How New York Startups Access the State's Pre-Seed and Seed Matching Fund
The $40 million Pre-Seed and Seed Matching Fund Program offers equity investments of $50,000 to $250,000 to early-stage startups, with a 1:1 matching requirement from private investors.
New York State offers $40 million in matching venture capital to early-stage startups through the Pre-Seed and Seed Matching Fund Program, a federal initiative launched in January 2023. The program sits within the broader State Small Business Credit Initiative (SSBCI), which has allocated more than $500 million to New York from the American Rescue Plan Act. Pre-seed funding is typically the hardest venture capital to secure for new companies, and this program aims to fill that gap for startups that meet its requirements.
The program is managed by NY Ventures, the state's venture capital arm within Empire State Development. It offers equity investments between $50,000 and $250,000 to companies at the pre-seed or seed stage, with a 1:1 matching requirement: for every dollar the state invests, companies must secure an equal amount from private sector investors.
Who Qualifies
To access the program, a startup must meet several criteria. The company cannot have raised more than $2 million in dilutive funding before applying. It must be registered to do business in New York State and in good standing. The company must also establish its headquarters in New York and maintain at least one C-suite executive—a founder or executive officer—based in the state for at least 12 months after receiving the investment.
The program focuses on technology companies across specific sectors: advanced manufacturing, agricultural technology, climate technology, consumer tech, data platforms, SaaS, artificial intelligence, fintech, healthcare, life sciences, biotech, and medical devices. The program does not currently fund cannabis companies due to federal regulations.
Beyond these formal requirements, the program prioritizes expanding venture capital access to entrepreneurs from historically marginalized backgrounds and to startups in underserved regions of New York State. This focus reflects a policy goal of broadening who gets funded in the early-stage venture ecosystem.
Investment Structure and Terms
The program invests as dilutive equity, not as grants or non-dilutive capital. This means founders give up a percentage of ownership, just as they would with any private venture investor. The state's investment must follow the same terms and conditions as the private co-investor in the same funding round, so the state does not negotiate special deal terms.
Startups can structure the investment as a Simple Agreement for Future Equity (SAFE), convertible note, or direct equity. The choice depends on what the private investors in the round prefer and what the founders negotiate.
To qualify for state investment, a startup first needs to secure commitments from private investors. These can be venture capital funds, angel investor groups, family offices, or accredited individual investors. The state will not invest as a lead investor or as the sole investor in a round. This matching requirement ensures that professional private investors have already validated the startup's business model and team.
The Application Process
Startups apply through an online portal on the Empire State Development website. The program accepts applications on a rolling basis with no fixed deadline. After submitting, founders can expect to hear back within approximately 30 days about their application status.
The program evaluates applications based on several factors: the strength of the business model, the size of the addressable market, the quality and track record of the founding team, the product's stage of development and traction, financial projections and unit economics, competitive advantages, and the potential economic impact for New York State.
The timing of an application matters. Founders should apply after they have secured commitments from private investors but before their funding round closes. Federal rules require that once the state approves matching investment, the actual investment must be completed within 90 days.
“Pre-seed funding is typically the hardest venture capital to secure for new companies, and this program aims to fill that gap for startups that meet its requirements.”
Accessing Technical Assistance
Navigating early fundraising can be complex. Empire State Development has allocated a $1 million grant to LaunchNY, a state-supported organization, to provide free technical assistance to startups applying for the program. This assistance covers legal structuring, accounting and financial planning, and general fundraising guidance.
The program also offers weekly office hours—held on Mondays—where founders can ask questions about eligibility, the application process, and general concerns about the program. These sessions are free and open to anyone considering applying.
Even after a startup is rejected, it can reapply. However, the program cannot provide detailed feedback on rejected applications due to volume. Founders are encouraged to seek guidance through the office hours or LaunchNY's technical assistance to understand what might strengthen a future application.
Things Startups Need to Know
The state's investment is ultimately a business decision, not a grant or subsidy. Founders will dilute their ownership, just as they would with any private financing. The state votes its shares like other shareholders and can participate in board governance depending on the deal structure.
The requirement for a 1:1 matching dollar is strict. If private investors commit $100,000, the state will invest up to $100,000 to match it. If private investors commit $250,000, the state cannot invest more than $250,000, even if the company wants more state capital.
Companies must maintain operations in New York. The C-suite executive requirement is not just a one-time box to check at closing; the person must remain in the state for at least a year after the investment. This is a federal requirement tied to the American Rescue Plan funding.
The program is not designed for later-stage funding. A company that has raised $2 million and is seeking a Series A or later round will not qualify. The $2 million threshold applies to cumulative dilutive funding raised before the application.
