Cincinnati angel capital investment group Queen City Angels has begun raising its seventh investment fund with hopes of making it the firm’s largest-ever.
Queen City Angels is targeting at least $20 million for its latest fund, although chairman Tony Shipley has his sights set even higher.
“Our goal is to hopefully match or exceed fund VI,” he said.
That fund, which Queen City Angels finished raising in 2022, totaled $23 million. It was the largest one the 24-year-old firm has raised.
The latest fund is already off to a good start. Queen City Angels has pitched its 199 individual members on investing in the fund and has received commitments for more than $5 million so far.
The group plans to have a first close of the fund this week, Shipley said. That will enable it to collect that $5 million and begin investing the money.
“That’s important because we’ve been pipelining new deals for the past three months,” Shipley said.
It has three deals that members need to vote on soon. Wrapping up a first close on the fund will enable it to commit much-needed capital to those companies.
“It’s important for us to get those deals launched,” Shipley said. “If we can’t vote soon, those companies will probably do something else.”
The investments it’s initially planning for the money it raises in Fund VII include a company that has developed a treatment for hospital mattresses to eliminate bacteria that causes diseases, a cybersecurity company and a nanoparticle business that delivers drugs to specific areas of the body. It’s also working on a follow-on investment in a life sciences company that aims to address skin problems. All are based in the Greater Cincinnati region.
Queen City Angels now invests across the country, Shipley said. It focuses mainly on the Midwest and does a lot of deals in Greater Cincinnati. But its membership now extends nationally, with people in 21 states who are part of the group.
Queen City Angels’ first five funds were limited to investing in Ohio because state money was invested in them. But the sixth fund and the current one aren’t that way, opening them to deals anywhere.
“Given the relationships we had across the country, we started to get really great deal flow from all over the country,” Shipley said. “That continues to this day. But our preference is to invest as local as we can to support local entrepreneurs.”
Shipley is not sure yet when the fund will be completed and closed to investors.
“We’d like to keep it open as long as possible because we’re always bringing in new members,” Shipley said. “One of the major attractions is to be in the fund.”
Queen City Angels almost always invests through its fund in new opportunities. It also typically includes what it calls “sidecar” investments. Those are made by individual members who put their own money into specific deals.
Investors comprise several categories: high-net-worth individuals, family offices and institutions.
Queen City Angels is raising the new fund because it’s nearly tapped out of Fund VI. It has just a limited amount of capital left in that fund, not even enough to make any new investments, Shipley said. It can make follow-on investments in companies in which it has already injected money, but that’s it.
Shipley didn’t provide figures on investment returns.
Queen City Angels looks to invest primarily in technology, life sciences and advanced materials companies. Its initial investments typically range from $500,000 to $1 million, Shipley said. That has climbed from $300,000 to $500,000 several years ago. The larger deals have caused the group to move from almost strictly seed-stage capital to a mix ranging up to Series A rounds of financing. But those earlier-stage deals still make up the majority of investments for the group.
Queen City Angels has invested more than $100 million since it was launched in 2000, Shipley said. More than $50 million of that has come through its funds. The rest comes from investment made individually by members. But Shipley points to the nearly $1 billion in total investments its companies have received when co-investors’ amounts are included. That’s a better indication of its impact, he said.
Queen City Angels has a number of success stories it can tout to potential investors. It was the initial lead investor in Assurex Health, the Mason-based genetic testing developer that had a successful exit when it was acquired for $300 million, including earnouts, in 2016. And it was a seed-stage investor in Blue Ash-based Standard Bariatrics and initially led the Series A round for the developer of devices to treat obesity. It was acquired in a deal valued at $300 million in 2022.
