Innovation Capital Accelerates Growth in Central Ohio

TechColumbus recently released its annual Central Ohio Innovation Capital Report which provides a comprehensive overview of funding trends within Central Ohio for 2010. The full 2010 Central Ohio Innovation Capital Report is available here.

TechColumbus research indicates that over the past year (2009-2010), innovation capital increased nearly 73% to over $307 million in Central Ohio. Innovation capital, which includes all sources of funding—venture capital, angel investments, loans, grants, etc.—provides crucial financial support to entrepreneurial businesses. In 2010, 117 enterprising companies received a share of the record-setting funding. This figure represents a nearly 43% increase over the number of young companies receiving such capital funding in the prior year.

Not only did a record number of companies receive a share of record levels of innovation capital, but, according to TechColumbus, the capital was distributed across all stages of growth. Startup firms need seed capital to cover expenses and to help expand the brand before the company is profitable. In 2010, TechColumbus reported that more than $113 million went to 66 earliest-stage companies (representing a 44.56% increase from 2009 levels). Venture capital and angel investors provided over $48 million in funding with Central Ohio investors committing just under half of this amount. (For more information on seed funding for Ohio companies, see this list of capital sources maintained by The Gillespie Law Group.)

Earliest-stage innovation capital ($113 million) was spread across various sectors with Healthcare and Advanced Material companies obtaining the most funding. The table below provides a breakdown of funding by sector for 2010.

Equally important, however, is a source of exit funding for the founders of a successful business.  A lack of such funding can inhibit startup companies because founders do not have a clear way to get out of their investment.  TechColumbus reports that more than $194 million in exit funding was brought in by seven companies in 2010 (a dramatic increase over 2009 levels).

The report concludes that the availability of early-stage funding and late-stage exit funding provides entrepreneurs vital capital at critical times and has helped contribute to a friendly entrepreneurial climate in Central Ohio.  However, in order to continue attracting later-stage capital, young companies must be funded when they are in the early-stage and growth phases.  Without a continuous supply of companies—at all stages of growth—in the entrepreneurial pipeline, later-stage innovation capital may be stymied.  The report ends with the cautiously optimistic view that investment activity in Central Ohio is increasing, but that there is still a significant need for future funding if the region is to retain its growth trajectory.