2008 Venture Capital Report

the 2008 venture capital report

the annual survey of venture investing activity across the cleveland plus™ region of ohio

In 2008, more companies in the Cleveland Plus region received investment than in any of the past four years. In a year that will be remembered for the national financial and

VENTURE Capital ADVISORY task force

economic slowdown, this positive trend demonstrates that the Cleveland Plus region continues

Tim Biro, Ohio Innovation Fund

Dorothy Baunach, NorTech

its purposefully conceived role as a nationally significant center for innovation and growth. While

Greg Blonder, Morgenthaler Ventures

nationally there was a four percent decline in the number of investments in 2008, the Cleveland

Becca Braun, JumpStart Inc.

Plus region actually experienced a five percent increase. It is this steady activity that leads us to believe that our regional goal of ensuring that $1.2 billion of venture capital is raised by Cleveland

Melford Carter, Ohio-Midwest Fund Chris Coburn, Cleveland Clinic Foundation

Plus area companies over five years (beginning in 2007) will be met. Completing the second year

Paul Cohn, Fort Washington Capital Partners

of this ambitious goal, companies have raised $577 million, or 48 percent of that five year goal.

Mark Coticchia, Case Western Reserve University

Other highlights of this report include:

Lorelei Davis, Frantz Medical Ventures

• 73 companies received $259 million in investment capital. The dollar amount is a decline from 2007, largely because of a few significant non-recurring later and growth stage investments.

Michael Goldberg, Bridge Investment Fund, LP William Grimberg, Consumer Innovation Partners Jack Harley, JWH Group, Inc.

• 60 percent of the capital raised in 2008 was in the Healthcare sector, demonstrating this region’s status as a national center for healthcare innovation and entrepreneurship.

• With 27 Healthcare venture firms now located in Ohio, the state is one of the top five states in the nation in terms of Healthcare venture firms having offices established within its bounds.

• Cleantech, which consists of the Energy, Advanced Materials, and Environmental sectors,

Steve Haynes, Glengary Ventures LLC Joe Hudson, OneEarth Capital James Ireland III, Early Stage Partners, LP Don Knechtges, GLIDE/Lorain County Community College Fund Ray Leach, JumpStart Inc. Floyd D. Loop, M.D., Radius Ventures

more than doubled the investment dollars from 2007 to 2008, leveraging the region’s

Chris Mather, TechLift/North Coast Opportunities Technology Fund

strengths in materials-based sciences and manufacturing.

Kevin McGinty, Peppertree Capital Management, Inc.

• Seed and early stage investment dollars increased by ten percent, demonstrating a steady pipeline of innovation and continuing development of the venture capital continuum.

Joe Michael, Fort Washington Capital Partners Bill Mulligan, Primus Capital Funds Don Murfin, DCC Growth Fund

• 14 firms from outside the region made their first investment here in 2008.

Jonathan Murray, Early Stage Partners, LP

Along with these achievements, this report highlights the progress and celebrates the successes

Clay Rankin, North Coast Angel Fund

of companies and investors in the region in 2008. These stories demonstrate the great opportunity

Barry Rosenbaum, Akron ARCHAngels

the Cleveland Plus region offers to investors at all stages of the venture capital continuum.

Scott Roulston, Fairport Asset Management, LLC

What kind of progress should we expect for 2009? While we remain concerned about the

Charlie Schliebs, iNetworks

significant national slowdown of the IPO market, and the overall near- and mid-term economic

Bill Seelbach, The Riverside Company

outlook, where crisis lies, opportunity abounds. Entrepreneurs and investors specialize in taking

Baiju Shah, BioEnterprise Corporation

advantage of opportunities (such as the strong market for strategic aquisitions of entrepreneurial

Chris Sklarin, Chrysalis Ventures

companies), and the Cleveland Plus region is no exception, offering continuing opportunities for

Jon Snyder, Arboretum Ventures

successful innovation and growth.

Karen Spilizewski, RiverVest Ventures Bill Stuart, Portal Capital Mike Stubler, Draper Triangle Ventures

Dorothy Baunach

James Ireland III

President and Chief Executive Officer, NorTech

Managing Director, Early Stage Partners, LP Chair, NorTech Venture Capital Advisory Task Force

Bill Trainor, Mutual Capital Partners Eric Von Hendrix, MWV Pinnacle Capital Fund, LP Brad Whitehead, Fund for Our Economic Future Bob Williams, Roulston Ventures Neil Wyant, Everett Partners, LTD. Wayne Zeman, MAGNET

Ray Leach

Baiju Shah

Chief Executive Officer, JumpStart Inc.

