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The Greater Cleveland Venture Capital Report


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The Greater Cleveland Venture Capital Report

  1. 1. The Greater Cleveland Venture Capital Report The 2006 Annual Survey of Venture Investing Activity Across Northeast Ohio
  2. 2. GReATeR CleVelANd A ReGION’S eCONOmIC SuCCeSS IS dRIVeN by The ‘ The Economist Magazine recently ranked Cleveland as The Nation’s Supply Of CApITAl: human capital in the form of the education and skill levels of its citizens, intellectual capital the “#1 livable City in America,” based on such factors as cost of living, housing, quality of suburban schools New hotspot for in the form of research and innovation, and investment capital, in all of its forms. Where Capital in all of its forms and commute times. Venture-backed is in plentiful supply, regions thrive. Where it’s lacking, an area’s economy is doomed to underperformance. Our region is once again a thriving area for entrepreneurship due to the collective, collaborative, Innovation In this report, we endeavor for the first time to present and coordinated efforts of many. A key driver of this change has been the State of Ohio. We can’t emphasize an overview of the region’s venture capital environment, enough how crucial the state’s support has been to our The 2006 Greater Cleveland Venture Capital Report an important driver and indicator of a region’s level region’s entire effort to nurture and develop high-growth of innovation and entrepreneurship. Through the companies. Over the last five years, the Cleveland evidence marshaled here, we think you will see that a area has received over $300 million from the State of critical mass of talent and investment-grade ideas and Ohio’s Third frontier program. This funding represents innovations has emerged in Greater Cleveland and its important support for translational research and surrounding region. In recent years, Northeast Ohio commercialization, business accelerators, as well as has truly become a national hotspot for innovation and start-up companies, and also provides leverage for the entrepreneurship. private capital markets in catalyzing deal flow. Still skeptical? Perhaps you’ll consider these salient facts: The region’s funding and entrepreneurial-support community have in recent years developed a continuum of 2 ‘ Between 2004-2006, 97 companies across this region support through the entire spectrum of company growth— received equity investments of more than $500 million from the seed stage to the exit event. from venture capital firms or private equity groups. ‘ An unprecedented number of equity investment The good news is that all of this activity has created a groups from outside the region—no fewer than 41 pipeline of venture-quality companies in various stages national firms—have made follow-on investments in of development. The corresponding challenge, however, companies based in this region since 2004. is with so many promising companies in the region, a ‘ Institutions in the region annually conduct more than funding gap has developed. $600 million in research, and more than 550 clinical trials for new therapies.
  3. 3. Over the next five years, we expect that the region will NORTeCh VeNTuRe CApITAl AdVISORy TASk fORCe Dorothy Baunach, NorTech need to generate and attract over $1.2 billion in venture Robert Baxter, BioEnterprise capital to meet the market’s needs. Tim Biro, Reservoir Ventures Melford Carter, Ohio-Midwest Fund The evidence strongly suggests that venture-backed Chris Coburn, The Cleveland Clinic Foundation companies enjoy an edge in the marketplace simply as a Mark Coticchia, Case Western Reserve University result of the greater discipline built into the organization Lorelei Davis, Frantz Medical Ventures Steve Girouard, Oakwood Medical from the beginning. The National Venture Capital Michael Goldberg, Bridge Fund Association has documented the fact that venture- Lynn-Ann Gries, JumpStart backed companies, on average, have about twice the The 2006 Greater Cleveland Venture Capital Report William Grimberg, Consumer Innovation Partners economic impact as their counterparts. They contribute Zev Gurion, New Global Ventures disproportionately to revenues, exporting activity, technical Steve Haynes, Glengary Ventures innovation, research and development, jobs and wealth. Jack Harley, MAGNET Jamie Ireland, Early Stage Partners Ray Leach, JumpStart By any measure, the level of venture investments in a Chris Mather, NorTech region is a meaningful barometer of its success and Kevin McGinty, The Peppertree Fund its future prospects. We are thrilled about our recent Joe Michael, The Peppertree Fund successes, but even more excited about what is on the Trevor Jones, BIOMEC horizon over the next few years. We hope you’ll take a Bill Mulligan, Primus Venture Partners Don Murfin, Development Capital closer look at why this region is increasingly a great David Morgenthaler, Morgenthaler Partners destination for serious investors. Jonathan Murray, Early Stage Partners 3 Clay Rankin, North Coast Angels Scott Roulston, Fairport Asset Management Gordon Schorr, Akron ArchAngels Dorothy Baunach, James D. Ireland III Baiju Shah, BioEnterprise President and Managing Director, Chris Sklarin, Chrysalis Ventures Chief Executive Officer, Early Stage Partners, LP NorTech Mike Stubler, Draper Triangle Ventures Chair, NorTech Venture Capital Advisory Task Force Ted Theofrastus, Beta Partners Bill Trainor, Mutual Capital Partners Eric Von Hendrix, MWV Pinnacle Management Company Brad Whitehead, The Cleveland Foundation Wayne Zeman, MAGNET Baiju R. Shah Ray Leach President, Chief Executive Officer, BioEnterprise JumpStart Inc.
