Closing the Gap: Overview and Takeaways from the 2014 VentureReport

Startup company formation continues to increase across Ohio thanks in large part to Ohio’s highly successful Third Frontier Program (OTF) and the state’s active angel investor community, according to the 2014 Ohio VentureReport released by VentureOhio. The VentureReport, which reflects the results of a statewide survey of investors and other participants in Ohio’s entrepreneurial ecosystem, noted that $321 million was invested in 210 Ohio companies during 2014, primarily in the information technology and life sciences sectors. 

At the other end of the company-building continuum, several Ohio growth companies completed successful exits during the past year, delivering over $1 billion in financial returns to employees and investors and increasing Ohio’s visibility as a hotspot for entrepreneurial activity. All of these companies were supported in their launch and early growth by angel and/or venture investors based in Ohio. 

The rapid growth in the number of seed and startup stage companies being formed has greatly increased Ohio’s early-stage capital gap, which was first quantified by VentureOhio in 2014. As these new companies accelerate their commercialization and hiring, they require venture capital to fuel growth. Respondents to VentureOhio’s 2014 survey indicated that 115 seed/startup and early-stage companies will require $633 million in funding before the end of 2016 to sustain accelerating job creation and revenue growth. This capital need comes at a time when the number of active venture capital firms based in Ohio is decreasing, and the capital available from existing firms is less than half of the need cited above. 

“The number of venture capital firms headquartered in Ohio with capital to make new investments in early-stage companies is at what may be a 10-year low, and the amount of capital available from Ohio firms to support the growth of the state’s high potential startups is far less than the reported amount when one considers that many of these firms also invest outside of Ohio. It’s a growing challenge for the state, and one that VentureOhio is working to solve,” said John McIlwraith, Chairman of VentureOhio. 

The 2014 Ohio VentureReport also highlighted the extensive business building resources available to entrepreneurs in Ohio, and profiled seven Ohio-based companies on a fast track to commercial and financial success. “We are on the cusp of something very special,” said Falon Donohue, Executive Director of VentureOhio. “Momentum is building and all eyes are on the Midwest. There has never been a better time to start a company in Ohio.”