Report says venture capitalists contributed $1.1 billion to Northeast Ohio companies over past five years

A new report says venture capitalists and angel investors poured $1.1 billion into Northeast Ohio in the past five years, supporting 183 companies and fueling some 40,000 jobs.

The 2009 Venture Capital Report being released today also notes that while seed-stage investment in the country declined 38 percent last year, investor attention to Northeast Ohio start-ups climbed to its highest level in four years.

''Support of seed-stage investments is reflective of a thriving entrepreneurial environment and demonstrates that the Cleveland Plus area supports the acceleration of its young, innovative, technology-based companies,'' the report concluded.

Cleveland Plus is defined as a 16-county region in Northeast Ohio for purposes of economic development and marketing.

The report is compiled annually by the Venture Capital Advisory Task Force, which has summarized the region's investment activity since 2005.

Other highlights of the report:

• About two-thirds of investment activity happened in the health sector. There were 69 area companies sharing $729 million from investors between 2005 and 2009. The companies range from biopharmaceuticals to medical devices to medical-information systems. The report said Ohio is now ranked among the top 10 states in the nation for medical device jobs.
• There were 33 companies in the ''cleantech'' sector raising a collective $115 million, contributing to Ohio's ranking as No. 4 in the country in cleantech jobs. Cleantech is a term for products or services that improve performance and productivity while reducing waste, pollution and energy consumption.
• A total of 172 seed-stage investments totaling $82 million have been made in the last five years. In 2009, 27 companies shared $18 million. Seed investment is often the first investment that follows funds provided by founders, friends and family.
• According to the National Venture Capital Association, one job is created for every $26,435 of equity investment, which means $1.1 billion equates to 40,700 jobs for the region.

''I think the most exciting thing I see right now is you've got these companies, hundreds of companies, that are poised to become leaders within their respective industries, with jobs that sustain into the future,'' said Baiju Shah, president of BioEnterprise, which works to accelerate the growth of biomedical companies in the region. ''These are not projects of a defined length like construction.''

He also pointed out that Northeast Ohio can take pride in how many of these innovative companies are working to solve
''big important problems that affect humanity.''

They're inventing devices and procedures that are saving lives and the environment. ''This stuff is life changing,'' Shah said.

Among Akron-area companies highlighted by the report was MAR Systems, an Akron Global Business Accelerator tenant developing a process to remove mercury and other metals from water.

The company received a $1 million investment in 2007 and a $1.5 million investment in 2009, and plans to expand from its seven-person team to a staff of 50 this year.

Also, PartsSource, the Aurora-based supplier of hospital equipment parts, raised $50 million in 2008, and increased its revenue by 338 percent in 2009. It employs more than 200 people and has been averaging four to six hires a month.

In addition to looking back, the report looked forward, projecting that Northeast Ohio will need $1.2 billion in the next five years to propel its young stars to the next level and fill the pipeline with new startups.

James Ireland III, who chairs the Venture Capital Advisory Task Force and is managing partner of Early Stage Partners in Cleveland, said he hopes the report will stir support for renewal and expansion of Ohio's Third Frontier grant program, as well as for continued support for the Ohio Capital Fund and the Ohio Technology Investment Tax Credit.

Without the state programs, ''it will be monumentally harder for these companies to continue to grow, or potentially even maintain the jobs already created,'' he said.

 

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