A new unicorn, a biotech manufacturer, ticketing software and the next startup from CoverMyMeds co-founder Matt Scantland led Central Ohio's top venture capital rounds of 2022 – and while the region's total was less than half that of the record-smashing 2021, it was still higher than any prior year.
Publicly disclosed funding rounds for Central Ohio technology companies totaled $617 million, according to Columbus Business First research. Regulatory filings for rounds not yet closed could add about $90 million, still totaling half the $1.4 billion raised in 2021. In 2020, the total was a then-record $555 million.
Nationwide, 14 megadeals early in the year propelled another record even though VC investing fell sharply in the second half of the year, according to PricewaterhouseCoopers. Through mid-November the total raised in the tech sector hit a new high of $333 billion.
But rising interest rates expected to stay high have changed where investors want to put their money, according to PwC's 2023 tech outlook.
"The rise in the opportunity cost of capital on a risk-adjusted basis has caused tech companies to pivot from 'growth at all costs' to focusing on the path to profitability and positive cash flows," it said.
That trend has benefited Central Ohio: With few exceptions like a drug developer and stealth-mode energy startup, the companies that raised capital this year are generating revenue. On the flip side, companies that had been in hyper-growth mode such as Root, Olive and Klarna cut jobs this year, with about 1,000 lost in the region overall.
Branch Insurance, the latest Columbus unicorn valued at $1 billion in a June round that was the year's largest, since inception has set premiums for its digital home and auto insurance high enough to cover costs, co-founder and CEO Steve Lekas said then.
"The venture way is to grow at all costs," Lekas said in June. "Our way was to grow at an adequate cost."
Grove City biotech Forge Biologics steadily added customers for its manufacturing facility making the cells and modified viruses needed for gene therapies – helping cover the research expenses of developing its own proprietary therapies. But it also secured both a non-dilutive credit facility and a VC round for plenty of runway. The Drive-backed company is part of a thriving biotech cluster in the region.
Columbus-based HomeTown Ticketing Inc., which runs digital ticketing for some 200,000 school athletics events, had been bootstrapping and growing quickly since a 2019 relaunch before raising $75 million in April.
This year also marked the return of Matt Scantland, who had taken some time away after stepping down from CoverMyMeds, a still-growing subsidiary of healthcare giant McKesson Corp. AndHealth, which unites telehealth specialists with the leadership team that built Ohio’s first unicorn, emerged from stealth mode in February with a private equity round and paying customers. Employers provide the service as a benefit to reverse certain chronic diseases, starting with migraine and a set of autoimmune conditions.
The year's tech acquisitions included:
- Health in Motion Network LLC, a five-year-old Columbus startup connecting pharmacists to patient's health records, by a Silicon Valley firm.
- Clarus R&D Solutions LLC, a fintech that bootstrapped its way to become one of Central Ohio's fastest-growing private companies, by a publicly traded HR outsourcing firm from the San Francisco Bay Area.
- Aviso Retention, for 10 years backed solely by revenue and grants for its software that helps community colleges keep students from dropping out, by a private equity-backed Austin firm that is building a coalition of edtech software.
As ever, Ohio accounts for less than 1% of the total VC raised in the U.S. The state first passed $1 billion in VC in 2018, $1.13 billion in 2020 and $2 billion last year, according to data compiled by PitchBook and the National Venture Capital Association. Their full 2022 report comes out in January.
Very early startups are expected to have better luck raising rounds at increased valuations in 2023 because they "are more insulated from public market volatility," according to PitchBook's VC outlook released this month. But later-stage growing tech companies could be raising Series C and D rounds at reduced valuations.
Central Ohio saw five mega-rounds greater than $100 million last year; this year Columbus had one in Branch. There were four rounds that size in Columbus in 2018-20 combined. Last year 11 local companies in the Drive Capital LLC portfolio alone accounted for $983 million; this year Forge was alone in publicly announced rounds.