  4. 4. The Venture Economy In the last century, businesspeople, created in a region. New ideas and innovations Regions with thriving entrepreneurial cultures government officials and citizens understood attract premium talent and investment capital have an appreciation for the necessity of The 2006 Greater Cleveland Venture Capital Report that a region’s economic health is best to form start-up companies. A pipeline of fast- continuous innovation and creation, and a supported through investments in its physical growing, venture capital-financed companies is collective appetite for the business risks. infrastructure—such things as roads, bridges, developed. Importantly, despite the high risks of any single water systems and ports. venture, dynamic entrepreneurial regions These high-growth companies account already are economically robust as the portfolio of In the new century’s knowledge economy, for nearly 10% of all American jobs, and emerging companies provides a solid and a region’s capacity for creating wealth will contribute approximately one in seven new growing economic base for the community. increasingly be a function of the strength of jobs to the American economy. These jobs its innovation infrastructure: talent, research are well-paying positions with benefits at all universities, technology transfer offices, levels of the employment ladder, and are high- business accelerators, and regional seed and knowledge and service positions that are at less 4 venture capital investors. risk of being transported overseas in the near term. Some of these companies are destined to When this collaborative network is established become the large companies of the future, while and operating at full capacity, a virtuous, self- others will becoming the breeding ground for perpetuating cycle of entrepreneurship is the next generation of emerging companies.
  5. 5. The Venture Capital Continuum SEED EARLy GROWTH ExIT Venture economies require a robust and comprehensive ‘ Early-stage investments are typically $1-5 million and ‘ Exits are the final stage of investment in venture capital continuum to fuel the development of innovations is usually provided by regional venture capital firms or opportunities, and typically involve some element of The 2006 Greater Cleveland Venture Capital Report into companies. The life of high-growth ventures can be angel investors. At this stage, the company is focused return of capital to the original venture backers and broken into four stages of investments along the venture on producing a commercial offering, validating it management teams. At this stage, strategic acquirers capital continuum: seed, early-stage investments, growth with initial customer sales and developing a broader typically take on enterprises and provide the resources equity and exits. industry advisor network necessary for widely distributing the offering. The first two stages of the continuum tend to be provided Companies that continue to prosper will typically find the As companies grow through these stages of development, by regional capital sources: next two stages of capital from national capital providers they must attract strategic financial partners that can as well as strategic industry partners: provide increasing amounts of capital and wider industry ‘ Seed investments and funding is typically $250,000- networks to support that growth, in the same manner that $1 million and provided by friends & families of ‘ Growths financing span a range from as low as $5 companies develop operating infrastructure and systems the entrepreneur, nonprofit venture development million to more than $50 million for companies. The to position that the firm for sustainable success. 5 groups, and grant funding sources. The company is funds are provided by a range of equity sources, focused typically on building or testing its offering and regional and national, as well as strategic investors assessing early customer interest in that offering. and mezzanine/debt capital sources. Companies at this stage are focused on accelerating market adoption of their offerings and scaling infrastructure to support their continued growth.
