a promising market for venture investment

A PROMISING MARKET FOR VENTURE INVESTMENT 1entrepreneurship.osu.edu

A PROMISING MARKET FOR VENTURE INVESTMENT2011 OHIO VENTURE CAPITAL REPORT

Center for Entrepreneurship

2 2011 OHIO VENTURE CAPITAL REPORT

TABLE OF CONTENTS

List of Partners 3

2011 Ohio Venture Capital Activity 4

Total Investment Activity

Investment Highlights by Sector

Investment Highlights by Stage

Investment Highlights of the Ohio Capital Fund

Investment Highlights in a National Context

2011 Exit Highlights 7

Intelect Medical

Znode

Regional Highlights

West Central 9

Southwest 10

Central 12

Northeast 14

Southeast 16

Northwest 18

A PROMISING MARKET FOR VENTURE INVESTMENT 3

The Center for Entrepreneurship at the Fisher College of Business manages the Ohio Venture Capital Research Program in collaboration with the contributing state and regional partners listed below. The objective of this collaborative program is to track venture capital investment activity, with an emphasis on the earlier stages, to provide a comprehensive view of statewide investment activity, and to tell the true story of Ohio’s unique investment opportunities.

LIST OF PARTNERS

2 Contributors 2008 Ohio Venture Capital Report

Fisher College of Business Center for Entrepreneurship

The Center for Entrepreneurship at the Fisher College of Business manages the Ohio Venture Capital Research Program in collaboration with the contributing state and regional partners listed below. The objective of the collaborative program is to track total venture capital investment activity, with an emphasis on the earlier stages, and to tell the true story of Ohio’s unique investment opportunities.

ohio Department of Development77 S. High St., PO Box 1001Columbus, OH 43216-1001Phone: (614) 466-4551Fax: (614) 644-5758http://development.ohio.gov

the ohio capital fund41 S. High St., Suite 2495Columbus, Ohio 43215www.theohiocapitalfund.com

stAte LeVeL

Jumpstart inc.737 Bolivar Road, Suite 3000Cleveland, OH 44115Phone: (216) 363-3400Fax: (216) 363-3401www.jumpstartinc.org

Adena Ventures20 East Circle Drive, Suite 143Athens, Ohio 45701Phone: (740) 597-1470Fax: (740) 597-1399www.adenaventures.com

Dayton Development coalition900 Kettering TowerDayton, OH 45423Phone: (937) 222-4422, (800) 241-2469Fax: (937) 222-1323, (800) 237-2044www.daytonregion.com

regional Growth partnership (rGp)300 Madison AvenueSuite 270 Toledo, OH 43604Phone: (419) 252-2700Fax: (419) 252-2724www.rgp.org

techcolumbus1275 Kinnear Rd Columbus, OH 43212Phone: (614) 487-3700Fax: (614) 675-4101www.techcolumbus.org

cincytech30 West 3rd Street, 6th FloorCincinnati, OH 45202-3559Phone: (513) 263-2720Fax: (513) 381-5093www.cincytechusa.com

reGionAL LeVeL

STATE LEVEL PARTNERS

REGIONAL LEVEL PARTNERS

JumpStart Inc.6701 Carnegie Ave., Suite 100Cleveland, OH 44102Phone: (216) 363-3400Fax: (216) 363-3401www.jumpstartinc.org

Ohio Department of Development77 S. High St., PO Box 1001Columbus, OH 43216-1001Phone: (614) 466-2490Fax: (614) 644-5167http://development.ohio.gov

The Ohio Capital Fund41 S. High St., Suite 2495Columbus, Ohio 43215Fax: (614) 361-7605www.theohiocapitalfund.com

Dayton Development Coalition900 Kettering TowerDayton, OH 45423Phone: (937) 222-4422, (800) 241-2469Fax: (937) 222-1323, (800) 237-2044www.daytonregion.com

Regional Growth Partnership (RGP)300 Madison Avenue Suite 270Toledo, OH 43604Phone: (419) 252-2700Fax: (419) 252-2724www.rgp.org

TechColumbus1275 Kinnear RdColumbus, OH 43212Phone: (614) 487-3700Fax: (614) 484-5033www.techcolumbus.org

Cincytech30 West 3rd Street, 6th FloorCincinnati, OH 45202-3559Phone: (513) 263-2720Fax: (513) 381-5093www.cincytechusa.com

TechGROWTH Ohio20 E. Circle DriveOhio UniversityAthens, Ohio 45701Phone: (877) 476-9681www.techgrowthohio.com


Total Investment Activity

Venture capital investments in the U.S. experienced a significant growth in 2011 in total investments, total capital raised and the number of active funds. Investments grew from $23.3 billion in 2010 to $28.7 billion in 2011, a 23.2 percent increase (Table 1). In contrast to the national trend, venture capital investment in Ohio declined in 2011. Ohio’s venture-backed companies received $440.9 million in 2011 compared to $567.4 million in 2010 (Table 2), a 22.2 percent decline. Despite this decline, however, total accumulated venture capital investment in Ohio between 2006 and 2011 has nearly reached $2.5 billion. Ohio accounted for 1.5 percent of venture investment nationwide in 2011, down from 2.4 percent in 2010.

