Co-Investor Relationships and the Capital Gap: Rev1 and Tamarind Hill
Assessing the Midwest capital gap
Much has been written and discussed about the Midwest capital gap. It’s a fact: only 4.3 percent of all VC investment made it to the Midwest in 2017.
While we are seeing good progress—last year $3.1B of VC capital was invested in the Midwest, up from $2.2B in 2016—attracting capital continues to be a challenge here, especially because as more companies are started and thriving, their need for follow-on capital grows.
In 2017, more than 50 investments totaling $120MM were made in the Columbus region. That’s up from $82MM in 2016 and is the most we’ve ever seen here. This great result further compounds the challenge of the capital gap.
Rev1, for example, participated in 31 of those 50 investments. We estimate that over the next five years, our IT-focused portfolio companies will need at least $100MM additional in growth capital, and our young life science companies will need another $75MM or more.
It is well known that very little investment capital comes into an ecosystem from outside, and when it comes to seed and early-stage companies, the number is even smaller.
According to a Crunchbase report that analyzes more than 36,000 venture capital deals, 57 percent were between investors and startups in the same state. More than 50 percent were between investors and startups in the same metropolitan region.
This all points to the importance of a regional strategy to close the capital gap through partnership and syndication with other investors in the region. Co-investor relationships are a big part of that strategy. Rev1 has been an investor in more than 80 percent of the region’s deals over the past five years and has co-invested with most of the venture capitalists in our region and in Ohio.
New Fund Launch
To that end, I’m excited to announce that we are supporting a new fund, Tamarind Hill, to expand the growth of capital in our market. While Rev1’s investments are focused at the concept and seed-stage, Tamarind focuses on the early and series A stages.
Tamarind is co-founded by Mark Shary, an exited company founder who has cycled back to launch a number of our fast-growing local companies as co-founder, investor and mentor, and someone we’ve worked with for many years at the Rev1 enterprise level as well as portfolio company level. Tamarind is moving into Rev1 Labs, Rev1’s innovation space. This proximity will allow us to better share best practices, market intelligence, and network relationships for the benefit of our region’s entrepreneurs.
For the foreseeable future, Columbus and Ohio need to continue to build more homegrown capital sources as well as a pipeline of deals that attract syndication from investors from other regions and states. We intend for our relationship with Tamarind Hill to serve as a template for additional venture firms with complementary sector and stage focus who locate partners in Central Ohio.
The Columbus region’s progress in growing investments and investment capital contributes to our well-earned reputation as a city where entrepreneurs can successfully start up and grow companies. Proof point: Columbus has been ranked by the Kauffman Foundation as the #1 City for Scaling Startups for two consecutive years.
And, we still have a lot more work to do—starting with raising more capital for later and bigger growth-stage investments.
