Ray Leach, Jeffrey Stern and their colleagues at the recently launched O.H.I.O. Fund are trying to do something that's never been done before — create an impact fund that invests in high-growth opportunities in Ohio's future economy.
Leach is the fund's president and founding managing director in Cleveland. He's also the founding CEO of JumpStart Inc., the local venture development and capital organization, which he left more than a year ago to launch the Ohio High-growth Investment Opportunities (stylized as "O.H.I.O.") Fund.
Stern is the fund's co-founder and principal. He's also a serial tech entrepreneur, co-founding Axuall, the health care workforce intelligence company in Cleveland, among other companies, and the creator/host of the Lay of the Land podcast.
Leach and Stern joined other venture capital heavy hitters in Columbus and Cincinnati to raise $108 million for the first closing of their fund in early July. The fund made its first investment around the same time: acquiring 148 acres of land in Sunbury, 10 miles north of New Albany, which is exploding with data centers and Intel's semiconductor chip-making project.
The O.H.I.O. Fund is loosely patterned after Temasek, the global investment company in Singapore that started with a fund of $354 million Singapore dollars in 1974 and now has a fund worth SG$389 billion.
Leach and Stern, who live and work in Northeast Ohio, recently talked with the Cleveland Business Journal about the startup of their fund and the structural trends in which they plan to invest.
These interviews have been edited for clarity and brevity.
What makes the O.H.I.O. Fund unique?
Leach: It should take three to four years to invest [the fund's goal of $500 million] in Ohio opportunities. We would invest about one-third of our capital into real estate and real estate projects in Ohio. We're never going to be the principal investor in any single project. We want to fill the capital gap or help to fill a portion of the capital gap. The funds also co-invest [in deals] together. So if it ends up we're at $500 million, the fund should leverage at least $1.5 billion to $2 billion of co-investment with [its] money.
Another big element of what we're trying to build is a conversation that leads to co-investing ... learning [and] better financial and economic outcomes across the entire state. We think a big portion of the O.H.I.O Fund's value proposition is going to be connecting the dots with the private sector. It's one thing for the universities to come together or for governments to come together. It's another to have business leaders ... and investors from across the state come together virtually and physically to learn, understand, inform their community, their business and their industry strategies.
The O.H.I.O. Fund's goal is to be a partner and a catalyst to opportunities across Ohio. This is an impact fund. Yes, it’s all about generating financial returns, but, secondarily, it's about benefitting Ohioans and economic development in Ohio. We’re very excited about the opportunities in Ohio. There's a tremendous opportunity for the fund and for its partners to make an impact.
How might the O.H.I.O. Fund change the venture investing landscape in Ohio?
Stern: A vast majority of investments in Ohio startups — 90% of capital — comes [from outside] Ohio after Series A [funding rounds].
Leach: We need to figure out a way to get Ohioans to invest in B, C or D [funding rounds] because [this later-stage] capital has historically come from the coasts. Ohioans don’t get the benefit … unless they are investing in the entire [funding] spectrum. The O.H.I.O. Fund [also] invests as a limited partner in funds that invest in seed or Series A [funding rounds].
We want to ... bring investors from outside Ohio into the Series A space. Not only [do we want investors to] co-invest with each other, our goal is to have hundreds of investors in our funds. We may not write a check [for] seed and Series A [funding rounds]. We bring in other investors [instead].
What are the long-term structural trends in which you want to invest in Ohio?
Leach: Temasek [is investing in] digitization, sustainable living, future of consumption and longer lifespans. In our case ... it's reshoring of advanced manufacturing. For Ohio, that is a huge opportunity. Intel's an example, but there'd be many more examples of significant electronics manufacturing growing in Ohio and or reshoring to Ohio.
Another [structural trend] is AI. What are the ramifications to Ohio and Ohio employers as a result of the advancements in AI? And how can the O.H.I.O. Fund invest in things that correlate to positive outcomes with AI, but at the same time share learnings and best practices from different industries and different geographies with each other?
Tell me about the O.H.I.O. Fund Foundation.
Leach: Ohio, like many other states, has a systemic set of opportunities and challenges that are impeded by a lack of capital. So 25% of the ... "profit" of the fund that would normally go to the fund managers is being donated to a brand-new nonprofit called the O.H.I.O. Fund Foundation. The foundation would be a substantial entity to ... invest, make grants and support projects across the state that ... can generate returns [and be] focused on increasing opportunities for all Ohioans to participate in the economy.
Sign up for the Business Journal’s free daily newsletter to receive the latest business news impacting Cleveland.
