Drive Capital is trying to raise almost $1 billion, and a number of nascent funds mean Central Ohio startups will have more places to turn than ever for local venture capital in 2022.
Despite the looming prospect of the federal government tightening the reins on big tech, the region's VC sector looks to build on this year's record-breaking investments, while broadening the base of who can invest in venture and which founders are backed.
Regulatory filings from September indicate Columbus-based Drive is seeking to raise a $600 million second Overdrive Fund for later-stage technology companies and a $350 million Fund IV in its traditional seed and Series A space, which would nearly double its funds under management. Nothing had yet been raised when the forms were filed, and the firm is not commenting. But a consultant report to a county pension fund that invested projected the combined funds could top $1 billion.
At the same time, at least 10 new Columbus seed and early-stage investment funds launched in 2021, including several that focus on founders from underrepresented populations.
"New funds are a good sign of a growing startup ecosystem, and we are thrilled to see that growth in Columbus, as success begets success," Rev1 Ventures CEO Tom Walker said in written response to questions from Columbus Business First. "We welcome these partners and potential co-investors and have already begun sharing deal flow with some of them."
Out-of-state dollars still are rolling in: Even though Ohio still attracts less than 1% of VC invested nationally, the entire pool is rising. Last year San Francisco Bay Area and New York City firms invested a combined $23 billion outside of the their metro areas and Boston, instead sending the money to "rising" cities including Columbus, according to an analysis by Rise of the Rest, an initiative of the VC firm Revolution. Overall Central Ohio tech companies raised a record $1.4 billion this year.
There's plenty of need to fill: Rev1 predicts that startups in its portfolio will need to raise a combined $500 million next year, from seed through Series B stages. In 2021 the Columbus organization itself raised a $20 million fund to invest in early stage startups, and a separate $10 million fund for even earlier pre-seed startups.
"While 2021 was a record year for capital invested in Ohio, we still have a large and growing capital gap at the earliest stages," Walker said.
Several newcomers have already started investing in startups as they continue to raise their funds:
Zell Capital started at least a two-year path to raise $50 million, using a first-time structure that allows limited partners to join with a minimum $1,000 investment – thus opening VC to those who aren't already wealthy. The Columbus firm, led by serial entrepreneur Will Zell, invested an undisclosed sum in its first startup.
Overlooked Ventures by year's end reported raising $10 million of a $50 million fund focused on startups led by women and non-white founders, and had made its first seven investments. Co-founder Janine Sickmeyer is in Columbus, and partner Brandon Brooks is in South Carolina.
Loud Capital, a Columbus VC firm that according to a regulatory filing is raising a third fund, together with Columbus-based Atlas Venture Partners launched three funds since 2020 to make investments more inclusive:
- United Dream Fund, aimed at immigrant and refugee founders, $25 million.
- Pride Fund, for LGBTQ-owned and allied businesses, $10 million.
- Ohio Impact Fund, for-profit social enterprises, $5 million.
Tamarind Hill, an early stage investment firm jointly based in Columbus and Ann Arbor, reported in a regulatory filing that it's raising a second fund of up to $50 million.
And statewide economic development organization JobsOhio created a $50 million fund dedicated to co-investing in VC rounds for in-state tech companies.
The state budget enacted this July created an incentive for the sector: Starting in 2026, capital gains will be tax free on certain VC investments, whether made directly in Ohio companies or as a limited partner in funds that invest in Ohio companies now through 2025. VC firms register with the state to qualify; they must manage at least $50 million in investment funds, and two-thirds of managing directors and partners must be Ohio residents.
