For the past couple decades, Ohio officials, founders and investment communities have pooled resources to cultivate local startup ecosystems, with a pretty steady track record of incremental growth. Then, in the past couple of years, things really exploded.
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So far this year, Ohio-based companies have raised over $2.2 billion in venture funding across all stages, per Crunchbase data. That’s more than double the sum raised in all of 2020, and marks the highest statewide funding total to date.
Leading the gains are a bevy of big rounds at hefty valuations for companies including health AI provider Olive and welding automation upstart Path Robotics. Average round size, meanwhile, has more than doubled. All this is leading longtime local investors to conclude that the Buckeye State startup scene is finally hitting its stride.
“I do think this outsized uptick isn’t a one-off,” said Ray Leach, CEO of JumpStart, a Cleveland-based venture development organization that supports and invests in startups. He points to several factors—including a few recent Ohio founder success stories and a larger pool of local capital. The shift away from in-person meetings amid the pandemic also helped local companies woo out-of-state investors.
Three C’s and beyond
Funding distribution has been somewhat uneven for a state with multiple large metro areas. Most funded companies are located in or around one of the “three C’s”—Columbus, Cleveland and Cincinnati, each a metropolitan area of over 2 million people.
Of the three, Columbus has seen the highest gains. It helps that the city is home to The Ohio State University, the flagship of the state university system, and a local talent base in insurtech and fintech, two hot areas for startup investment.
Leach also extends some credit to Drive Capital, the venture firm founded nine years ago by former Sequoia Capital partners Mark Kvamme and Chris Olsen, that is based in the state’s capital city.
The city is also home to Olive, a Drive portfolio company focused on health care industry automation, that raised the largest funding round this year for an Ohio company—a $400 million Series H. Other Columbus companies raising big rounds this year include Beam Dental, a dental benefits provider, Lower, an online marketplace for home purchase and financing, and Path Robotics, focused on automating the welding industry.
Cincinnati, about 100 miles southwest of Columbus, also counts a number of fast-scaling startups. Among the companies that call the city and its environs home are indoor farming company 80 Acres and the biotechs Cincor Pharma and Physna, which collectively raised over $350 million this year.
Cleveland, a few hours north, isn’t seeing the same concentration of supergiant rounds of $100 million and up. However, there are sizable deals getting done. Two standouts are Splash Financial, a student loan refinancing platform that raised a $44 million round in June, and SPR Therapeutics, a medical device startup focused on pain management that closed on $37 million in October.
When one drills down more closely into the locales where funded startups cluster, a few neighborhoods in each metro area stand out, Leach notes. This includes the Over-the-Rhine district in Cincinnati, the Short North neighborhood in Columbus, and the Tremont area in Cleveland. The broad trend for startups is toward choosing cities over suburbs, picking areas with some history, an urban vibe and a high concentration of trendy commercial establishments.
From early stage to exits
Notably, Ohio’s startup scene is pretty happening across all stages, with an enormous jump in early-stage funding as well as a few big-ticket public offerings and late-stage deals.
On the early-stage side, Ohio was one of the top-performing states for investment gains, according to a Crunchbase analysis last month. Overall Series A and B investment topped $850 million in the 12-month period surveyed, up 500 percent year over year.
Exits have also been piling up, although not all hotly anticipated debuts have done well.
One example is Root Insurance, which offers competitive car insurance rates for good drivers. The Columbus-based company made its Nasdaq debut a year ago and was recently valued around $1.26 billion, well below its initial public valuation.
Lordstown Motors, a Warren, Ohio-based electric truck upstart that went public via SPAC last year, was another deal that went south. Shares are down over 80 percent from their peak, valuing the company around $1 billion.
Still, it’s likely the biggest smash debuts are yet to come as companies such as Olive, Beam Dental and Path Robotics are still in later-stage fundraising mode.
More local capital to invest
While Ohio startups still typically court out-of-state investors for later-stage rounds, it helps that there’s a sizable pool of local angel and venture firms to get them started.
A Crunchbase data dive unearthed 25 Ohio-based startup investors at seed stage and beyond. (See the whole list here.) Of those, Drive is still by far the largest, having raised $1.2 billion across five funds to date. But others are scaling up.
At JumpStart, Leach said, the team is planning to finalize a for-profit fund later this year–the organization has historically operated as a nonprofit–with a target raise of $50 million or more. The organization benefited from being an early backer in CoverMyMeds, a successful exit a few years ago that helped put the Columbus startup scene on the map.
Where does Ohio’s startup scene go from here? Of course, indicators can change and often quickly. But looking at the funding data for recent quarters, and in particular the surge in early-stage investment, it’s not hard to imagine that things will be looking up.
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Featured Image: Erik Drost, CC BY 2.0, via Wikimedia Commons.
Blogroll image: Li-Anne Dias
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