  6. 6. Cleveland Area Venture Investments SNAPSHOT OF SUCCESS $ Millions Companies Financed Numbers have a way of telling vivid stories. Over $500 million has been invested in regional start- 123 259 156 43 56 51 ups over the last three years. 2004 2005 2006 2004 2005 2006 Even among those who work in Source: Dow Jones Venture Wire; Venture Source; BioEnterprise; JumpStart; ODOD Greater Cleveland’s investment Investments by Sector The 2006 Greater Cleveland Venture Capital Report and innovation communities the statistics may be an eye-opener. Other Business & COMPANIES Advanced Materials Medical Devices EqUITy Consumer Services Medical Devices Collectively, these numbers By SECTOR INVESTMENTS Advanced Other Business & Materials Number Consumer By SECTOR IT, Communica- Biopharma- demonstrate an increasingly vibrant Services Biopharma- ceuticals Percent of tions & Software ceuticals regional venture economy. IT, Communications & Software Health Care IT & Services 2004-2006 $ Health Care IT & Services n medical devices 23 n business & Consumer n medical devices 20% n business & Consumer The data suggest the region is n biopharmaceuticals 11 Services 14 n biopharmaceuticals 15% Services 10% n Advanced materials 12 n Advanced materials 5% beginning to reach a critical mass n health Care IT & n health Care IT & 6 Services 11 n Other 5 Services 28% n Other 1% of entrepreneurship and venture n IT, Communications & n IT, Communications & Software 21 Software 22% financing across multiple technology sectors, a new level from which even Investments by Stage larger success will be achieved. After all, nothing breeds success SEED EARLy GROWTH like earlier success. $ mIllIONS 49 173 315 # Of deAlS 71 57 22 AVG. deAl SIze 0.7 3.0 14.3 $ mIllIONS
  7. 7. National Investment ExTERNAL EqUITy INVESTORS IN CLEVELAND AREA COMPANIES, 2004-PRESENT bOSTON Ampersand Ventures mIdweST Eastward Capital Apex Ventures Norwich Ventures Beecken Petty Polaris Ventures Blue Chip Venture CID Equity Hopewell Ventures Reservoir Ventures The 2006 Greater Cleveland Venture Capital Report Talisman Capital Thomas McNerney Partners Triathlon Medical Ventures New yORk/eAST COAST weST COAST Behrman Capital Angiotech AAdvance Columbia Capital 7 Chevron Technology Ventures Domain Associates Compass Group GMG Capital Hambrecht & Quist Halyard Capital Morgenthaler Ventures Investor Growth Capital Palo Alto Investors SOuTh Johnson & Johnson Panorama Capital Cordova Ventures LSKW Investments Parker Price Venture Capital ExOxEmis New Enterprise Associates Sierra Ventures MB Ventures StarVest Partners Vivo Ventures River Associates Sunrise Equity Western Technology Texas Pacific Welsh Carson
  8. 8. STAGEK Seed // EARLY // GROWTH // EXIT As a region, Northeast Ohio opportunities. They have been in the last few years has committed aided greatly by the Third Frontier to the identification, development Program, through which the Build & test prototype and acceleration of high-potential State of Ohio has invested over Protect start-ups. The collective efforts $300 million in Northeast Ohio’s intellectual are bearing fruit: the region has research institutions, capital property averaged just over 20 opportunities funds, development groups, and Measure that have attracted seed funding companies since 2002. The Third customer interest each year from 2004 through 2006. Frontier funds have been invested in centers of distinctive and The 2006 Greater Cleveland Venture Capital Report New ventures in this stage of translational commercialization in development have a number of medicine such as neurostimulation, critical hurdles to negotiate. They atrial fibrillation, regenerative must assemble their initial business medicine, and medical imaging, case and craft a compelling and in other technology areas such business plan. Depending on their as fuel cells, sensors and controls, underlying product or service, and advanced materials. In addition, FUNDING they may need to build and test a the Third Frontier has catalyzed prototype or demonstrate proof the development of a number of of concept in a lab. They will be pre-seed and seed-stage funds and required to protect their intellectual investment groups in the region property. And of course they all through its grant programs. Regional Seed Funds must harvest expressions of real customer interest to present to any These investments, along with potential investors. the increasingly interconnected Friends Family efforts in these areas of distinctive The region’s world-class research innovation, will produce an institutions, technology offices, increasing stream of high-quality, Grants and venture development groups seed-stage opportunities for years are working in concert to increase to come. the pipeline of funded seed stage
