Columbus, Ohio, flourishes as a startup ecosystem, but Buckeye State IPOs remain elusive

Ohio-based companies are laying claim to more venture dollars, with the amount of equity invested in Buckeye State companies in 2018 on track to nearly quadruple the amount raised three years ago.

Columbus is leading the state’s tech renaissance, overtaking Cincinnati and Cleveland in terms of venture dollars raised in the first quarter of 2018, according to data from Thomson Reuters.

In 2015, Ohio-based companies raised $273.21 million across 107 venture deals. Companies in Columbus saw 27 of those deals and $55.3 million raised. Fast-forward to 2017, when Ohio-based companies raised $427.3 million across 115 venture deals, with 26 Columbus-based companies raising $62.8 million.

And in the first quarter of 2018, companies in the state raised $242.6 million across 20 deals, with $199.3 million of that going to Columbus companies.

The city’s expanding share of venture dollars is the result of early-stage local investors organizing capital to take advantage of the region’s technical talent and demand for innovation. The region includes research institutions and capital pools like Ohio State University, Nationwide Children’s Hospital and a diverse corporate base.

Factors like those prompted Rev1 Ventures, one of the state’s most active seed-stage investors, to launch a startup studio in Columbus aimed at combining capital and strategic services to help startups scale.

In 2017, 28 of the 83 startups funded by the firm were spinouts from research institutions, such as Ohio State University, according to the firm.

About half of the firm’s deal flow is software companies, including data analytics companies, which align with the needs of the region’s corporate base of logistics, medical, insurance and banking companies. Those industries are heavy data users, “and we have that talent in our backyard,” said Tom Walker, CEO and president of Rev1 Ventures.

Another 30 percent of the firm’s deal flow is life sciences and the remaining portion is companies in the advanced materials and energy sectors, he said.

Ohio Midwest Guest Column VC
Tom Walker, president and chief executive, Rev1 Ventures. Photo courtesy of the firm.

“Columbus is still in the prove-it mode,” said Pamela Springer, president and CEO of Oris Intelligence, a Rev1 portfolio company that helps manufacturers maintain pricing integrity. “We were for the longest time a fly-over state, and that’s increasingly not the case,” she said.

For example, in 2012, two Sequoia Capital alums, Chris Olsen and Mark Kvamme, launched Drive Capital in Columbus.

Local and Midwest venture firms make the most investments in Ohio. Rev1, formerly known as TechColumbus, was the state’s most active investor in 2017, with 17 deals. Cincinnati-based private-public seed stage investor CincyTech followed with 16 deals, and Cleveland-based JumpStart made 7 deals, according to data from Thomson Reuters.

A total of 73 venture firms, including Battery Ventures, Greycroft Partners, Bain Capital, OrbiMed Advisors, and U.S. Venture Partners made at least one deal in the state in the past year, according to Thomson Reuters.

While firms like Rev1 provide capital and support for companies at the seed stage, and coastal firms often invest at later stages, Springer said she sees an opportunity for Columbus’ venture industry to expand to invest in the middle ground between seed and later stage.

“Where is that B and C round coming from? That’s the place where I see a growing need,” she said.

In the past three years, 15 Ohio-based companies have exited, taking an average of 7.7 years to do so compared to the national average of 6.1 years during the same time period. None of the companies went public, according to Thomson Reuters, but were acquired or sole in a secondary sale.

The largest acquisition in that period, and the only Columbus-based company to exit, was CoverMyMeds, which sold in April 2017 to McKesson for $1.4 billion.

To download a list of the largest Ohio-based venture deals in Q1 2018: Top Ohio based venture deals

Photo of Ohio road sign courtesy of Feverpitched/iStock/Getty Images.