2014 Northeast Ohio Venture Capital Report

THE 2014

NE OHIO VENTURE CAPITAL REPORT

FROM THE DESK OF RAY LEACH CEO, JUMPSTART INC.

2014 was another strong year for venture capital in Northeast Ohio.

104 companies raised $336 million in venture and angel investment, the highest total amount ever recorded since we began keeping track of this data in 2004. Meanwhile, growth-stage investments are also at an all-time high, with $207 million invested this year.

2014 also provides us with a unique opportunity for a ten-year look back. Seen across an entire decade, the statistics are even more impressive.

Since 2004, investors from across the U.S. have pumped more than $2.3 billion into Northeast Ohio companies. During this same period, the total amount of capital invested per year has more than tripled, as has the total number of companies receiving investment capital.

Statistically, there have been ups-and-downs from year-to-year, but over a ten year period we have unquestionably seen major growth in nearly every major investment category we track.

There is an important story behind this growth.

No other region, or state has benefitted from such a proactive, comprehensive investment in their entrepreneurial future as we have through the Ohio Third Frontier (OTF). The funding and direction the OTF has provided has created a thriving network of organizations – including JumpStart – in Northeast Ohio, all dedicated to accelerating the success of entrepreneurs in any way they can.

The economic impact chronicled by this report was made possible largely by the efforts of the OTF and its many private and philanthropic partners – efforts that have helped create a steady supply of seed-stage capital over the last decade, giving companies an opportunity to launch and grow right here in Northeast Ohio.

With more than $126 million in OTF dry powder still left to be invested in pre-seed/seed-stage companies, the future continues to look bright for startups in Ohio. Still, with each new year it becomes more clear that continued economic growth will rely heavily on a healthy supply of early-stage “Series A” capital for young companies who are becoming more mature and preparing to grow aggressively.

can ensure that our companies have what they need to launch here, grow here and stay here for the long haul, creating the kind of robust 21st century economy we all want.

Here’s to another prosperous year,

Ray Leach CEO, JumpStart Inc.

1 ‘14 NEO V ENTURE CA P I TAL RE P ORT

STATS AT A GLANCE IN 2014

$336

million raised in venture and angel investments by 104 Ohio companies.

69

of these companies were at the seed-stage.

$207

million was invested in growth-stage companies, the highest amount on record.

4 exits

FROM 2004-2014

$2.3

billion was invested in Northeast Ohio companies by U.S. angel investors and venture capitalists.

412

companies in Northeast Ohio were funded by angel investors and venture capitalists.

74%

of these companies received some form of assistance from the Northeast Ohio ESP Network, a group of organizations – including JumpStart – supported by the Ohio Third Frontier’s Entrepreneurial Signature Program (ESP).

4 regional venture/angel-backed companies experienced successful exits.

This maker of cloud-based software was acquired by California

This clean energy innovator was acquired by Johnson Matthey,

were not publically disclosed.

deal were not publically disclosed.

This provider of ion channel testing services was acquired by Massachusetts-based Charles River Laboratories International, Inc. in an all-cash transaction of up to $54 million.

This maker of 3D virtual reality surgical simulation and training solutions was acquired for $120 million in cash by South Carolina-based 3D Systems.

A WORD FROM THE NATIONAL VENTURE CAPITAL ASSOCIATION (NVCA) In so many ways, the story of Northeast Ohio is the story of our nation. How do we leverage entrepreneurship and small business growth to replace the withering economy of the past with something new and better?

The statistics presented in this report show a rising trend of economic growth and an increasing amount of investment There are big deals happening in the Buckeye state, thanks in large part to the vision of private, philanthropic and government leaders who have made bold, long-term commitments to the region’s economic future.

As an NVCA board member, JumpStart CEO Ray Leach has long advocated for Ohio — and the Midwest as a whole— as an emergent region for savvy investors. Increasingly, major exits like TOA Technologies and massive healthcare IT investments like CoverMyMeds are proving these projections a reality.

As Ray prepares to rotate off the active NVCA board, we will continue to look to Northeast Ohio for new ideas and new inspiration. Your region should be proud of what it has accomplished in the last decade; and your future looks even brighter from where we sit.

Bobby Franklin President & CEO, National Venture Capital Association

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10+

YEARS OF VISION AND LEADERSHIP FROM THE OHIO THIRD FRONTIER 13 Years ago, Northeast Ohio seemed like a totally different place to do business. National publications were pronouncing the region’s entrepreneurial ecosystem all but DOA, and years of setbacks had left the existing economic development structure exhausted. Frustrated private and philanthropic leaders saw the writing on the wall. Thankfully, so did some forward–thinking leaders in our state government.

to provide capital investment and intensive technical assistance to entrepreneurs and the high-tech, high-growth ventures they build.

