Venture capital investment in 183 Cleveland Plus™ region companies tops $1 billion over past 5 years

Tuesday, January 26, 2010

GCP economic development partners’ report shows region’s performance contributes
to state’s ranking among top 10 for investment deal activity

Cleveland, Ohio—The 2009 Venture Capital Report for the Cleveland Plus™ Region announces that between 2005 and 2009, $1.1 billion has been invested by venture capitalists and angel investors in 183 unique companies in the region. In the last five years, these 183 Northeast Ohio companies have received 348 investments, contributing to the state of Ohio’s 2009 ranking as a top-10 state for investment deal activity.

Northeast Ohio has also seen a number of exits over this same time frame including: Hyland Software’s acquisition by Thoma Cressey Bravo in 2007, MemberHealth’s acquisition by Universal American in 2007 for $630 million, Brulant’s acquisition by Rosetta in 2008, Theken Spine’s acquisition by Integra Life in a deal valued up to $200 million in 2008, and AXENTIS’ acquisition by Wolters Kluwer in 2009.

In addition, in the past five years, more than 80 investors from outside the region have invested in Northeast Ohio companies. James D. Ireland III, chairman of the Venture Capital Advisory Task Force and managing partner of Early Stage Partners in Cleveland states, “Investors from outside the region and state see potential in the innovative ideas coming out of Ohio and are partnering on deals. Importantly, these results have been furthered by the Ohio-based creation of several new venture capital pools, including the Ohio Capital Fund and the OPERS/Credit Suisse Ohio-Midwest Fund, that have expanded the availability of capital for regional investment.”

The information and the Report are compiled and communicated annually by the Venture Capital Advisory Task Force, composed of over 40 of the region’s institutional investors. This is the fourth year of the report, which summarizes the region’s venture and angel investment activity. The printed report will be available in February.

Other highlights of the 2009 Report focus on the stage and sectors which have been at the core of the region’s activity over the last five years:

  • Seed stage investment, at its highest level in the last four years in 2009, reflects the thriving Northeast Ohio environment for innovative, technology-based companies. The stability of this stage of investment is particularly noteworthy given a national decline of 37 percent in overall venture capital investment compared to 2008. 172 investments have been made in the past five years, 32 of which were in 2009.

“The fact that investment actually increased in seed stage companies in 2009 is an indicator of the commitment of the region’s investors and the State of Ohio to commercializing technologies,” says Ray Leach, CEO of JumpStart Inc. “Seed stage investors in the region are priming the pump for later stage investors, enabling them to find competitive investment opportunities here.”

  • 67 percent of capital invested in the region has been invested in healthcare companies, primarily in the Biopharmaceuticals, Medical Devices and Equipment, and Medical Information Systems segments. $729 million has been invested in 69 companies over the last five years.

“Healthcare continues to be Cleveland’s flagship sector. The success of regional healthcare startups continues to attract regional and national investors,” says Baiju R. Shah, president and CEO of BioEnterprise. “With 28 Healthcare venture firms located in the state, Ohio is among the top five states for healthcare investors.”

Deals in this space have included the 2009 $12 million round for Franklin & Seidelmann Subspecialty Radiology; $11 million between two rounds in 2008 and 2009 for OrthoHelix Surgical from Mutual Capital Partners and River Cities Capital; and the 2008 $50 million round for PartsSource led by Polaris Venture Partners, joined by Primus Capital Funds.

Cleantech is the fastest-growing sector, with capital invested growing over 200 percent since 2005. $115 million has been invested in 33 cleantech companies in the last five years.

“The growth in investments in Northeast Ohio’s cleantech sector is not surprising, given both the market demand and our region’s historical expertise in advanced materials and electronics applications,” says Rebecca Bagley, president and CEO of NorTech. “We are seeing burgeoning numbers of companies creating differentiated solutions which address the world’s need for renewable energy sources, clean water, and more efficient systems.”

Deals in this space have included the 2009 $1.5 million round in Blue Spark Technologies from SunBridge Partners and Early Stage Partners; Carbolytic Materials’ $12.4 million round from Advantage Capital Partners in 2008; and Arisdyne Systems’ $5.3 million round led by Morgenthaler Ventures with participation from Cordova Ventures and Early Stage Partners in 2008.

“The dollars invested and number of investments realized in the past five years demonstrate that the region is generating innovative companies offering competitive investment opportunities, and these companies are accessing the capital they need to grow their businesses and create jobs,” notes Ireland.

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About the Venture Capital Advisory Task Force

The Venture Capital Advisory Task Force is a group of Cleveland Plus area venture community members who convene to further entrepreneurial investment and success in the region. From 2002 through 2004, the group worked to pass legislation, resulting in the creation of the $150 million Ohio Capital Fund, which is now actively investing in regional venture funds around the state. James D. Ireland III chairs the group, Becca Braun, president of JumpStart Ventures, is vice chair of the group, and partner organizations NorTech, JumpStart Inc., BioEnterprise, and the Fund for our Economic Future support ongoing reporting and educational efforts. This collective group publishes the annual Venture Capital Report for the Cleveland Plus region.

BioEnterprise, JumpStart and NorTech are part of the private sector’s economic development system, which the Greater Cleveland Partnership supports to improve the region’s ability to retain and create jobs and wealth for all residents at scale.

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