CincyTech has formed its fourth and largest fund to date, one that will provide about $30.75 million to invest in as many as 25 homegrown startups in the digital and life sciences fields.
The Cincinnati-based accelerator projects the CincyTech Fund IV LLC will create at least 600 jobs in Southwest Ohio over the next five years. New hires would earn on average about $80,000 a year. The new fund is larger than CincyTech’s first three funds combined. In addition, most of the new investors in the latest fund are individuals, a sign that people trust and respect public-private CincyTech’s ability to get results.
When Castellini Management Co. “invested in CincyTech’s first fund in 2007, it seemed like a good idea for the community, but the model was untested,” said Bob Castellini, the principal owner of the Cincinnati Reds and chairman of the Castellini Group of Companies, a billion dollar produce company based downtown. “The community impact and results speak for themselves and it’s gratifying to see so many others participating in Fund IV,” he said in an email.
“The goal of this fund is to create jobs in Southwest Ohio and a return on investment for our investors,” said Bob Coy, CincyTech’s chief executive officer, in an interview. “This fund is going to enable us to invest larger amounts in those companies.”
CincyTech is the largest seed-stage investor in the region and one of the top five in the Midwest. Now, with a larger fund and a growing network of co-investors, CincyTech officials say they can support companies from concept to early stage growth.
Coy predicts the new fund can lead to as much as $230 million in so-called follow-on investment in those 25 companies, whose enterprise value could approach $1 billion.
“We have very good founder talent in Cincinnati and the region,” Coy said. “It’s the quality of the founders and their ideas that really are the reason for the success that we’ve had and the increasing level of entrepreneurial activity that we see in the region.”
Coy attributed that to CincyTech’s previous performance and to the state of Ohio increasing its investment from $5 million to $10 million.
CincyTech had to match the state’s investment if it wanted to get the full investment, so it found 91 investors, the majority of whom are local individuals.
The accelerator went from having no individual investors in its first fund to about 80 in the new one. (The remaining investors besides Castellini Management include Cincinnati Children’s Hospital Medical Center, Interact for Health, the Greater Cincinnati Foundation and UC Health.)
“It shows how dynamic and engaged the region is,” CincyTech managing director Mike Venerable said. “That network of successful, connected people becomes a second resource for us to fall back on, when companies need advice and when we go to raise more capital.”
The accelerator has invested in more than 60 technology-based companies that are creating things from digital solutions for youth sports leagues to new medical devices and technology out of Cincinnati Children’s Hospital.
“The most important impact it gives us more dry powder to fund these companies further,” Venerable said. “The money is translating into people, and those people make the difference.”
CincyTech has established itself as the leader in Southwest Ohio in assisting startup companies to get capital funding and to bring in additional funding from investors around the state and country, according to Mike Hooven, CEO of Sharonville-based Enable Injections. Enable, which makes devices to inject anti-cancer and other medicines via a discrete body-worn device, is a CincyTech “portfolio” company.
“They are good leveraging a relatively small venture capital fund into pretty sizable investments that promote job creation in Cincinnati,” said Hooven, who has previous medical startup experience when he helped launch Mason-based heart surgery device maker AtriCure.
He said CincyTech played a key role in building his business, which was recognized by Gov. John Kasich in his State of the State address last week as broadening the base of new-to-Ohio employers that are creating jobs.
“Consulting at CincyTech as an entrepreneur in residence introduced me to Children’s Hospital and some technology that Children’s had developed and that became the technology of Enable Injections,” Hooven said. “They provided the support and the funding, and then we grew that business.”