invest significant resources in the company, Buffalo Automation. The funding comes from UB’s Innovation Hub, which has money to invest thanks to a $10 million venture capital fund created by New York State.
Buffalo Automation, formed in 2015 and headquartered in East Amherst, uses artificial intelligence techniques to develop autonomous navigation technology for commercial ships and recreational boats, seeking to improve maritime safety. In addition, this year it responded to the COVID-19 pandemic by redeveloping its thermal imaging software, allowing for quick scanning of crowds of people to detect fever.
Matthew Pelkey ’10, who directs the e-Law Clinic, says clinic students work with the Innovation Hub to provide the legal structure for some of its transactions. In previous semesters, he says, students have developed the standard documents that are then adapted to the unique circumstances of each transaction – a particularly complex task because those documents need approval by both UB and the State University of New York.
In general, he says, the goal of any investor – including the Innovation Hub – is to see the company gain traction in the marketplace, then reap the reward of its investment. That happens when the company reaches a “liquidity event,” either by going public or being bought by another company.
“Unlike a traditional investor,” he says, “there’s a dual purpose here, both education and investment. It’s something unique that UB and the law school are doing. I’m actually kind of jealous the students have this opportunity – this would have been great to work on when I was in law school.”
The clinic’s lead in creating the transaction documents was Alex Kaczmarek, a third-year law student who’s in his second semester with the e-Law Clinic. Under Pelkey’s supervision, he represented the University’s interests in creating the investment documents along with attorneys from the Buffalo law firm Lippes Mathias Wexler Friedman, LLP, which represented Buffalo Automation.
It was no small job; Kaczmarek says the transaction documents totaled approximately 36 pages. “It mostly involved a discussion of the specific terms of the deal, and double-checking amounts, percentages and rates,” he says. For example, he says, the investment agreement stipulated that private investors would have to put up a matching amount of money, and detailed how and when the University will reap a return on its investment, either as a repayment of the investment with interest or in company stock.
The experience, he says, was a thorough education in how a venture capital transaction works. “In the clinic, our clients are primarily businesses looking for this sort of investment,” he says. “We’ll talk about all the different things you can do to set them up for it. But to actually be part of a deal like this was really cool. I think the clinic should be a required class for anyone who wants to practice transactional law. The work is something you’d receive as a first-year associate at a law firm. And in the clinic, you have support every step of the way.”