2011 OHIO VENTURE CAPITAL ACTIVITY

2006 17.96 0.00 .025 0.00 141.02 45.70 20.13 16.91 241.97

2007 30.95 0.25 16.04 0.84 285.71 82.21 47.42 0.10 463.53

2008 50.94 0.00 69.46 1.56 202.22 93.77 27.40 0.25 445.60

2009 30.55 0.05 37.54 0.84 133.07 102.09 9.13 0.26 313.53

2010 75.86 0.13 66.12 9.27 216.84 173.29 25.87 0.00 567.38

2011 36.96 3.45 75.93 4.58 217.74 93.89 6.50 1.95 440.99

Total $243.21 $3.88 $265.34 $17.09 $1196.61 $590.95 $136.45 $19.47 $2473.00

AdvancedSpecialtyMaterials/Chemicals EnergyAgriculture Healthcare

InformationTechnology Other

Retail andConsumer

Grand TotalEnvironmental

Table 2Ohio’s Venture Capital Investment by Year by Sector ($ millions)

YEAR AMOUNT ($millions) % CHANGE NO. OF FUNDS

2006 $26,165 233

2007 $30,346 15.98 237

2008 $28,657 -5.56 213

2009 $19,383 -32.36 161

2010 $23,263 20.02 169

2011 $28,675 23.26 173

Table 1National Venture Capital Activity and Annual Percentage Change

Source: VentureXpert, May 2012

Investment Highlights by Sector

As has been the case since 2006 when the Ohio Venture Capital Research Program began tracking venture investment in Ohio, healthcare and information technology received the largest amount of venture capital investment in 2011 (Table 2). Healthcare investments totaled $217.7 million, almost half (49.3 percent) of all Ohio investments, while information technology accounted for $93.9 million (21.3 percent) (Table 2). Investments in healthcare were up slightly from 2010, while investments in information technology were down more than 45 percent for the same period. As of 2011, total accumulated investment in Ohio’s healthcare ventures since 2006 had nearly reached $1.2 billion (Table 2). The energy sector once again received the third largest annual investment at $75.9 million or 17.2 percent of Ohio’s total venture capital investment. Energy investments were up almost 15 percent over 2010. A detailed breakdown of venture capital investment by sector in Ohio since 2006 is provided in Table 2.


Investment Highlights by Stage

Even though the total amount of investment was lower in 2011, the total number of companies that attracted investment increased from 341 in 2010 to 360 in 2011, a 5.5 percent increase (Figure 1). A total of $256 million was invested in seed and early-stage deals in 2011, which represented 58 percent of all investments. Seed- and early-stage investment each accounted for half or $128 million. For seed-stage investment this represented a 16.8 percent decrease, yet the total number of seed-stage companies receiving capital increased to 280. In 2010, seed-stage investment was at record levels as venture capitalists rebounded from the slow economy in 2008 and 2009. In 2011, however, the focus shifted somewhat to those prior seed-stage deals requiring additional follow on investment (Figure 2). The $128 million invested in early-stage companies in 2011 represented a 25 percent increase over 2010. Later-stage growth investment was hit hard in 2011 with a total of $185 million, which represented a 40 percent drop from $310 million the previous year.

Investment Highlights of the Ohio Capital Fund

By year-end 2011, the Ohio Capital Fund (OCF) had committed $129 million across 25 venture funds. Twenty-one (21) of the funds are considered “Core” or “New” Ohio-based funds and four are “National” funds. In total, the 25 funds have been responsible for investment of $197 million in 67 Ohio-based companies. Funds which do not rely on out-of-state affiliates for significant fund management services (“Core Ohio Funds”) have invested $100 million into Ohio-based companies. Funds that have a presence in Ohio but do rely on out-of-state affiliates for significant fund management services (“New Ohio Funds”) invested $67 million into Ohio-based companies. These New Ohio Funds have invested in 22 Ohio-based companies and led 16 of those investments. The National Funds, which typically do not maintain a presence in Ohio, have invested a total of $30 million into Ohio-based companies. Figure 3 shows the significant increase in investment into Ohio-based companies by the underlying funds and their co-investors.


0

100

200

300

2006 2007 2008 2009 2010 2011

INVE

STM

ENT

AM

OU

NT

($m

illio

ns)

YEAR

Figure 2Total Annual Investment by Stage

600

500

400

300

200

100

0

2006 2007 2008 2009 2010 2011

$242

$464$446

$314

$567

$441

COM

PAN

IES

TOTA

L IN

VEST

MEN

T ($

mill

ions

)

360341

167 177205 202

Figure 1Total Investment Activity

500

375

250

$125

0

2006 2007 2008 2009 2010 2011

$18.9$68.2

$178.93

$245.45

$331.74

$491.37

INVE

STM

ENTS

($m

illio

ns)

OCF FundsCo-Investors

Figure 3From the OCF Annual Report


Investment Highlights in a National Context

In 2011 venture capital investments in the U.S. were spread across a record 47 states and the District of Columbia. The top five states (i.e., California, Massachusetts, New York, Texas, and Illinois) accounted for 77 percent of the total dollars invested. Of the total funds invested, California-based companies received a record 51.2 percent.

Ohio is second only to Kansas in terms of the percent of dollars invested within the state by investors domiciled in the state (Table 3). This means that Ohio investors on average invest 74 percent of their available funds in Ohio-based companies. The National Venture Capital Association reports that 23.6 percent of the total investment received by Ohio-based companies is raised from investors within Ohio (Table 4). Ohio ranked sixth in the percent of capital raised within the state. In California, in comparison, over 50 percent of the total investment was raised from in-state investors.

