The startup community hasn’t been spared from the coronavirus outbreak, but CincyTech has been able to help almost all of its companies raise money through the pandemic.
Avondale-based seed capital investor CincyTech has 30 active portfolio companies. It will have been involved in providing financing to 28 of those by year-end, CincyTech CEO Mike Venerable told me.
“This will be a really good year from a capital standpoint,” Venerable said. “I’m really happy that everybody got galvanized and our partners responded.”
CincyTech has made $4.67 million in direct investment this year. But that’s just a small piece of what those companies – the vast majority of which are based in Greater Cincinnati – were able to raise. CincyTech’s investment resulted in $90 million in total investment for its companies, including capital from angel investors and outside investors that partnered with it. Venerable expects that latter figure to reach $140 million to $150 million by the end of the year.
“That’s a lot of money,” Venerable said. “If we had made a forecast, that’s not what I would have expected.”
To put it in perspective, in a typical year about half of CincyTech’s companies would raise a round of financing.
The financings ranged from extensions of senior rounds to bridge financing with the help of JobsOhio.
Over-the-Rhine based Astronomer, which helps companies manage data flow, raised $13.6 million, Venerable said. Medical imaging device maker Genetesis raised $6.2 million. Health care company Enable Injections added a $25 million debt facility. Lisnr, a longtime CincyTech company that develops ultrasonic technology, raised a financing round. But new companies did, too, such as Peero, a Cincinnati-based company that has developed a platform for job training and employee recruitment, received an initial investment from CincyTech.
The higher-than-usual investment level is a product of a couple of factors.
One is CincyTech’s ability to team with other investors.
“When something happens like a global pandemic, you can skinny down, you can shut down or you can go through this and grow,” Venerable said. “You need partners to raise money.”
The quality of its companies also played a big role.
“That’s outside money, objective capital coming in to support those ideas,” Venerable said. “It’s a reflection of the continued growth and quality of local venture-backed companies.”
Since CincyTech began operating in its current format in 2006, it has invested $68 million directly. Its companies have received $1 billion in co-investment alongside CincyTech.
Some CincyTech companies needed to slow their hiring during the pandemic. But several companies saw opportunities to increase their spending, Venerable said. Losant, Airway Therapeutics and Cordata were among those. Losant developed a contact tracing program. Biopharmaceutical company Airway teamed with a partner to develop a therapy that it hopes can be used to treat inflammation and injury from respiratory disease caused by Covid-19. Cordata created an employee management system that helps companies manage people working remotely.
Not all has gone smoothly, which is usually the case in the startup world.
Eccrine Systems, a developer for technology that analyzes sweat, shut down earlier this year. That wasn’t related to the coronavirus pandemic, Venerable said. It had 50 employees last year. And another CincyTech-backed company, whose name Venerable declined to disclose, had a significant revenue impact from the pandemic and is working to figure out how it will proceed.
“This has been far less impactful in a negative way than I ever would have expected,” Venerable said of the pandemic. “I think everybody is surprised at how much economic activity there is.”
Many startups are insulated from a sudden shock to the economy because they’re at a pre-revenue stage and not dependent on money coming in yet, Venerable said.
Companies have also been able to hang onto their employees despite the pandemic. Its portfolio companies and companies that used to be in its portfolio but have been acquired and still maintain local operations combine to employ more than 1,200.
“I think employment overall is about flat (for its portfolio companies),” Venerable said. “That’s shocking.”
Meanwhile, CincyTech is in the midst of raising a fifth fund it hopes will total $50 million, according to a regulatory filing. Venerable couldn’t comment on that because it’s in the midst of fundraising.