  9. 9. Selected Deals CARdIOINSIGhT CONTAINed eNeRGy GReAT lAkeS OVATION pOlymeRS CardioInsight is commercializing Contained Energy is a Cleveland- phARmACeuTICAlS Ovation Polymers, based in a novel electrocardiographic based company building a Great Lakes Pharmaceuticals Medina, is in the business of imaging technology developed direct carbon fuel cell based is focused on the development leading-edge, nano-engineered at Case Western by two doctoral on technology from Lawrence of antimicrobial systems and polymer compounding innovation. students and their engineering Livermore National Laboratory in devices to guard against catheter- The company’s specially-designed professor. The technology non- California. Initial applications are mediated infections. The company and proprietary processes invasively images electrical being developed for the mobile- recruited an experienced biotech enable the creation of high- The 2006 Greater Cleveland Venture Capital Report activity on the surface of the power and distributed-power CEO from San Diego to lead the performance engineered materials heart, pinpointing the nature generation markets. The company effort. The company received seed for electronics, aerospace, and and location of abnormalities. will develop products with support funding from Case Technology industrial applications, as well as In 2006, the company closed a from the Wright Fuel Cell Group, a Ventures and JumpStart, as well consumer and health products. Series A funding round from public-private partnership funded as support from Ricerca and The company was launched with Draper Triangle Ventures, by the State of Ohio. JumpStart BioEnterprise. Product testing is financial backing by Early Stage JumpStart and Case Western, and and a group of angel investors being conducted in collaboration Partners. The firm now has eight is receiving additional support provided the seed funding for the with the Case Western, MD product platforms, eight patents from BioEnterprise. The capital is company. Anderson Cancer Center in and 22 active programs spread out being used to develop an advanced Houston, and Ricerca, a Cleveland- among 15 clients. prototype of the device and conduct area contract research company. clinical trials. 9
  10. 10. STAGEK SEED // eARly // GROWTH // EXIT Complete The growth in seed-stage promising early-stage technology business plan investments has naturally resulted ventures. They have done so Validate in a similar growth in early-stage through professional investment offering investment opportunities. In 2006, funds as well as professional angel Prepare commercial Northeast Ohio had 25 companies investment groups. For many young prototype that received early-stage venture companies, these investors provide Plan for profit support, similar to the two previous a crucial bridge between early Recruit years which had 21 and 25, financing supplied by friends and seasoned respectively. family members and the national advisors venture capital market. In addition At this stage of business to providing capital, these investors The 2006 Greater Cleveland Venture Capital Report development, venture-quality are a prime source of contacts and companies are typically focused guidance to emerging companies. on expanding their management teams and clinical or industry The region also benefits from a partnerships, producing a market- professional and comprehensive ready product, and demonstrating business accelerator network that initial market adoption that validates spans industries and geography. FUNDING the company’s offering. These intermediaries, supported by progressive philanthropy, Two crucial ingredients that are institutions, and corporations, and needed to support a large number the State of Ohio, have worked in a 10 of emerging companies are concerted fashion to nurture these Regional investors dedicated to early-stage firms into viable enterprises, by Venture Firms opportunities and professional introducing mentoring management, business accelerators skilled at connecting these firms to market Angel supporting these opportunities. resources and preparing them for Investors In the last few years, the region is and introducing them to national witnessing the emergence of these investment funds. ingredients. Northeast Ohio now has a bevy Seasoned regional investors have of venture-backed, early-stage begun concentrating on supporting technology and service companies.
