Report: Ohio Companies Raise Over $961M in 2019

Ohio businesses raised more than $961 million over 147 deals in 2019. That's lower than 2018's figures, which saw slight north of $1.1 billion raised over 153 deals.

These numbers were culled from PitchBook and the National Venture Capital Association's new report, which studies funding moves in metro service areas, regions and states.

It indicated that Ohio's Q3 that contributed the most to these annual returns, boasting 38 deals worth a total of $484.84 million.

Q4: The Stats

PitchBook reports that the largest Ohio deals in Q4 were:

Interestingly, the report doesn't include VINDLY's $35 million Series B fundraise from December, which included participation from the likes of Cintrifuse's Syndicate Fund and Hyde Park Venture Partners. If it had, Cincy would have had the most reoccurring appearances (four) on the state's list of biggest deals.

Cincinnati Leaders Sound Off

While the report didn’t specifically break out Cincinnati’s VC funding data in 2019, we can still get a clearer picture of how the ecosystem performed from local thought leaders.

A common theme many observed was "expansion," and that's in terms of local deal size, type of company receiving funding and even the way investors found the right organizations to work with.

"In 2019, our tech ecosystem saw foundational investments from big-name coastal VC," said Rob McDonald, co-manager at Vine Street Ventures. "It very much felt like the ecosystem matured in 2019 as we are seeing companies secure bigger later stage funding rounds.  In prior years, we saw a plethora of seed stage financing. This year, the efforts seemed more focused on the Series A or later companies."

Ohio Innovation Fund Managing Director Bill Baumel told Cincy Inno that while the Queen City's consumer tech industry has always been strong, companies in the medtech scene are getting increasing amounts of attention and dollars.

"Cincinnati-based company Enable Injections is the most exciting medtech investment I've seen since Dexcom, which is now a more than $21 billion company," he said. "I have also seen the application of artificial intelligence and machine learning within medtech companies. An example of this is Genetesis, a company in Mason, Ohio, that is providing breakthrough diagnostic solutions."

McDonald agreed.

"We continue to see meaningful commercialization of technology out of Cincinnati Children's Hospital," he said. "In addition, in combination with Cincy Tech's focus in health care, we are seeing a meaningful pocket of health care companies thrive."

Speaking of AI, there's Connetic Ventures, a Covington-based firm that uses maching learning in an effort to remove bias when finding future startup investments. In March, it raised $25 million for its second fund.

The company credits this fundraise and its AI platform "Wendal" for two of its most recent local moves.

"We have several companies from the region in our portfolio," said Connetic Principal Kim Banham. "Connetic recently invested in two local technology companies with minority and female founders, ReadySetSurgical and Cloverleaf."

Connetic co-founder, CIO and Partner Kyle Schlotman explained more.

“Wendal allows us to ingest hundreds of companies a month, analyze them in real time and then have humans follow-up and complete deeper diligence on the top prospects," Connetic co-founder, CIO and Partner Kyle Schlotman explained. "Our current version of the platform launched in early 2019, and we were able to complete 25 deals while ingesting almost 800 companies during that time."

He added that since the firm's dive into AI, he noticed other firms doing the same.

Trend setting wasn't relegated to Connetic Ventures. In fact, #StartupCincy veteran Queen City Angels celebrated its twentieth birthday in 2019.

"The 20 year milestone is significant because there were no angel investing groups 20 years ago, and QCA has not only stood the test of time, it has growth significantly in the past 18 months (49 members as of April 2014, 112 members now)," said QCA Executive Director Scott Jacobs.

In addition to turning 20, QCA raised its sixth fund in 2019.

Cincy experienced meaningful, foundational ecosystem development outside of the pure funding space, in ways that could perhaps spur more money moves in the future.

"In 2010 when we started the Brandery, there wasn't a 'home' for the tech meet-ups and events. Later, Cintrifuse became the home," McDonald said. "In 2019, we saw 1819 [Innovation Hub at the University of Cincinnati] become another key space for entrepreneurs to congregate, and additional coworking spaces become key parts of the geographic footprint of the startup community."

Startups, too, have seen fundamental growth in the last year, especially those who received significant funding. Consider some of local seed stage investor CincyTech's portfolio, and the product releases, awards, testing and more they were able to conduct and win thanks to the money they raised in 2019 (CincyTech wasn't available for comment at press time).

HOW DOES THIS COMPARE TO NATIONAL MOVEMENTS?

U.S.-based companies raised about $136.5 billion across more than 10,700 deals in 2019, according to PitchBook. 2019 VC activity was slightly lower than 2018, when U.S. companies raised $140 billion across 10,500 deals. The dip was due to a slower fourth quarter, PitchBook says. But overall, the data, released Tuesday, shows that venture capital raised by U.S. companies has been steadily rising since 2006.

California startups saw the most funding of any state, with companies raising more than $63 billion across 3,623 deals. The state had several multi-million-dollar deals from San Francisco companies such as DoorDash, which raised $700 million last year, and Databricks, which raised $400 million in October.

Following California was New York, whose startups raised more than $27 billion across 1,315 deals, and Massachusetts, which saw more than $10 billion raised in 2019 across 740 deals.When it came to startup exits, 2019 hit a new record for U.S. VC exit value, coming in at $256.4 billion across 882 liquidity events. One of the year’s largest exits was Honey, which was acquired for $4 billion by PayPal in November.

Female-founded companies saw record activity on both a capital and deal count basis, raising $18 billion across 2,184 deals in 2019, compared to nearly $17 billion across 2,057 deals in 2018.

Looking Ahead

It's only two weeks in 2020 and there's already been major funding news for Cincy.

"Hillbilly Elegy" author and Rise of the Rest Seed Funds special advisor J.D. Vance announced that he had raised $93 million of a planned $125 million fund for his new firm, Narya Capital. Based in Cincinnati, it already boasts limited partners such as Eric Schmidt, Peter Thiel and Marc Andreessen. The fund (with its Quenyan moniker; think Tolkien) will focus on "under-served" ecosystems outside of Silicon Valley. It's the second large raise for an Ohio firm in the past three months, with Columbus' Drive Capital closing $350 million for its Fund III in November 2019.

Narya won't be the only firm looking to invest.

"In 2020, we are optimistic about investing in companies and founders from the local region," Banham said. "We look forward to lots of success from local companies, as well new companies being created this year. Connetic believes it is important to work with other investment groups locally to collaborate and build a stronger ecosystem."

McDonald outlined what investments could look like specifically in the year ahead — besides one to two "meaningful" exits and newly funded startups building out stronger teams.

"I think we will see similar activity at the seed stage as we saw in 2019 (not necessarily more or less)," he said. "And, we will continue to see institutional VC look to invest heavily in the Series A or later companies. With the amount of VC available globally now, investors are looking in new geographies to find portfolio companies. These funds generally deploy their capital in bigger investments."

Jacobs echoed McDonald's sentiment regarding investors looking outside the box.

"Many investors have moved to more of a cash position and the trend will be to take that cash and invest in more alternative asset classes," he said. This can only bode well for angel groups and venture capital firms. With the regulations becoming more clear for opportunity zones, it is likely that will become a growing trend for investors as well."

Read More

Read the stories behind some of the year's biggest Cincinnati deals on Cincy Inno.