Of the $28.7 billion in venture capital invested nationally, $5 billion (17.5 percent) was invested in companies receiving capital for the first time. The remaining $23.7 billion (82.5 percent) was invested in follow-on opportunities. This translates to 1,173 companies receiving financing for the first time compared to 2,095 companies receiving follow-on funding. In Ohio, 258 companies received funding for the first time in 2011 for a total investment of $209.5 million (47.5 percent of total investment) and 103 companies received follow-on funding for a total of $231.5 million (52.5 percent of total investment). This suggests that Ohio is still an emerging market for venture capital investment and follow-on opportunities should make a promising prospect for both Ohio and national venture capital funds.

Kansas 78%

Ohio 74%

California 71%

Tennessee 70%

Texas 54%

Fund Domicile

Percent Invested

Within State

California $14671.9 $7410.1 50.51%

Tennessee $103.0 $39.8 38.64%

Kansas $67.5 $24.5 32.30%

Massachusetts $2988.7 $860.1 28.78%

Washington $542.4 $140.7 25.94%

Ohio $205.0 $48.4 23.61%

TOTALINVESTMENT

($millions)

AMOUNT RAISEDFROM WITHIN STATE

($)

AMOUNT RAISEDFROM WITHIN STATE

(%)

Table3Percentage of Total Funds Invested by In-State Funds

Table 4Portion of Total Investment Received from In-State Funds

* Minimum $20 million invested; Source NVCA Yearbook 2012

* Minimum $20 million invested; Source NVCA Yearbook 2012



2011 EXIT HIGHLIGHTS

Though it would be impractical to profile every company that successfully exited in 2011, two specific companies are highlighted below. We profile these two to highlight the accomplishments of our state-wide venture community in leading Ohio’s transition to a knowledge-based economy.

Intelect Medical

Intelect Medical is developing proprietary deep brain stimulation (DBS) therapies and technologies to improve the outcome for patients with neurological disorders and disabilities. Concurrently, development is underway on novel DBS technologies that are envisioned to provide significant improvements in stimulation delivery and parameter optimization. The company was founded in April 2005 based on intellectual property developed at Cleveland Clinic’s Center for Neurological Restoration and its Lerner Research Department of Biomedical Engineering. Shortly thereafter, an exclusive license to key patents was secured from Weill-Cornell Medical College’s Laboratory for Cognitive Neuromodulation. Commercialization efforts including pre-clinical research, clinical feasibility trials, and system development have progressed considerably in the last few years. In January 2011, Boston Scientific acquired Intelect Medical for $78 million.

Znode

Znode®, a Columbus, Ohio based company, has established itself as an industry leading ecommerce solution provider. The company’s proprietary ecommerce platform enables businesses to easily build and manage rich, multi-store and multi-device ecommerce websites with a significantly higher ROI. Znode is trusted by leading global brands including LoJack, Waste Management, Wawa, Channellock, Arbor Day Foundation, Sonos, Fechheimer (Berkshire Hathaway) and others. Znode is ranked #223 in the INC 500 list of America’s fastest growing companies. In July 2011, Znode was acquired by Yell Group Plc, a British digital advertising agency, for $19.2 million. Yell Group is a global company that owns several media brands with over 1.3 million customers worldwide.


Total venture capital investment in Ohio

declined in 2011. However, the number of

deals continued to increase and many regions

were able to move forward aggressively.

The following regional summaries highlight

the significant developments in each

region in terms of venture investing and

entrepreneurship activity.

REGIONAL HIGHLIGHTS


List of West Central Angel Funds and Venture Capital Firms

Dayton Region Signature Fundwww.daytonregion.com

Draper Trianglewww.drapertriangle.com

Enterprise Ohio Investment Companywww.citywidedev.com

Miami Valley Venture Fundswww.daytonregion.com

NCIC Capital Fundswww.ncicfund.org

Ohio TechAngel Fundswww.ohiotechangels.com

River Cities Capital Fundswww.rccf.com

Venture capital in 2011 in West Central Ohio was a year of focus on pre-seed and seed opportunities. Coming off two previous years of $96.5 million and $63 million, investments of $17.1 million in 2011 showed a significant decrease in terms of raw dollars. The investment totals in 2009 and 2010 were driven by venture investment in early-stage companies which had transitioned away from seed-stage investments in earlier years. Worth noting, however, were a 39 percent increase in the number of deals from 39 to 52 and an 83 percent increase of the number of angel investment deals from 6 to 11, signifying a dual focus on new opportunities and stimulating more angel activity.

Summary by SectorInvestment in 12 information technology startups accounted for $10.6 million in capital accessed, or 62 percent of the total funds invested in the region. Advanced materials and advanced manufacturing startups received $5.2 million of investment, which included 7 companies (30 percent of the total venture capital). Additionally, an energy company received $1.2 million (7 percent) and two medical technology companies received $110,000 (1 percent).

Summary by StageAll of the $17.1 million invested in 2011 went to a total of 23 pre-seed and seed-stage companies. The regional focus was on providing resources to high quality technology commercialization opportunities by assisting new entrepreneurs in starting up and gaining access to new capital. Seven companies received over $1 million each in 2011, which indicates further advancement along the commercialization framework and should result in substantive new capital investment in 2012 and beyond.

