AI startups are moving out of Boston and into Buffalo — here’s why

AI startups drawn to Buffalo’s emerging tech ecosystem: Two Boston-based artificial intelligence startups, Spiky AI and HeronAI, are relocating to Buffalo, New York, as part of a $1 million investment from the state’s 43North startup accelerator program.

• Spiky AI, founded less than two years ago, focuses on using generative AI to coach salespeople in real-time.
• The move highlights Buffalo’s growing appeal as an AI hub, surprising some in the Boston tech scene.
• 43North, named after Buffalo’s latitude, has been instrumental in attracting startups to the region since 2014.

Buffalo’s AI landscape: The city’s artificial intelligence ecosystem is thriving, supported by academic institutions and state-funded initiatives.

• The University of Buffalo’s Institute for Artificial Intelligence and Data Science and its new $275 million state-funded supercomputer contribute to the city’s AI capabilities.
• Burak Aksar, Spiky’s cofounder and CTO, cited Buffalo’s “super large” AI talent pool as a key factor in the decision to relocate.
• The move also offers opportunities to connect with large local corporations, such as M&T Bank, as potential early customers.

43North’s impact on Buffalo’s tech scene: The accelerator program has played a crucial role in revitalizing Buffalo’s economy and reversing the brain drain that plagued the region.

• Since its inception in 2014, 43North has funded 69 companies and created approximately 1,000 jobs in Buffalo.
• The program’s success has led New York state to establish six similar accelerator programs across the state.
• Colleen Heidinger, 43North’s president and a Buffalo native, notes that the program has attracted talent from outside the region and encouraged former residents to return.

Competitive landscape for startup funding: The relocation of these AI startups highlights the increasing competition among states to attract and retain innovative companies.

• Massachusetts, traditionally a strong player in the startup ecosystem, has seen a 9% decrease in startup funding in the first nine months of 2023 compared to the previous year.
• California and New York, the top two states for startup funding, have increased their lead over Massachusetts.
• New York startups raised $18 billion in the same period, representing a 31% increase from the previous year.

Boston’s response to the competition: While Boston has its own accelerators and support systems for startups, the New York strategy of state-backed venture capital funding could serve as an appealing model.

• Boston’s accelerators include MassRobotics and a local Techstars outpost, though most don’t require startups to relocate.
• State funds support startups through initiatives like the Massachusetts Clean Energy Center.
• The success of New York’s approach may prompt other states, including Massachusetts, to reevaluate their strategies for attracting and retaining innovative companies.

Broader implications for tech ecosystems: The relocation of these AI startups from Boston to Buffalo underscores the evolving landscape of technology hubs in the United States.

• Emerging tech ecosystems like Buffalo are successfully challenging established hubs by offering unique advantages and substantial financial incentives.
• This trend may lead to a more distributed tech landscape, potentially benefiting regions that have historically struggled to attract high-tech jobs and investment.
• As competition for AI talent and startups intensifies, established tech hubs may need to reassess their strategies to maintain their competitive edge in the rapidly evolving field of artificial intelligence.