  11. 11. Selected Deals CSf TheRApeuTICS AyAlOGIC, INC. fIVe STAR TeChNOlOGIeS SyNApSe bIOmedICAl CSF Therapeutics, a spin-off Ayalogic is an Akron-based Five Star Technologies is Synapse Biomedical, based in from the Cleveland Clinic, is business-communications an advanced materials Oberlin, is developing minimally developing medical devices to software company. The company’s nanotechnology provider of high- invasive neurostimulation restore cognitive function in product—qmunicate—uses a VOIP performance powders and other devices to diagnose and treat patients affected by trauma and Network to merge voice and text solutions for the electronics patients with various forms neurodegenerative disorders data and messaging into a single industry. The company’s unique of neurological impairments. such as stroke and Alzheimer’s customer solution. The company technologies and processes can The company was formed on The 2006 Greater Cleveland Venture Capital Report disease. The company, a part of has closed initial customers in deliver custom dispersions with technology from Case Western, the BioEnterprise Initiative, is the multiple industry verticals, and in exceptional speed and quality. In University Hospitals of Cleveland, Cleveland Clinic’s 18th spin-off 2006, closed a venture-round of 2006, it closed a $7.1 million Series and MetroHealth, and is a partner since 2002. The company received investment led by Draper Triangle B round of funding from Early in the Ohio Neuromodulation its venture round of funding from Ventures, Early Stage Partners and Stage Partners, Morgenthaler Neurostimulation Partnership, a Boston-based Norwich Ventures. JumpStart. Ventures (Menlo Park), Cordova State-funded collaborative that is Ventures (Atlanta), Reservoir supporting several Cleveland-area Venture Partners (Columbus) and neurostimulation start-ups. The Chevron Technology Ventures company has been funded by two (California). Palo Alto based venture funds, Vivo Ventures and Palo Alto Investments, as well as JumpStart and angels, 11 and also receives support from BioEnterprise.
  12. 12. STAGEK SEED // EARLY // GROwTh // EXIT Build infrastructure From a broad base of promising Over the last three years, Northeast Attract growth management emerging companies with innovative Ohio has seen a significant influx Fill demand products, services and new ideas, of growth capital from across the Secure strategic Northeast Ohio’s business and civic country. Investment firms from partners leadership has, in recent years, the east Coast capital centers of Sustain given special attention to those New york and boston to Silicon profitability companies which show promise of Valley on the west Coast and one day growing into much larger to all parts in between have entities, the kind that do business made significant investments in around the world, attract the best Cleveland area firms. The 2006 Greater Cleveland Venture Capital Report talent and help anchor a region’s economy and its reputation. And the amounts they invest are significant, representing over 60% During this stage, companies of the capital invested in the region are typically trying to accelerate over the last three years. With the and scale the adoption of their growing pipeline of funded seed and products or services. They are early-stage ventures, the number adding infrastructure and attracting of deals and the dollar amounts FUNDING broader professional management. attracted to the region should All of which takes money, which continue to grow substantially over is sometimes supplied by public the next few years. 12 capital markets, but in most cases through the investment of growth Venture Capital Mezzanine and equity and strategic capital. In a truly Firms Debt Funds vibrant region, much of this latter funding will come from outside Private Equity investments from national venture capital firms and other private equity Strategic Investors players.
  13. 13. Selected Deals TRek dIAGNOSTIC SySTemS TuRNING TeChNOlOGIeS SImbIONIx whOle heAlTh Trek Diagnostic Systems is Turning Technologies, a company Simbionix is the leading developer Whole Health is the leader in a global manufacturer and supported by the youngstown of interactive medical simulators quality and service for the on-site distributor of automated systems Incubator, develops interactive and simulation software to train health care industry. The Whole in the clinical, pharmaceutical response systems utilizing the physicians in a wide array of Health program enables employers and veterinary lab markets. Its latest software and hardware tools minimally invasive therapies. The to provide self-insured health care products are designed to provide available and transforms them into medical device company originated to employees ranging from primary cost-effective improvements in state-of-the-art applications for in Israel, and established its and urgent care to preventative The 2006 Greater Cleveland Venture Capital Report workflow efficiency, ergonomics audience response. The company’s headquarters in Cleveland in health and wellness programs and test-result performance. flagship products, TurningPoint® 2002, led by an investment from while also reducing costs and Ampersand Ventures of Boston Software and Responsive Early Stage Partners and with increasing employee productivity. and Hambrecht quist of San Innovations ResponseCard® the support of the Cleveland Founded in 1991, it now serves a Francisco completed a growth- (Keypads), integrate with Clinic, University Hospitals and number of high-profile clients— stage financing of the company Microsoft’s PowerPoint® software, BioEnterprise. Simbionix is one including Continental Airlines, and merged it with Magellan providing the most advanced of nearly a dozen venture-funded Sprint/Nextel, Intel and Capital Biosciences, a clinical diagnostics combination of knowledge and Israeli health care companies that One—under long-term contracts company, another portfolio technology currently available in now have significant collaborations and currently serves more than company. the field of audience and student and presence in the Cleveland 200,000 individuals. The company assessment. The company area. The company completed recently completed a growth received a significant growth equity another financing round in 2006. financing round. 13 investment in 2006 from Talisman Capital of Columbus.