Regional HighlightsTwo pre-seed stage companies exemplified a growing interest in Dayton Region companies in the optoelectronics industry and successful models for “spinning-in” of university technologies into the Department of Defense. Optonicus, an intelligent fiber-optics company, received $7.5 million in US Department of Defense contracts and Innova, Inc., a LASER systems company, received $700,000 in venture investment in anticipation of a large federal contract. In addition, Grid Sentry, LLC, a wireless smart-grid sensor company, attracted $1.1 million in angel capital as it prepares to enter the market with its product in 2012. Several other companies continued to attract large strategic partner interest and investment in medical technology advanced material and advanced manufacturing. These promising examples reinforce the Dayton Region pre-seed and seed technology sector focuses of advanced materials and advanced manufacturing, instruments / controls / electronics, medical technology, and information technology.

WEST CENTRALDayton Development Coalition


List of Southwest Angel Funds and Venture Capital Firms

Allos Ventureswww.allosventures.com

American Financial Corp.www.afginc.com

Blue Chip Venture Companywww.bcvc.com/index.lasso

Charter Life Scienceswww.charterls.com

The Tomorrow Fund ofCincinnati Children’s Hospital Medical [email protected]

CincyTech Ventureswww.cincytechventures.com

Draper Triangle Ventureswww.drapertriangle.com

Fort Washington Capital Partners Groupwww.fortwashington.com

Isabella Capitalwww.fundisabella.com

Queen City Angelswww.qca.com

River Cities Capital Fundswww.rccf.com

Triathlon Medical Venture Partnerswww.tmvp.com

The amount of venture capital invested in Southwest Ohio startup companies rose nearly 34 percent in 2011 to $70.2 million, driven by four large deals. There were 36 total deals, a 34 percent increase from 2010. The four big deals – Akebia Therapeutics, AssureRx Health, Bioformix, and Thinkvine – accounted for more than half of the $70.2 million invested in Southwest Ohio life sciences and information technology companies.

The four largest investments which accounted for more than half of $70.2 million invested included the following.

•Akebia:$17.9millionroundledbyNovartisandincludingOhioinvestorsAthenian Venture Partners, CincyTech, Triathlon Medical Ventures, Tri-State Growth Capital Fund and Queen City Angels

•Bioformix:$13.6millionincubatingroundledbyBraemarEnergyVenturesandincluding CincyTech and Queen City Angels

•AssureRxHealth:$10millionroundformarketentryledbyClaremontCreekCapital and Sequoia Capital with Allos Capital, CincyTech, Queen City Angels, and Tri-State Growth Capital Fund

•Thinkvine:$7.2millionmarketentryroundledbyNorthwaterCapitalandincluding CincyTech, Draper Fisher Jurvetson and Tri-State Growth Capital Fund

Also among the highlights last year was the exit of Blue Ash Therapeutics, which had received investment from local investors CincyTech and Queen City Angels, at a multiple of 12 times investment.

On the investor side, local funds had around $458 million under management in 2011. Locally based venture funds saw another three exits of startups located outside Southwest Ohio in 2011: the acquisition of Aprimo by Teradata for Allos Ventures; the acquisition of BioVex by Amgen for Triathlon Medical Ventures; and the acquisition of BlueArc by Hitachi Data Systems for Fort Washington Capital Partners Group.

Summary by SectorInvestment in Southwest Ohio-based healthcare companies was up 98.6 percent to $39.4 million from 2010, and the number of deals jumped from 11 to 36. Investment in health care related firms accounted for 56 percent of the total activity in 2011. About $28.4 million was invested in 24 information technology companies, which was double the number that received investment in 2010.

SOUTHWESTCincyTech


Summary by StageSouthwest Ohio saw a strong jump (41 percent increase) in the amount of seed-stage money invested in local startups to $17.8 million in 2011. The number of seed-stage rounds also jumped from 15 to 26 during the year driven by an increase in the number of follow on rounds. Meanwhile, growth and expansion dollars increased as well from $23.5 million in 2010 to $52 million in 2011.

Regional HighlightsSouthwest Ohio has begun to enjoy increased deal flow. The overall investment of $70.2 million in 2011 compares favorably to approximately $45 million in 2007. Since it began its investment activity in 2007, CincyTech funds have gone from representing 8 percent of total venture activity to 80 percent in 2011. CincyTech has brought new regional investors to the table, including high-net-worth angels who are often the source of qualified deal flow. CincyTech seeks to partner with the region’s angel investors for due diligence and post-investment services.Startup accelerator, The Brandery, graduated 14 technology-based consumer marketing companies from its first two classes in 2010 and 2011; seven of these graduates have received funding.

Perhaps the most important development for Ohio is the region’s success in attracting both qualified deal flow and significant seed- and early-stage capital investment from other states. Southwest Ohio startups raised $91.5 million in out-of-state financing from 2007 to 2011. The strong momentum created in the region for seed-stage investment allows the region to solidify its position as a net importer of capital and qualified deal flow.

Healthcare 36 $39.41

Information Technology 24 $28.45

Other 2 $2.39

Total 62 $70.25

NUMBER OF COMPANIES

DOLLARSRAISED

($millions)

Summary by Sector


Funding for entrepreneurial activity within Central Ohio continued the trend of growth and development with 112 companies receiving $178.4 million in innovation capital in 2011. While this amount is a decrease from the record year of 2010, it is inline with the growth trend in the previous four years. Innovation capital represents all sources of funding—venture capital, angel investments, loans, grants, mergers and acquisition—that support the formation, acceleration, and growth of entrepreneurial-driven, innovation-based private companies.