Today, the foresight of our state leadership is paying off. In Northeast Ohio alone, a network of 16 organizations supported largely by the OTF – including JumpStart – has helped more than 975 early-stage entrepreneurs obtain the space, investment, advice, support and connections they need to raise nearly $1.7 billion in additional risk capital and create more than 4,000 jobs.*

They decided try something new, and the Ohio Third Frontier (OTF) was born. Among the many initiatives the OTF has supported, one of the most successful has been the Entrepreneurial Signature Program (ESP) – a program that supports and coordinates a network of organizations throughout the state

16 ORGANIZATIONS

975+ ENTREPRENEURS

1.7B DOLLARS IN CAPITA L

* known to be out of business, their most recently known job numbers are removed from the total.

4K JOBS*

OUR 2014 ESP NETWORK PARTNERS

NETWORK STATS AT A GLANCE 2004 — 2014

$57.5 Million

$1 Billion

4k+

In capital invested into Northeast Ohio ventures by network partners.

In revenue generated by network clients.

Direct jobs created/retained by network clients.

$1.7 Billion

950+

In additional capital raised by network clients.

Early-stage entrepreneurs assisted by the network.

5 ‘14 NEO V ENTURE CA P I TAL RE P ORT

NORTHEAST OHIO Early Stage

Seed Stage

Growth

TOTAL CAPITAL INVESTED BY STAGE: IN 2014

TOTAL CAPITAL INVESTED BY STAGE: TEN YEAR LOOKBACK

M I L L I O N S

2 5 0 ,0 0 0 , 0 0 0

1 5 0 ,0 0 0 , 0 0 0 1 0 0 ,0 0 0 , 0 0 0

I N

111

2 0 0 ,0 0 0 , 0 0 0

$336

5 0 ,0 0 0 , 0 0 0 0 2004

207

MI LLI ON

2009

2 0 14

18

NATIONAL TOTAL CAPITAL INVESTED BY STAGE: TEN YEAR LOOKBACK Early Stage

Seed Stage

Growth

5 0 ,00 0 ,000,000

3 0 ,00 0 ,000,000

2 0 ,00 0 ,000,000

I N

M I L L I O N S

4 0 ,00 0 ,000,000

1 0 ,00 0 ,000,000

0 2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2 0 14

NEO COMPANIES THAT RECEIVED INVESTMENT BY STAGE: IN 2014

C O M P A N I E S

9

NEO COMPANIES THAT RECEIVED INVESTMENT BY STAGE: TEN YEAR LOOKBACK

27

#

O F

104

100 80 60 40 20 0 2004

2009

2014

CO MPA NIE S

Seed Stage

69

Early Stage Growth

METHODOLOGY The 2014 Venture Capital Report gathers data from multiple sources including primary research conducted by JumpStart staff, public databases of VC activity, media reports and a survey of companies conducted by the Northeast Ohio ESP.

information reported by different sources. Additionally, many growing companies operate either in a space between sectors or in multiple sectors. As a result, different reports from different organizations often display some statistical differences.

Nevertheless, we believe this to be the most accurate and comprehensive Northeast Ohio venture capital report available.

7 ‘14 NEO V ENTURE CA P I TAL RE P ORT

EXIT

SEED

EARLY

GROWTH

SEED

EARLY-STAGE

Sector: Information Technology

Sector: Healthcare

Since its public launch in November, Cleveland startup Beegit (a JumpStart client company) has already closed a $220k funding round, including $100k awards from the North Coast Opportunities Technology Fund and the Northeast Ohio Innovation Fund. The company, and its eponymous platform makes it easier for writing teams to create quality content by combining the convenience of collaborative writing/editing software with the control of project management software.

Founded in 2012, Westlake’s own GenomOncology (a JumpStart portfolio company) spent nearly two years after software solutions for managing and interpreting oncology data. In early 2014, the company emerged from this development phase with a new investment from Nash-

to operate comfortably for “the next couple of years” as their products begin to produce cash.

FEATURED COMPANIES

BY STAGE GROWTH-STAGE

EXIT

Sector: Healthcare

Sector: Cleantech

In November, fast-growing healthcare IT leader CoverMyMeds (a JumpStart portfolio company) announced a

In September, Ravenna-based clean energy innovator Catacel (a JumpStart Portfolio Company) was acquired by

year’s largest healthcare IT investments nationwide, since Francisco Partners typically makes investments from $50 million to over $2 billion.

but Johnson Matthey leadership made it very clear throughout the process that they see strong potential in the technology, products and people of Northeast Ohio and are making a strategic investment in the region.

9 ‘14 NEO V ENTURE CA P I TAL RE P ORT

JumpStart’s mission is to strengthen the economic vitality of Northeast Ohio and the U.S. by helping communities realize their entrepreneurial potential.

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