Fresh off a recent Third Frontier grant, public-private investment group CincyTech is looking to invest about $3 million in Southwest Ohio early stage startups this year.
That funding will be split between new investments and some existing CincyTech portfolio companies, of which there are 18.
A $2 million grant from Ohio’s Third Frontier technology acceleration program will combine with $2.3 million in private investment to comprise CincyTech’s $4.3 million second fund. That’s a significant drop-off from CincyTech’s first fund, which launched in 2007 with $10.4 million ($6 million of that amount came from Third Frontier).
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But Bob Coy, CincyTech’s president, said the smaller fund isn’t a cause for concern — it just means CincyTech will begin raising fund No. 3 a little earlier than it otherwise would have. “We’ll just go out and raise another fund next year,” he said. “We’ll continue to invest at the same pace.”
Though the $3 million figure may seem small, Coy stressed that it doesn’t fully measure CincyTech’s reach. A syndicate of angel investors and sometimes venture capitalists typically invest alongside CincyTech at a 10-1 eventual ratio, meaning that $3 million is part of a much larger whole that could eventually reach $30 million.
CincyTech invests only in Southwest Ohio companies, or out-of-town companies that intend to move to the area. The vast majority of its companies are in the biomedical, information technology and alternative energy industries.
CincyTech sources most of its dealflow through the typical channels — local entrepreneurs, law and accounting firms, other investors — but also has access to Cincinnati Children’s Hospital Medical Center and the University of Cincinnati. Cincinnati Children’s, in particular, has been a valuable source of medtech dealflow, including the following portfolio companies: personalized medicine test-maker AssureRx Health and device firms Enable Injections and SpineForm.
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CincyTech has taken advantage of another, somewhat unusual source of local dealflow: consumer products giant Procter & Gamble’s decision a few years ago to begin dismantling its pharmaceuticals division. Two companies that own the rights to drugs that began development under P&G are among CincyTech’s most promising — anemia drug developer Akebia Therapeutics and heart-arrhythmia drug developer Blue Ash Therapeutics.
Akebia raised a significant amount of capital ($28 million in a Series A) and expects — if all goes well in clinical trials — to have a drug on the market within the next few years. That’ll make Akebia an attractive acquisition, or more likely, partner, for a big pharmaceuticals firm if the company’s drug continues to prove itself.