Summary by StageOut of the total innovation capital in 2011, $96.6 million went to the earliest-stage companies (defined as seed, early, and growth). This represents a 14.6 percent decrease from the $113.1 million in early-stage funding for companies in 2010, but it is an increase of 23.5 percent from the $78.2 million in early-stage funding for companies in 2009. In 2011, there were 33 seed-stage deals funded. While this is a decrease from the great number of deals in 2010, the progression from 2005 is still an indicator of the growth and evolution of Central Ohio’s knowledge economy. In 2005, 15 seed-stage deals accounted for $10.4 million (average deal: $0.7 million). Comparatively, in 2011, 33 seed-stage companies received $34.2 million (average deal: $1.0 million).

The lower amount of activity resulted in a decrease in innovation capital in the exit/other stage. Seven companies received $79.6 million compared to the $194.5 million received by seven companies in 2010. This stage includes only those exits, mergers, and acquisitions for private companies whose operations, talent, and profits will remain in the region.

Summary by SectorAs Central Ohio’s innovation economy continues to advance, it also continues to diversify as indicated by the distribution of innovation capital across industry sectors. The table below shows how the companies in different sectors were funded with innovation capital.

List of Central Angel Funds and Venture Capital Firms

Athenian Ventureswww.athenianvp.com

Copper Run Capitalwww.copperruncap.com

Custer Capitalwww.custercapital.com

Fletcher Spaght Ventureswww.fletcherspaght.com

Microcomwww.microcomcorp.com

Nationwide Mutual Capitalwww.nationwide.com/about-us/mutual-capital.jsp

NCT Ventureswww.nctventures.com

Ohio Capital Fundwww.theohiocapitalfund.com

Ohio TechAngel Fundwww.ohiotechangels.com

Reservoir Venture Partnerswww.resevoirvp.com

Talisman Capitalwww.talismannetworks.com

TechColumbuswww.techcolumbus.org

CENTRALTechColumbus

Summary by Sector

BioScience/Healthcare $50.4 52.2%

Information Technology $22.9 23.7%

Advanced Materials $10.9 11.2%

Power and Propulsions $5.4 5.6%

Energy/Alternative Energy $4.6 4.8%

Other $2.5 2.6%

Total $70.25 62

CAPITAL INVESTED ($millions)

PERCENTAGEOF TOTAL


In 2011, a great percentage of innovation capital invested went into the health care/bioscience sector, with $50.4 million (52.2 percent) invested in the earliest-stage companies. A large proportion of these funds were attributed to one company receiving considerable funding. As is expected, with Ohio’s long-standing legacy in advanced information processing, IT remained strong, with $22.9 million (23.7 percent) of innovation capital invested. The advanced materials sector saw similar results, receiving $10.9 million (11.2 percent) of early-stage funding, and energy/alternative energy received a total of $4.6 million (4.8 percent).

Regional HighlightsA strong indicator of Ohio’s success in becoming a significant innovation economy is the $99.4 million (55.7 percent) of the total capital contributed in 2011 coming from non-Ohio investors. Ohio investors from outside the Central Ohio region also demonstrated their interest by investing $46.2 million (25.9 percent) in Central Ohio companies.

Even as investment activity from outside the Central Ohio region continues to gain momentum, there is still significant need for additional venture capital to continue the trajectory of Central Ohio’s innovation economy. At the end of 2011, a majority of the companies were in the earliest stages of development. Additionally, initiatives like the 10-Xelerator Program at Ohio State’s Center for Entreprenurship and the new programs at the Technology Commercialization Office should continue to create a steadily increasing amount of deal flow. These factors will provide many opportunities for investment within Central Ohio in 2012 and beyond.

Representative Company Highlights Znode, Inc., Columbus (Exit): Znode, an IT company, is a provider of internet storefront software. Znode enables rapid and inexpensive internet storefronts that would otherwise require expensive and time-consuming custom development. In July, 2011, Znode announced that it had been acquired by UK-based Yell Group, Plc (LSE: YELL) for $19.2 million but will stay in Central Ohio. Investors included TechColumbus, Ohio TechAngel Fund II, North Coast Angel Fund II, Co-Investment Fund, and the Innovation Ohio Loan Fund (IOLF).

Cardiox Corporation, Dublin (Seed): Cardiox Corporation, a medical device company, has developed a patented non-invasive method for detecting the presence of a right-to-left cardiac shunt. The first sign of a shunt is often massive cardiac arrest or death, but with early detection, the shunt can be closed and life-threatening complications can typically be prevented. In September 2011, Cardiox announced that it secured $8 million in Series C financing from investors including LifeLine Ventures, Early Stage Partners, Reservoir Venture Partners, and Glengary. Earlier investors included TechColumbus, Ohio TechAngel Fund II, North Coast Angel Fund, and Co-Investment Fund.


List of Northeast Angel Funds and Venture Capital Firms

Arboretum Ventureswww.arboretumvc.com

Blue Olive Partnerswww.blueolivepartners.com

Bridge Investment Fundwww.bridgefundllc.com

Case Technology Venturesctv.cwru.edu

Chrysalis Ventureswww.chrysalisventures.com

Cleveland Clinic Innovationswww.clevelandclinic.org/innovations

Draper Triangle Ventureswww.drapertriangle.com

Early Stage Partners, LPwww.esplp.com

Frantz Medical Ventureswww.frantzgroup.com

Glengary Ventures LLCwww.glengaryventures.com

JumpStart Inc.www.jumpstartinc.org

Kadima Partnerswww.kadimapartners.com

Lorain County Community College Innovation Fundwww.lorainccc.edu

Investing activity in the 21 counties of Northeast Ohio continued to demonstrate long-term growth, reflecting the impact of the private, public, and philanthropic commitments. With a more than 110 percent increase in deals and a 27 percent increase in dollars, Northeast Ohio companies are receiving the investor attention they need to grow, generate revenues and create jobs. The $966 million invested in the region’s startups over the last five years is creating, and is projected to ultimately create, over 37,000 jobs for Ohio citizens.

