Fast-growing Columbus startup Aware is one of the highlights among the shrinking number of active tech companies in the portfolio of the Ohio Capital Fund LLC, fund managers said.
The state program to boost venture capital will need to use a combined $10.2 million in tax credits to cover next year's principal and interest on its bonds, according to Cincinnati-based Fort Washington Capital Partners Group. That's augmented by an expected $3.9 million in payouts from the venture funds in which Ohio Capital is a limited partner.
But those conservative projections are based only on done deals – leaving open the possibility of a big win, such as one VC firm that still holds its stake in a biotech whose stock has swelled since its 2018 IPO.
"We think there could be a lot more upside from here," said Tarik Adam, senior investment manager for Fort Washington, which manages the fund for the state Department of Development.
"If things are positive that could change the story a lot," he said in an interview. "We don’t want to project that. We want to be as realistic as possible."
Fort Washington measures other forms of return, including nearly 1,900 net new Ohio jobs since 2006. The program has generated an estimated $35 million in income tax, according to last week's presentation to the Ohio Venture Capital Authority.
"Since the beginning of the program it’s always been a dual mission, returns as well as economic development in the state," Adam said.
Since 2006 the fund of funds invested $135 million from state-backed bonds into 30 VC firms, almost all of them based in Ohio or with an office in the state. Those firms in turn invested in 403 startups; 174 of them are still operating. Of those, 107 are in Ohio, with 40 active. The 30 funds themselves are no longer investing in new startups.
To date, distributions from the 30 firms have returned exactly the value of what the bond fund invested. Ohio Capital Fund went 11 years without dipping into tax credits for its debt payments, but since 2017 has used $65 million. Fort Washington also has successfully lowered interest rates through refinancing.
"We have done everything we can to reduce the debt burden, and that is helping us with the tax credits as well," Adam said.
One of the VC firms, RiverVest Venture Partners, owns 9.4% of biotech firm Allakos Inc., according to the Allakos proxy, which is worth about $400 million at this week's market capitalization. The company is in the final phase of human trials for a therapy it developed, and results are expected by early next year. That will have a big impact on the stock price, and on how quickly RiverVest liquidates its holdings.
"We’re just sitting and waiting until we see that news," Adam said. Ohio Capital estimates its share of the RiverVest fund's overall asset value at about $24 million, according to the presentation to the authority.
Columbus companies in the overall portfolio include DOmedia, a digital marketplace for out-of-home advertising such as billboards and digital displays; Aware, cybersecurity and employee sentiment analysis for workplace collaboration platforms like Slack; and Olive AI Inc., AI-powered administrative automation for hospitals.
Olive is valued at more than $4 billion, but represents a tiny sliver of the Ohio Capital Fund. The state fund invested in Columbus-based NCT Ventures, which in turn participated in an early round for what was then called CrossChx, so OCF has a very small portion of a shrinking equity stake.
Aware is in the portfolio thanks to an investment by Draper Triangle Ventures. The startup grew exponentially during the rapid shift to remote work in the pandemic.
"That’s one we’re hopeful for," Adam said. "We think (OCF is) a good story from an Ohio perspective. Aware is one of those stories."