President, BioEnterprise

More Northeast Ohio companies received investment in 2008 than in any of the past four years.

Cleveland Area Venture Investments $ Millions

Companies Financed

124

260

157

318

259

42

56

51

71

73

2004

2005

2006

2007

2008

2004

2005

2006

2007

2008

Source: Dow Jones VentureWire; Venture Source; Private Raise, LLC; BioEnterprise; JumpStart Inc.; Ohio Department of Development; TITC

Investments by Stage (2004-2008)

Building Pipeline Number of Companies by Stage of Financing

Growth

Early

Seed

$ millions

84

438

600

# of deals

164

122

47

Avg. deal size

0.51

3.59

12.77

14

22

8 16

27

29

8

1 Growth

15

early

19 22

26

27

29

33

SEED

2004

2005

2006

2007

2008

Investments by Sector Healthcare Services, Medical Information Systems, & Other

Agriculture

Business & Consumer Products & Services

Biopharmaceuticals

Number of Investments By Sector [2004-2008]

Information Technology

Medical Devices & Equipment

Equity Investments by sector

Biopharmaceuticals

Healthcare Services, Medical Information Systems, & Other Business & Consumer Products & Services

[$ Millions 2004-2008] Medical Devices & Equipment

Advanced Specialty Energy Materials & Chemicals

Agriculture

Information Technology Energy

Environmental

Environmental Advanced Specialty Materials & Chemicals

Healthcare n 33 Healthcare Services, Medical Information Systems, & Other n 28 Biopharmaceuticals n 81 Medical Devices & Equipment

Healthcare Cleantech n 38 Advanced Specialty Materials & Chemicals

n 68 Information Technology

n 17 Energy

n 55 Business & Consumer Products & Services

n 5 Environmental

n 1 Agriculture

n $249 Healthcare Services, Medical Information Systems, & Other n $228 Biopharmaceuticals n $247 Medical Devices & Equipment

Cleantech n $48 Advanced Specialty Materials & Chemicals

n $148 Information Technology

n $49 Energy

n $147 Business & Consumer Products & Services

n $3 Environmental

n $.32 Agriculture

Incentives for Investors

X

G The Ohio Capital Fund, supported by the State

Opportunity Taken

of Ohio, has committed over $98 million to 18 venture funds to date. Eight funds managing

Funds under management of firms taking advantage of Ohio Capital Fund incentives to establish a new Ohio presence

over $600 million have taken advantage of Ohio Capital Fund incentives to establish a new presence in Ohio.

G The Ohio-Midwest Fund, comprised of $102 million from OPERS and Credit Suisse, has now committed $72 million to 12 funds.

G The third and newest fund, the NEO Capital Fund, will commit capital to venture capital firms that have or establish a presence in Northeast Ohio.

$255

$330

$624

2006

2007

2008

X

G The Ohio Technology Investment Tax Credit program allows individual investors in qualified

Source: Ohio Capital Fund

technology-based Ohio companies to reduce their

X

taxes by 25–35 percent of the amount invested.

Featured Deals

Tursiop Technologies

Ovation Polymers

PartsSource

Brulant

Tursiop Technologies is

Ovation Polymers, based in Medina,

Founded in 2001, PartsSource is

Brulant, a digital marketing

commercializing a novel magnetic

Ohio, is at the leading-edge of

the nation’s only alternative parts

firm, has been growing steadily

resonance imaging (MRI) coil that

polymer compound innovation. The

aggregator for hospital equipment

since it was founded in 1989.

will greatly increase MRI resolution,

company’s breakthrough polymer

parts. The company supports

Brulant

allowing clinicians to capture

products are used in electronics,

over 2,500 different makes and

provides

more detailed images or use less

optical technologies, medical

models of hospital equipment and

marketing

expensive or smaller MRI machines

devices, energy production products

has automated the process for

programs

for the same results. Led by CEO

such as batteries and fuel cells,

ordering them through an online

for its

Brad Goldstein, who brings 20 years

and products for the wind and

experience in commercializing

solar industries. By creating

advanced technologies, the

alliances with their clients

company raised its $1.4 million seed

and selecting forward-

round for continued research and

thinking polymer

development from local investors,

industry partners, the

RMS Management and JumpStart

company has continued

Inc. Soon after, Goldstein and his

significant time and money. With a people-

GROWTH

to grow since

team received FDA certification

interface, saving its customers

it was founded

X

EXIT

clients that—beyond being user friendly and

oriented, continuous

technologically savvy—are

improvement culture

differentiated by their

forged by serial

stringent focus on being

entrepreneur, CEO Ray Dalton, the company shows a commitment to

X

insight-driven and focused on business results. In 2008, Brulant was acquired by

on their initial design and are

in 2004 by 30-year

growth at all levels. A winner of

Rosetta out of Princeton, New

currently continuing down the

plastic veteran,

numerous awards for growth,

Jersey, with the resulting

Asis Banerjie.

customer service, training and

company enjoying status as

Banerjie and his

its commitment to humanitarian

the largest and most profitable

efforts, PartsSource is a true

independent interactive

success story. In 2008, PartsSource

agency in the country, with

financing to date from Early Stage

raised a $50 million investment

30 percent growth in 2008.

