By Bob Coy and Mike Venerable of CincyTech
In the basement of the Mason, Ohio, municipal building, a high-speed DNA lab went live last month. The lab supports a fast-growing diagnostics company, AssureRx Health, which is nurtured by an emerging ecosystem of private investment dollars and public support. Based on scientific discoveries at Cincinnati Children's Hospital Medical Center and the Mayo Clinic, AssureRx is one of many high-potential companies growing far from the concentrations of venture capital on the coasts.
In its first years of operation, the company struggled to resist the pull of Silicon Valley. But key investment by state-supported, privately managed seed funds and private investors kept it in Ohio. By 2011, AssureRx had made enough progress to attract investment from leading West Coast venture funds without having to relocate. It now employs 125 people in Mason and is adding staff rapidly.
Along the Interstate 71 corridor from Mason, 25 miles south to downtown Cincinnati, quality, early-stage companies are emerging at a fast clip. This momentum is creating a talent crunch for the region and in turn, new career options for recent college graduates.
The Need for Talent in "Fly-over" Cities
In 2012, Cincinnati was selected to receive Fellows from Venture for America, a New York-based nonprofit that deploys graduates from leading schools to work in emerging start-up economies. We now have seven new members of our ecosystem, with more coming from 2013's class. If these graduates have a great experience in Cincinnati startups, their network of social and professional connections may consider our region as a potential destination. Attracting new talent and retaining emerging talent are prerequisites to maintaining our momentum.
VFA recognizes that the emergence of "fly-over" ecosystems, like Cincinnati, is critical to the long-term health of the national economy. These areas are often overlooked by investors and talented individuals who gravitate to well-known innovation centers such as Silicon Valley, New York, Boston and Austin. Over the decades, these regions have combined capital, talent, technology and an entrepreneurial culture to ignite a virtuous cycle of growth.
But the growth of those established regions may be reaching its limits, as skills shortages develop and the cost of housing skyrockets. We can't move everyone to those mega-hubs. We need to develop talent and companies across the country and apply that energy to new discoveries emerging from existing research institutions and clusters in other regions.
Startup Support in Cincinnati
In the Greater Cincinnati area, we benefit from a mixture of state and local investment, regional accelerators, growing private investment, a base of talent resident in Fortune 500 company headquarters such as Procter & Gamble, Macy's, and GE Aviation, and strong research institutions such as the University of Cincinnati and Cincinnati Children's.
We also have a strong partner in the State of Ohio, which has catalyzed public and private dollars locally through a program called Ohio Third Frontier. This $2 billion program to encourage Ohio-based commercialization and company growth enjoys wide bi-partisan support and has been approved by voters twice in the last eight years through statewide referenda. It is unique in that it requires private match on a dollar-for-dollar basis. This ensures that programs are being held accountable by local leaders who also have money at stake.
CincyTech Helps Local Businesses Grow
As a recipient of Third Frontier funding since its launch in 2006, CincyTech LLC manages two for-profit seed funds so far and has invested in more than 40 start-up technology businesses. The state of Ohio has been an active co-investor in those funds alongside private investors. The 40 startups have attracted an additional $170 million of private investment dollars and will generate about $50 million of revenue in 2013.
CincyTech's early investments, nearly all based on technology or innovations emerging from research institutions and other sources inside our region, are now maturing. Our first fund is performing better than industry averages, and we expect that to continue. Considering the geographic and early-stage profiles of our investments, this performance would indicate the capital markets are overlooking good opportunities in Cincinnati and other regions.
In CincyTech's portfolio, the ratio of private-to-state investment is better than 10:1, and that will only improve over time. Between the increased tax base, the new jobs and the personal wealth being created by successful companies, Ohio citizens will reap healthy economic returns.
It will take at least a generation to rebalance early-stage capital and talent allocation across the economy -- and an enduring commitment from state governments, and regional public and private sector leaders. But so far in Ohio and other fly-over states, emerging models of public-private partnerships are yielding encouraging returns, and programs such as VFA recognize this progress and contribute to their growth.
Bob Coy is president of CincyTech. Mike Venerable is managing director of digital/software/health tech. CincyTech was one of Venture for America's first partner companies, and currently employs 2012 Fellow and University of Maryland grad James Fayal. To support Venture for America in its goal of providing companies like CincyTech with young talent, offer your support today in the JobRaising Challenge.