In 2011, $153 million of investment was committed to 76 companies in 105 deals, and $202 million in cash was disbursed into companies in the same year. Of the dollars disbursed, 50 percent came from venture capitalists, while 16 percent were from angels or organized angel funds. Nearly 24 percent were in the form of government grants (including Third Frontier grants or loans), and 7 percent were from corporate strategic partners. These percentages have held relatively constant over the last five years, reflecting a balanced portfolio of funding sources providing innovation capital.

Companies in the region continued to attract capital from outside the state, with 9 new non-Ohio based investors (including Austin Ventures (TX), Sutter Hill Ventures (CA), Healthcare Ventures and Excel Ventures (MA), and BlueCrest Capital (IL)) joining the other 88 investors from outside of Ohio that have invested in companies in the region since 2005.

Summary by Sector Industry segment breakdowns reflected the national investing trend towards web-enabled/IT technology companies combined with the region’s historical areas of research and commercialization strength.

•Sixty-two(62)percentofinvestmentwenttoMedtechorotherhealthcarecompanies, but there was significant growth this year in the sub-segment of health care and medical information systems segment. Relative to past years, investment in medical devices dropped significantly, reflecting the tighter investing market in this segment.

•Nineteen(19)percentofdollarswenttocleantechnologycompanies,reflecting the region’s innovation strengths in polymers, advanced materials, coatings, advanced energies, flexible electronics, and water technologies.

•Sixteen(16)percentofdollarswenttoIT/web-basedbusinessmodels;whenadded to the aforementioned health care and medical information systems segment, 58 percent of dollars and 40 percent of companies receiving investment are in this space.

NORTHEASTJumpstart Inc.


Luxemburg Capitalwww.luxemburgcapital.com

Medical Growth Fundwww.medicalgrowthfund.com

Mutual Capital Partnerswww.mutualcapitalpartners.com

North Coast Angel Fundwww.northcoastangelfund.com

North Coast Opportunities Technology Fundwww.development.cuyahogacounty.us

Portal Capitalwww.portal-capital.com

Primus Capital Fundswww.primuscapital.com

Radius Ventureswww.radiusventures.com

RiverVest Venture Partners LLCwww.rivervest.com

Second Generation LTDwww.secondgen.com

SunBridge Partnerswww.sunbridgepartners.com

Zapis Capitalwww.zapiscapital.com

Summary by Stage Early-stage investment reflected the most significant segment relative to dollars invested, with seed-stage deal volume continuing its importance in the region to generating a pipeline of innovative companies. Dollars invested in companies and companies receiving investment both decreased from 2010; fewer companies received both seed-stage and growth-stage dollars than in 2010. However, 2012 data through Q2 reflects activity that is on track to exceed 2010 dollars and companies in seed, early, and growth stages. This is consistent with the national uptick in investing activity in 2012 compared to 2010 and with the less time-bound nature of venture investing. Northeast Ohio companies closed a significant number of deals in Q1 of 2012 compared to the prior year, representing deals underway but not closed in Q4 2011.

Regional HighlightsThe region had five (5) return-generating exits this year, with IntElect Medical’s purchase by Boston Scientific and Ganeden Biotech’s acquisition by Schiff Nutrition being among the most significant. Global Lighting Technologies, a specialist in LED-based edge lit illumination, held an IPO on the Taiwan Stock Exchange.Other fund raising stories of note include Cleveland Heartlab, a specialty clinical laboratory and disease management company that completed an $18.4 million Series B financing round in 2011, with proceeds going to support the company’s growth through accelerated adoption and commercialization of cardiovascular disease biomarkers. The round was led by Excel Venture Management and Healthcare Ventures, both of Boston. Cleveland Heartlabs’ five-biomarker panel offers broader prognostic coverage than traditional blood tests, enabling physicians to determine if and to what degree their patients are at risk for cardiovascular disease. Cleveland HeartLab has been referred to as one of the fastest growing startups to spin out of the Cleveland Clinic in recent years.

TOA Technologies, the only on-demand provider of enterprise class mobile workforce management software solutions, closed $17.2 million of funding to continue worldwide growth with an emphasis on sales, marketing and other strategic initiatives. The Series D round was led by Sutter Hill Ventures and included existing investors Intel Capital and Draper Triangle Ventures as well as Tim Draper and Fort Washington Capital Partners Group. TOA provides a cloud-based mobile workforce management software called ETAdirect which is the only complete end-to-end web-based enterprise class solution on the market today, managing more than 50 million appointments annually. TOA’s enterprise SaaS innovation leadership is evidenced by its impressive growth, with name brand customers such as Cox Communications, Virgin Media, Bright House Networks, Cablevision, and Suddenlink.