Partners of Cleveland, Ohio and

led by Polaris Venture Partners

other investors, including a Series

of Boston and joined by Primus

B round this year.

Capital Funds of Cleveland.

path to commercialization.

EARLY

X

team have raised over $9 million in

Seed

X

National Investment EXTERNAL EQUITY INVESTORS IN CLEVELAND PlUS AREA COMPANIES [2004-2008] Midwest (outside NEO) Advantage Capital Partners *08 Apex Ventures Beecken Petty BioOhio Blue Chip Venture Company CID Equity Entrepreneurs Fund

OUTSIDE U.S. Aberne Limited *08

Hopen Therapeutics *08 Hopewell Ventures Medtronic NCT Private Equity Fund Orix Capital OTAF Southwest Michigan First Life Science Fund *08 Talisman Capital Thomas McNerney Partners Triathlon Medical Ventures

Fidelity BioSciences *08

BOSTON Ampersand Ventures Boston Scientific Corp.

Capital Resource Partners Eastward Capital

MPM BioEquities

Behrman Capital

mTerra Ventures LLC

Brown Brothers Harriman & Co.

New Enterprise Associates

CMG Capital

Oak Investment Partners

Columbia Capital

OrbiMed Advisors

Cowen Healthcare

Psilos Group

Cordova Ventures

Domain Associates

Radius Ventures

ExOxEmis

GMG Capital

RLS Investments *08

MB Ventures

Greycroft Partners

StarVest Partners

Pappas Ventures

Halyard Capital

Sunrise Equity

Sierra Ventures

River Associates

Investor Growth Capital

Toucan Capital Corp. *08

SV Life Sciences

Symark

Johnson & Johnson

Welsh Carson

Vivo Ventures

Texas Pacific

Life Sciences Capital *08

South Accipiter Capital Management LLC

Compass Group

Roberts Communications Network

Morgenthaler Ventures

RA Capital Management

Midsummer Capital

Parker Price Venture Capital

Kearny Venture Partners *08

Polaris Ventures

Amphion Innovations *08

Chevron Technology Ventures

Intel Capital *08

Norwich Ventures

Aisling Capital *08

Panorama Capital

Hambrecht & Quist

M/C Venture Partners *08

NEW YORK/East Coast

West Coast Angiotech Advance

DW Healthcare Partners

Fletcher Spaght Ventures *08

LSKW Investments

Western Technology

Palo Alto Investors *08= FIRST INVESTMENT IN NORTHEAST OHIO IN ‘08

Ohio Venture, Angel, Seed & Pre-Seed Funds INVESTMENT Capital Funds

Isabella Capital

Second Generation Ltd.

Adena Ventures

Key Principal Partners

SunBridge Partners

SEED & Pre-seed INVESTMENT Funds

Arboretum Ventures *08

Luxemburg Capital

Talisman Capital

Blue Chip Validation Fund

Athenian Venture Partners

Max-Ventures

Triathlon Medical Venture Partners

Case Technology Ventures

Blue Chip Venture Company

Morgenthaler Ventures

Walnut Capital Partners

Bridge Investment Fund

Mutual Capital Partners

Xgen LTD

Cincinnati Children’s Tomorrow Fund

Charter Life Sciences

MWV Pinnacle Capital Fund

Zapis Capital Group LLC

Chrysalis Ventures

Nationwide Mutual Capital

CID Capital

NCIC Capital Fund

Consumer Innovation Partners

NCT Ventures

Crystal Ventures

Oakwood Medical Investors

Development Capital

Ohio Innovation Fund

Draper Triangle Ventures

Peppertree Capital Management

Early Stage Partners

Primus Capital Funds

Everett Partners

Radius Ventures

Fletcher Spaght Ventures

Reservoir Venture Partners

Frantz Medical Ventures

River Cities Capital Funds

Hercules Technology Growth Capital

Riverside Capital Microcap Fund

iNetworks

RiverVest Ventures Roulston Ventures

*08= NEW OFFICE IN OHIO IN ‘08

Cincytechusa Cleveland Clinic Innovations

Angel Networks & Funds

Flashline Partners LP *08

Akron ARCHAngel Network

Glengary Ventures

C-Cap

JumpStart Inc.

