Last year, 105 tech-based companies in Greater Cleveland raised $201 million from venture capitalists and angel investors, according to the region's Venture Capital Advisory Task Force. This activity represents a 34 percent increase over the amount raised by companies in 2011.
This growth also bucks a national trend: Data recently released in The MoneyTreeTM Report by PricewaterhouseCoopers and the National Venture Capital Association (based on data from Thomson Reuters), showed an overall decrease in dollars invested of 10 percent in 2012.
The number of Northeast Ohio companies attracting equity investment in 2012 also rose by 33 percent over the previous year. Of the 105 companies, slightly over half received angel investment, a marked increase from 2006 when only 11% of deals involved angel investors.
"Angels continue to be significant contributors to Northeast Ohio's investment momentum," says Clay Rankin, Managing Member of North Coast Angel Fund (NCAF).
Formed in 2006, NCAF is now the country's fifth-largest organized angel group. "We're showing that well-focused angel investment can help competitive Midwest technology companies successfully launch and grow their businesses, in many cases reaching a point where they can attract VC investment," says Rankin.
One such example is NCAF portfolio company OnShift, an enterprise IT provider of cloud-based staff scheduling and shift management software for the healthcare field. OnShift's strong performance-including a 400% revenue increase in 2011-enabled it to close more than $3 million in Series B financing early in 2012, a deal led by the venture fund West Capital Advisors LLC and which included participation from select existing investors, namely Early Stage Partners, Draper Triangle Ventures and Glengary LLC.
Information technology/software continues to be an important area of growth for Northeast Ohio, with 46 companies collectively attracting $40 million in venture capital. But, as in previous years, healthcare is the strongest-performing sector in Northeast Ohio overall, also outpacing national trends. Thirty-five (35) companies collectively attracted $141 million, with medical devices and equipment ($64 million) and healthcare services ($50 million) leading the way.
Investors from all across the nation continue to discover the region's investment opportunities, with 28 out-of-state funds making first-time investments in Northeast Ohio in 2012.
New York-based New Science Ventures was a co-lead investor in Juventas Therapeutics' most recent $22 million round while New Mexico's Flywheel Ventures was a seed investor in eFuneral. New York-based Easton Capital and Palo Alto's Takeda Ventures also participated in regional deals.
"The breadth and quality of first-time Northeast Ohio investors in 2012 speaks to the region's growing reputation," says Lynn-Ann Gries, JumpStart Chief Investment Officer. Since 2007, more than 150 organized equity investors have put money into Northeast Ohio. "Although VC is contracting nationally, sophisticated investors remain excited about what they're seeing here."
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