  14. 14. STAGEK SEED // EARLY // GROWTH // exIT All economically healthy regions is now itself becoming a major boast their share of signature company) to Steris, a major player companies that drive innovation in the sterilization-supply business, and attract investors and premium the region in recent years can managerial and operational talent. point to having been the incubator These companies capture healthy of a number of America’s most market share in their industry, and innovative companies. eventually capture the interest of larger companies intent on acquiring In addition, the region’s historic them. At a certain point in their technology companies such as The 2006 Greater Cleveland Venture Capital Report organizational lifecycle, these smart, Philips Medical and its polymer nimble companies also become the companies such as BF Goodrich are source of spin-off innovations, as still driving new start-ups through some employees leave to begin their their spinoffs and alumni. One own companies, thereby refreshing study traced the lineage of nearly the cycle of company formation. 80 medical device companies to the success of Picker and Technicare, The companies that reach this stage predecessors to Philips Medical. are thus magnets for talent and And the region’s many orthopedic capital, drivers of job and wealth companies trace their lineage to creation, and also, through the AcroMed, now a division of Johnson 14 cycle, sources for new innovation. Johnson. Northeast Ohio is blessed to have an increasing supply of these kinds of In 2006, the Cleveland region Strategic Acquisition companies. From Office Max, which witnessed a few very successful went from start-up to the number- exits through acquisition. In addition, Public Offering Launch New Ventures two player in the office supply one of the region’s promising and Spinouts industry in a relatively short period, bioscience companies completed a to Progressive Insurance (whose successful IPO on NASDAQ. spin-off, Comparison Market,
  15. 15. Selected Deals ® flAShlINe flIGhT OpTIONS Tmw SySTemS CleVelANd bIOlAbS Founded by Cleveland-based Flight Options is the world’s Founded by a Cleveland-area Cleveland Biolabs, started serial entrepreneur Charles Stack, second-largest provider of entrepreneur, Tom Weisz, TMW in 2003 as a spin-off of the Flashline focused on developing fractional ownership of medium to Systems has grown into one of the Cleveland Clinic, successfully reusable Java software code. It large private jets, with 200 aircraft world’s most trusted suppliers of completed an initial public allowed client IT operations to re- and more than 2,000 owners. dispatch and logistics enterprise offering on NASDAq in July 2006. use, reduce and remix software Founded in October 1998, the software for the trucking industry. The biotechnology company assets. The company received company quickly emerged as a For years, it has been among the is developing drugs offering The 2006 Greater Cleveland Venture Capital Report significant venture funding from leader in the fractional jet industry. fastest-growing companies in the protection from radiation and Adams Capital of Pittsburgh. The Flight Options was the first region, and it was selected by the cancer based on the work of Dr. company was acquired by BEA company in the industry to offer U.S. Army as a prime logistics Andrei Gudkov. Cleveland BioLabs Systems, a prominent Silicon fractional shares in previously software supplier. In late 2005, the has established a technological Valley-based enterprise software owned aircraft, which translated company was acquired by a pair pipeline for the development of company. into a cost savings of as much of private equity groups, Wachovia new pharmaceuticals and their as 35%, thus opening private Capital Partners of North Carolina rapid preclinical evaluation. The jet travel to a broader audience. and Peppertree Capital Fund of company, which had received The company had an estimated Cleveland. venture investment from Sunrise $700 million in revenues in 2005. Equity of New york, sold 1.7 million Raytheon recently acquired shares in its offering. controlling interest in the company. 15