Clarion Capital CoreNetwork

Lorain County Community College Innovation Fund

Custer Capital

Miami Valley Venture Fund

Findaway Ventures

Rocket Ventures

Growth Strategies Group

Southern Ohio Creates Companies

North Coast Angel Fund

TechColumbus

Ohio TechAngel Fund Queen City Angels RMS Capital Sycamore Partners

Companies That Have Raised Capital [2004-2008] INFORMATION TECHNOLOGY ARDC AVE Intervision Axentis Ayalogic Banyan Technology BlueBridge Networks

Think-a-Move, Ltd.

Turning Technologies

Interscopic Analysis

TOA Technologies

Victory Solutions

Interventional Imaging

Unitask

Visual Edge Technology

Lifeline Screening

Vox Mobile Workflow.com YeboTV BUSINESS & CONSUMER PRODUCTS & SERVICES Accessmount

HEALTHCARE AcelleRX Therapeutics Inc. American Safety & Health Institute

m2m Imaging Corp.

MDG Medical MemberHealth Merlot OrthopediX

Cleantech ADVANCED SPECIALTY MATERIALS & CHEMICALS 6062 Holdings AMTI Aria Analytics Blue Spark Technologies

AnalizaDx

NDI Medical

Aris Teleradiology Systems

NeoMed

Aerodynamic Trailer

Arteriocyte

NextMed Systems

Amish Naturals

Athersys

Ogenix

MemPro Ceramics Corporation

Technology Management

AxioMed Spine

MesoCoat, Inc.

DIY Real Estate Solutions

BDC Management Group LLC

CardioInsight Technologies

OrthoHelix Surgical Designs

Embedded Planet

Cleveland Unlimited, Inc.

Employ Media

Cervilenz

Cohesant

Everstream

ChanTest

Collaborent

Flashline

Clear Catheter Systems

CoupAd

FLX Micro

Cleveland BioLabs

DMI Manufacturing, Inc.

Myriad Health

CleveX

Embrace Pet Insurance

BSK Live Clear Image Technology ComSense Technology, Inc. CutterCroix LLC DimpleDough

Cell Targeting Inc.

Cone Instruments

Carbolytic Materials

PartsSource LLC PeriTec BioSystems PrognostiX

Helios Coatings

MIMFlow Technologies Nanomimetics Ovation Polymers RSP Tooling

ProPractica Ricerca

Stanton Advanced Ceramics

Roscoe Medical

Stratum Energy Systems

Simbionix

Trivium Technologies

I2C Technologies

Fire-Dex Inc.

InSet Systems

Copernicus Therapeutics

Inspherion

Gauntlet Technology Systems

CornerStone Medical

Inspiron

Hartville Group

IQS

HF Food Technologies

Knotice

InnoDesk

LogiSync

Insurance.com

Monarch Teaching Technologies

Ladies Who Launch

Franklin & Seidelmann Subspeciality Radiology

Learning Horizons Inc.

NCRx Optical

Freedom Meditech, Inc.

Nine Iron Innovations

QuickPayNet

NineSigma

Fused Multimodality Imaging

Northcoast PCS

PetsDx

Ganeden Biotech

Vascular Biogenics

One Source Technologies

Pfingsten Publishing Predictive Services

Great Lakes Pharmaceuticals

Vasolux Microsystems

PC On Call Inc.

ViewRay

ENVIRONMENTAL MAR Systems

PsiBase

PsyMax

Icon Interventional

WholeHealth Management

MORK Process

Imadent

within3

Polyflow

SageQuest SamePage Solutions

Stack Media Teraphysics

Critisense CSF Therapeutics Early Sense Endotronix

SpineMatrix Symphony Medical Synapse Biomedical Syncro Medical Telerad Express Thermedx Tolera Therapeutics Transcutaneous Technologies Trek Diagnostics Tursiop Technologies

Imalux

Sypherlink

Tooling University

Telisys Inc.

Improvita Health Products

Treatment Online

IntElect

AGRICULTURE

ENERGY Arisdyne Systems Contained Energy Energy Focus Five Star Technologies Greenfield Light Resonance Technologies Ocean Energy Systems reXorce Thermionics Inc. Wireless Environment

Sorbent Technologies

Delta Plant

Private Investments in Public Equities (PIPES) were included in cases where it appeared that venture investors were involved.

www.jumpstartinc.org

www.nortech.org

www.bioenterprise.com

Special thanks to the Fund for Our Economic Future for underwriting this report. www.futurefundneo.org