TOTAL INVESTMENT ($millions) $12 $90 $51

# OF DEALS 54 44 7

AVERAGE DEAL SIZE ($millions) $0.22 $2.05 $7.31

SEED EARLY GROWTH


List of Southeast Angel Funds and Venture Capital Firms

Adena Ventureswww.adenaventures.com

Athenian Venture Partnerswww.athenianvp.com

East Central Ohio Tech Angel Fundwww.ecotaf.net

Finance Fundwww.financefund.org

TechGROWTH Ohio Fundwww.techgrowthohio.com

Technology Seed Fundwww.ohio.edu/research/funding.cfm

Technology Gap Fundwww.ohio.edu/research/funding.cfm

TechGROWTH Enterprises, LLCwww.techgrowthohio.com

The 1804 Fundwww.ohio.edu/univcollege/fund

WesBanco CDC Fundwww.wesbanco.com

Twenty-nine (29) early-stage companies in Southeast Ohio acquired equity, federal grant, or other funding during 2011, totaling $6.3 million in new capital. Grant funding represented 57 percent, equity placements were 29 percent, and various forms of debt funding represented 14 percent of the total investment. TechGROWTH Ohio was the lead investor in five of the equity placements. Angel investors provided all other equity capital and benefitted substantially from TechGROWTH’s pipeline and due diligence work. Fifteen (15) of the 29 companies also benefited from TechGROWTH ‘s “Growth Grant” program which provides small, competitive grant resources to reduce technology or market risk and enhance investment readiness. TechGROWTH is the region’s leader and gateway for entrepreneurial activity. Its rural model for venture development continues to increase the region’s capacity to prepare companies for investment.

Summary by Sector and StageAdvanced energy and bioscience sectors continue to be strengths in the region, with bioscience technology emerging during 2011 as a focal area. Fueled by innovations from Ohio University, 38 percent of funding activities in 2011 involved bioscience companies and 24 percent were related to advanced energy and environment companies. Digital media became less of a focus in 2011, with 10 percent of the total, while commercial goods remained strong at 21 percent and agricultural innovations holding steady at 7 percent. All 2011 investments in the Southeast region were seed-stage investments.

Regional Highlights TechGROWTH’s model for rural venture development in Southeast Ohio achieved multiple milestones in 2011, continuing to enhance the region’s capital formation and entrepreneurial support infrastructure.

•TechGROWTHEnterprisesLLC(whichacquiredtheregion’sfirstpre-seedfundthrough provision of $1 million in match funding) finalized its portfolio of seven companies with the addition of two companies, both biomedical start-ups from Ohio University.

•Theregion’ssecondpre-seedfund,TechGROWTHFund,placeditsfirstinvestment in a qualified student startup and finalized due diligence for its second and third investments.

•ECOTAF,thesecondlargestrurally-focusedangelfundinthecountry,grewitsportfolio to five companies, with two additional prospects to round out fund deployment.

•TechGROWTHportfoliocompanyGlobalCoolingreceivedfollow-onfinancingin April with plans to launch its mainline product in 2012.

SOUTHEASTTechGROWTH Ohio


•TechGROWTHportfoliocompanyGhostblindsucceededinbuildinganationaldistribution network for its product lines of over 300 dealers nationwide and garnered adoption by big box retailers in 2012.

•Thefirststudentspin-outcompany,FlareCode,aparticipantinthe10xaccelerator at Ohio State’s Center for Entreprenurship, received its first pre-seed equity placement from TechGROWTH Ohio, and launched at SXSW in 2012.

•OhioUniversity’sTechnologySeedFundandTechnologyGapFundawarded$338,000 to early stage commercialization of Ohio University technology innovations.

•OhioUniversityandTheOhioStateUniversityworkedtogethertoinitiatethefoundation for a new seed- and early-stage venture fund designed to further technology commercialization in Ohio and beyond and to provide a source of institutional funding rounds for existing portfolio companies in the Ohio Third Frontier Pre-Seed Capitalization program..

•OhioUniversity’sCenterforEntrepreneurshipencouragedstudententrepreneurship through two idea pitch competitions, a Guest Lecture Series and the formation of five student entrepreneurship clubs during its inaugural year.

Ohio University is the transformational driver of economic development in Southeast Ohio, both through the commercialization of technology innovations originating in research activities and through its long-standing programs of entrepreneurial assistance and outreach in the region. Forty (40) percent of investment activities during 2010 involved companies commercializing OU technology, centering on advanced energy and bioscience and reflecting two of the university’s Centers of Excellence in the areas of Energy and the Environment and Health and Well Being. Ohio University’s Edison Biotechnology Institute attracted startup life sciences companies to the region to take advantage of its Drug Discovery Working Group and track record of successful commercialization.

Milestones hit by TechGROWTH client companies throughout the region attracted both media and private investment attention during 2011. Inc. magazine’s ‘fastest-growing’ list dubbed Third Sun Solar 16th nationally in 2011; the highest-ranked Ohio company. The OU student-founded interactive digital media company, Imgur, (2 billion page views per month) retains ties with the region despite relocation by serving on the Board of new portfolio company Flare Code, the latest OU-derived digital media innovator.


2011 was a good year for investment in Northwest Ohio with a total of 61 deals made among 52 companies – 11 more companies than in 2010 representing a 27 percent increase in companies receiving investment. As in past years, Northwest Ohio continued to be involved in tech-based startup companies from sectors including alternative energy, advanced specialty materials, health care/biosciences and information technology.

Northwest Ohio startup companies received a total of $31.8 million in investments in 2011 from venture capital, angel investors and grants. Venture capital and angel investments made up 59 percent of these investments. The total amount invested in the region is a slight increase from the 2010 total of $31.4 million and up over 148 percent from 2009. The total amount of investment for 2011 once again represents a significant amount of venture capital activity in Northwest Ohio. Two new Portfolio Companies in 2011 for Rocket Ventures are Advanced Battery Concepts and Blue Water Satellite, Inc.