  16. 16. The Regional Venture Landscape The 2006 Greater Cleveland Venture Capital Report Ohio, and especially the Cleveland area, fund of funds that has made investments to help companies, as they fulfill the important roles has benefited from a blossoming of angel, seed capitalize a number of regional and national of local validation as well as local investment and venture investors interested in financing new funds. The Ohio Capital Fund is jointly managed by syndicate management for the opportunities. regional technology companies. In addition to the Peppertree Capital and Fort Washington Partners. many regional firms created over the last five In addition, Ohio’s Public Employees Retirement Angel investors and networks have also played a year, the Cleveland area attracted offices from System launched the Ohio- Midwest Fund. That crucial role in developing good ideas into viable four national venture firms in 2005-06—Oakwood Fund, managed by Credit Suisse First Boston, has companies. Northeast Ohio is increasingly rich in Medical Investors (St. Louis), Chrysalis Ventures invested $51 million in eight groups focused on these supportive networks, yet another piece of (Louisville), Draper Triangle Ventures (Pittsburgh) early-stage investments in Ohio-based companies. the comprehensive capital continuum. The North and Bridge Fund (Cleveland and Tel Aviv)—and Coast Angel Fund and the Akron ArchAngels 16 saw the activation of two new angel networks— Active, well-capitalized regional venture firms have Network, both supported by experienced North Coast Angels and Akron ArchAngels. The been a vital element in developing the region’s entrepreneurs, were organized this year. And The State is now home to more than 45 capital sources high-tech entrepreneurial economy. These state Ohio Tech Angels provides a state-wide network of for enterprising entrepreneurs. monies and leading regional institutional investors investors. have stimulated the growth of these firms in The State of Ohio has aggressively supported recent years. The region’s diverse spectrum Not surprisingly, the growth in venture and angel these efforts through its Third Frontier programs of venture firms permits entrepreneurs to find investors in this region is directly correlated to to encourage angel investment, create new seed strategic capital partners for their businesses. the growth in high-quality technology investment and early-stage funds, and attract national venture In addition, these firms are critical to attracting opportunities emerging in Northeast Ohio. groups. The Ohio Capital Fund is a $150 million national venture investors into regional technology
  17. 17. OHIO VENTURE, ANGEL, AND SEED FUNDS VeNTuRe CApITAl fuNdS ANGel NeTwORkS ANd fuNdS Adena Ventures Akron ARCH Angel Network Athenian Venture Partners Clarion Capital BIOMEC CoreNetwork Blue Chip Venture Company Custer Capital Bridge Investment Fund Findaway Ventures Charter Life Sciences Growth Strategies Group Chrysalis Ventures North Coast Angel Fund CID Capital Ohio Tech Angels Consumer Innovation Partners queen City Angels The 2006 Greater Cleveland Venture Capital Report Crystal Ventures RMS Capital Development Capital Sycamore Partners Draper Triangle Ventures Symark Early Stage Partners Frantz Medical Ventures Seed VeNTuRe fuNdS Isabella Capital Case Technology Ventures Key Principal Partners Cincinnati Children’s Tomorrow Fund Max-Ventures Cleveland Clinic Innovations Miami Valley Venture Funds Glengary Ventures Morgenthaler Ventures GLIDE Fund Mutual Capital Partners JumpStart 17 MWV Pinnacle Capital Fund Nationwide Mutual Capital NCT Ventures Oakwood Medical Investors Panzica Investments Primus Capital Funds Reservoir Venture Partners River Cities Capital Funds Riverside Capital Microcap Fund SunBridge Partners Talisman Capital Triathlon Medical Venture Partners
