When Jeff Wilson hit the fundraising trail last year for his startup, Mason-based Soundtrace, the process admittedly took longer than expected. Most funding rounds do these days. It was as much about finding the right partners, he said, as it was securing the capital necessary to grow the business and hire.
Wilson said he eventually accomplished both.
Soundtrace announced $2.5 million in fresh funding in September. While the raise brought in a host of outside capital – the lead investor, a New York-based firm, signed its first check to a Cincinnati-area company in the deal – there was local involvement, too. And Cintrifuse Capital, a newly renamed arm of the Over-the-Rhine-based startup support group, is looking to fund significantly more deals in the region in 2024 and beyond.
The team behind the effort said the shift will be “transformational” for the ecosystem. Cintrifuse Capital could back 40 to 50 local companies over the next few years while also fostering new talent and uncovering venture-backable founders waiting in the wings to take the leap.
“It’s something we’ve never had before,” J.B. Kropp, Cintrifuse Capital managing director, said.
A fund 10 years in the making
Cintrifuse last year rebranded its syndicate fund as Cintrifuse Capital. The move means that arm of the organization is now functioning as a true venture firm. In the past, it has distributed funds to other venture groups throughout the United States.
The goal is to pump millions of dollars into local startups – as much as 40% of the firm’s Fund III, now active, is dedicated to that idea. There’s also talk of standing up a mini venture studio to help kick-start the creation of more venture-backable businesses in the region, while offering a talent management network also found at most national VC firms.
Kropp told me the push came following McKinsey’s most recent regional assessment, a 10-year overview of the local startup ecosystem, released during StartupCincy Week in October 2022.
The report confirmed glaring gap: Cincinnati “significantly” lags its peer cities in terms of VC engagement and investment, and there needs to be a much stronger capital continuum from seed to growth stage. McKinsey also took a hard look at Cintrifuse as an organization and recommended specific action steps.
Cintrifuse Capital has $175 million in assets under management from its previous two funds. It sees an opportunity to drive greater local impact via its investments.
“We're very fortunate to have these rollover dollars because raising money right now for VC funds is extremely hard,” Kropp said. “This allows us to truly accelerate our ecosystem, and right now is a great time to start a company.”
Kropp, an ecosystem veteran, joined Cintrifuse in April 2023. In his past career stints he helped launched the Brandery in 2010 alongside Rob McDonald and Dave Knox. The accelerator, at its peak, was a huge driver and put Cincinnati on the map as a startup hub both nationally and internationally.
He’s also the co-founder and a board member at Main Street Ventures, a nonprofit that offers programming and equity-free funding to startups across the Tri-State.
Since the hire, he’s been building out the Cintrifuse Capital team, which now includes Joseph Delworth, an analyst; Emily Easley, an associate; Principal Santiago García; Controller and Chief Compliance Officer Nikki Boehmker; and Max Dworin, its director of direct investments and venture creation.
In the past, its investment thesis has been similar to that of a mutual fund: it collects a pool of money from corporate, government, academic and private investors – including Procter & Gamble, Great American Insurance, Kroger, Mercy Health, Smuckers, FIS and more – and distributes those to VC funds like Cincinnati-based Refinery Ventures, Seattle-based Madrona and New York’s Greycroft.
Cintrifuse also made five direct Cincinnati investments under Fund I and Fund II, including Vndly (which was acquired by Workday in 2021 for $510 million); Enable Injections; Lisnr; Everything But The House; and Assurex Health (which sold to Myriad Genetics in 2016 for more than $300 million).
Dworin said the goal is grow that count roughly 10X.
Cintrifuse Capital could have upwards of 50 portfolio companies over the next five years, he said – all either based in Cincinnati or with core teams and/or functions in the region.
Given that 40% of the fund is dedicated to such deals, the firm expects to invest $60 million-$80 million locally. It wants to invest at the seed stage but will fund pre-seed deals and later-stage investments when they make sense.
If Cintrifuse Capital moves more dollars into the region at the seed and pre-seed stage, Dworin said Cincinnati should have more companies raising Series A or Series B rounds – and beyond. That, in turn, brings in talent – another area that Cintrifuse Capital said it must foster in order to meet its goals. When those companies exit, the people and funds involved in those companies recycle into the next round of startups.
It’s a process, he said, that’s been building over the past decade.
“It is important to acknowledge that it took the last 10 years to develop relationships with venture investors around the country and to build credibility around Cintrifuse, and that the returns from those (previous two) funds are enabling this strategy,” Dworin said. “Now with this fund we have skin in the game in backing our best startups early. That enables a different conversation with our national venture network than we've been able to have previously.”
Fund III already at work
Since its launch this fall, Cintrifuse Capital has deployed $3 million out of Fund III into eight startups.
Those deals have resulted in $11.5 million in outside capital – a sign, Kropp said, that its strategy is already bearing fruit. “We’re moving quickly,” he said.
The firm’s first investment was a $500,000 check to Soundtrace, which is developing software with artificial intelligence and IoT (Internet of Things) technology to protect employees from noise-induced hearing loss. Soundtrace, a Cincy Inno 2023 Startup to Watch, raised an oversubscribed $2.5 million pre-seed led by New York-based Gutter Capital. (Cintrifuse Capital wants to join rounds, not lead them, part of its strategy to bring in more outside capital: “We can't do it all ourselves,” Kropp said).
Gutter, in fact, met the Soundtrace team through Dworin. Now that Gutter has made its first investment in the Cincinnati region, it’s now plugged in to the broader ecosystem.
“They're (Cintrifuse Capital) really impressive,” James Gettinger, Gutter founder and managing partner, told me last year. “They have a lot of good ideas for how to kickstart something in Cincinnati.”