Advanced Battery Concepts is an Advanced Materials/Alternative Energy company that is very indicative of this region. The company has developed GreenSeal™

Battery Technology. This is a revolutionary technology for the large-format battery industry and increases energy, power and life of lead acid batteries at a competitive price with traditional batteries. Advanced Battery Concepts has a platform technology and provides massive scale potential in an addressable market of over $3 billion. The company continues to gain momentum as it strengthens existing partnerships and works to sign key customers in its market.

Blue Water Satellite, Inc. is an IT company that uses satellite imagery and proprietary image processing algorithms to measure chemical and biological constituents in water and on land. This method is much more accurate and cost effective than grab sampling, which is the present method used for identifying and monitoring algal blooms. The company is receiving follow-on orders from large power companies who are recognizing the value in Blue Water Satellite’s product after an initial order.

List of Northwest Angel Funds and Venture Capital Firms

CoreNetworkwww.core-network.org

Rocket Ventureswww.rocketventures.org

NORTHWESTRegional Growth Partnership

2008 17 $53.0

2009 27 $12.8

2010 38 $31.4

2011 52 $31.8

YEARNUMBER OF COMPANIES

TOTAL AMOUNT INVESTED IN THE

REGION($millions)


Summary by SectorEach of the Northwest Ohio startup ventures that received funding during 2011 can be categorized into one of the following five sectors: advanced/alternative energy; health care/bioscience; advanced materials; information technology; and agricultural sciences. The advanced and alternative energy sector is focused on solar and bio-fuel technologies with manufacturing playing a key industry sector role. The health care/bioscience sector investments help entrepreneurs start companies in the following fields: bio-pharma; medical devices; medical delivery systems; and bioinformatics.

In 2011, advanced/alternative energy was once again the dominant sector in the region. A total of 34 investments were made in 14 companies, representing 63 percent of all regional investments at over $20.1 million. The startup companies in this sector, while focusing primarily on solar and bio-fuels, are also manufacturing companies, representing the rich heritage of such companies in Northwest Ohio. Some of the companies in this sector include: Nextronex Inc. (a solar inverter manufacturer), Red Lion (a bio-fuels gasification manufacturer), Suganit Systems (a cellulosic ethanol processor), Greensleeves Inc. (a smart energy building manufacturer) and Xunlight Corporation (a thin-film, flexible solar panel manufacturer).

The advanced materials sector and the health care/bioscience sector were also important sectors for the region. The health care/bioscience sector had over $4.5 million in 28 investments for 12 companies. Advanced materials received $4.4 million in total investments for 2011, up over 50 percent from 2010.

Summary by Stage The majority of investments in Northwest Ohio continue to be made in pre-revenue companies, but some are moving into the early stage where revenue growth becomes critical to the companies. Northwest Ohio’s 18 county region continues to exhibit great potential and proves to have an available and dedicated pool of resources for investment.

Regional HighlightsRocket Ventures was created in late 2007 as the first early-stage venture capital fund in the region. The program is partially funded by the Ohio Third Frontier’s Entrepreneurial Signature Program and by 21 private and industry investors. Since program inception, the Rocket Venture Fund has made 42 investments including 13 new company investments and 29 follow on investments in early-stage companies totaling over $5.9 million (as of December 31, 2011). Rocket Ventures continues to add value to the 13 portfolio companies through board representation, interim management and industry contacts. Rocket Ventures is always looking to connect with other funding partners to share the Northwest Ohio story of growth and opportunity in job and wealth creation.


Fisher College of BusinessSince 1916, Fisher College of Business at The Ohio State University has produced exceptional leaders who meet the challenges of a changing global business environment through creative and effective solutions. In 1993, the college received a gift from alumnus Max M. Fisher, a leading industrialist, philanthropist, and public servant. Mr. Fisher’s desire to see his alma mater become one of the premier management institutions in the country spearheaded the construction of a state-of-the-art, six-building campus. In recognition of his commitment, the college was named the Max M. Fisher College of Business. Since then, the college has undergone a corporate turnaround; narrowing the focus of its programs, recruiting leading faculty, placing a renewed emphasis on experiential learning, and offering a wide range of international study options. Faculty and staff have also established new scholarship and fellowship opportunities, strengthened their commitment to diversity, and created innovative academic and corporate partnerships. As a result, Fisher’s international reputation continues to rise and is reflected in rankings which place the college among the top business schools in the nation at both the undergraduate and graduate levels.

Center for EntrepreneurshipLaunched in November 2001, the Center for Entrepreneurship supports academic research, education and community engagement in entrepreneurship. The Center strives to advance both the science and practice of entrepreneurship so as to stimulate economic growth and development through new company formation, technology commercialization, and improved competitive performance of entrepreneurial ventures. The Center is a leader in the development and dissemination of entrepreneurship theory and practice that will impact a global economy and stimulate economic growth by assisting new company formation and graduating students who possess strong entrepreneurial skills and experiences. Some of the compelling program offerings are the Technology Entrepreneurship and Commercialization Institute and the Venture Capital Research Program.

Fisher College of BusinessCenter for Entrepreneurship

The Ohio State University256 Fisher Hall2100 Neil Ave.Columbus, OH 43210-1144

Center for Entrepreneurship

entrepreneurship.osu.edu

a promising market for venture investment

Documents