  18. 18. The $1.2 Billion Opportunity Since 2001, the major institutions with a stake The burgeoning pipeline has created a new Regional venture firms play a vital role in in Northeast Ohio’s economic success—from challenge and an opportunity: the Cleveland area attracting follow-on investment from national venture capital funds to universities and will need to generate and attract an estimated investors. At last count, 41 VC firms, many from research institutions, from financial institutions $1.2 billion in additional equity funding over the East and West coasts, have made follow-on and philanthropy to the State of Ohio—have the next five years to support the needs of its investments in Cleveland-area companies in the collaborated in unprecedented ways to increase emerging technology companies. last three years, drawn to the region in many the pipeline of high-growth business start-ups. cases by their peers in Ohio. That trend should Working with a common vision, they have created To meet this challenge, the importance of continue to grow as regional venture portfolios a network that can support and encourage the Ohio-based venture firms, especially those that continue to mature: an estimated $00 million most promising emerging companies through participate at the seed and early-stages of venture of the equity requirement could be provided by The 2006 Greater Cleveland Venture Capital Report their entire stage of value creation, from their financing, cannot be overstated. The region follow-on growth equity sources, much of that earliest stages of development to their eventual must generate or attract $375 million in seed from national investors. sale or other liquidity event. and early-stage capital over the next five years to continue funding the stream of companies With so many entities from within the region and This range of coordinated collaboration has borne emerging from the innovation infrastructure. the state collaborating on planting the seeds more fruit than even its architects might dare have Efforts such as The Ohio Capital Fund and the for innovation and then nurturing the ventures dreamed initially. The region now boasts a robust Ohio-Midwest Fund as well as other Third Frontier through their early stages, the companies pipeline of promising, venture-worthy companies programs are a starting point to help fill that gap. emerging from this pipeline are prepped for in various points of development along the funding Much more, though, will be needed. success. Isn’t this the kind of market in which continuum. From 2004-2006, the region has seen you and your institution should participate? 35-40 seed and early-stage opportunities each year. 1 BUILDING PIPELINE CAPITAL NEEDS ExIT GROWTH Number of Companies by Stage of Financing EARLy 56 51 SEED 43 9 $75 $300 9 $800 Million LATER 4 Million Million STAGE 22 17 Pipeline EARLy 18 of venture STAGE quality deals SEED 21 25 25 Typically Typically sourced sourced regionally nationally 2004 2005 2006
  19. 19. COMPANIES RECEIVING INVESTMENTS, 2004-2006 medical device biopharmaceutical health Care IT Service Information Technology business Consumer Advanced materials AxioMed Spine AnalizaDx American Safety Health Software Services Aria Analytics CardioInsight Technologies Arteriocyte Institute AVE Intervision Comparison Market Delta Plant Clevex Athersys Lifeline Axentis Day-Day Five Star Technologies Critisense Cleveland BioLabs, Inc. MDG Medical Inc. Ayalogic Employ Media FLx Micro Early Sense Copernicus Therapeutics MemberHealth Banyan Technology InnoDesk MAR Systems Fused Multimodality CSF Therapeutics NCRx Optical BlueBridge Networks Nine Iron Innovations MIMFlow Technologies Imaging Icon Interventional NextMed Systems ComSense NineSigma Ovation Polymers Great Lakes Prognostix PetsDx Embedded Planet Pfingsten Publishing Stanton Adv. Ceramics Pharmaceuticals Tolera ProPractica Embrace Pet Insurance Predictive Services Technology Management The 2006 Greater Cleveland Venture Capital Report Imadent Transcutaneous Roscoe Medical Everstream PreEmptive Solutions Thin Battery Solutions Imalux Technologies WholeHealth Flashline PsyMax Trivum Technologies IntElect Vascular Biogenics Inspherion quickPayNet Interventional Imaging IqS Tooling University Other Technology Merlot Orthopedix Knotice Visual Edge Technology Contained Energy NDI Medical Northcoast PCS Heritage Fare NeoMed PsiBase One Source Technologies Ogenix Sagequest Stratum Energy Systems Orthohelix SamePage Solutions Teraphysics PeriTec BioSystems Sypherlink Simbionix TOA Technologies 19 Symphony Medical Turning Point Synapse Biomedical Unitask Syncro Medical Think-A-Move Trek Diagnostics
  20. 20. Design: Brian J. Willse / Newbomb Design; Editor: John Ettorre; Project Manager: Paul Nickels 216.363.6883 216.658.3999 Growing Bright Ideas 216.363.3400