Northwest Ohio venture and business development group Rocket Ventures is looking to invest about $8 million in early stage companies this year.
The majority of those investment dollars are expected to go to startups in two industries — bioscience and alternative energy, said Greg Knudson, Rocket Ventures’ director.
Rocket Ventures is a state- and private-funded group whose mission goes beyond funneling cash to promising companies. Like Cleveland’s JumpStart, Rocket also spends a significant amount of time and resources coaching entrepreneurs and helping them develop their ideas.
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Not all of the $8 million will go to new investments, however. A portion will also go to follow-on investments in Rocket’s portfolio companies, which number about 12, with plans to invest in about eight new companies, according to Knudson.
Perhaps Rocket’s biggest success thus far is Mithridion Inc., a drug developer that focuses on central nervous system disorders like Alzheimer’s disease. The company has received about $600,000 in funding from Rocket Ventures, and another $8.5 million from other investors, Knudson and Mithridion CEO Trevor Twose said. Mithridion has an Alzheimer’s and schizophrenia drug candidate in (pdf) clinical trials.
Mithridion’s headquarters are in Madison, Wisconsin, but it conducts clinical operations in Toledo and Ann Arbor, Michigan. (Mithridion acquired a small Toledo drug developer in 2008.)
“The Midwest doesn’t have as much venture capital as it should for the amount of technology coming out of the universities,” Twose said. “So the initiative that Rocket Ventures took to set up a fund is very welcome.”
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Rocket Ventures launched in 2007 with a $15 million grant from Ohio’s Third Frontier program, a voter-approved initiative designed to stimulate high-tech jobs. The group also pulled in $7.5 million (a 1-to-2 match) in private funding from a large group of investors, include the University of Toledo, Bowling Green State University and several Northwest Ohio county economic development groups.
The University of Toledo and its medical school have been among the group’s best sources of dealflow, Knudson said.
Rocket Ventures typically focuses on pre-revenue companies, and begins with an investment of $250,000. Through follow-on rounds, that per-company amount can grow as high as $1 million from Rocket Ventures, but the average is closer to $500,000. About 60 percent of Rocket’s investments go to biosciences, according to Knudson.
But while Knudson focuses on the day-to-day, he also must keep one eye on securing Rocket Ventures’ future, or at least the future of a second fund. Knudson is hoping for another Third Frontier grant, but expects that this time around, Rocket will have to secure a 1-to-1 match, a far greater challenge than the first fund’s 1-to-2 ratio.
Big changes are coming to the Ohio Department of Development, which administers the Third Frontier program, and that’s created uncertainty for grant recipients like Rocket Ventures. Still, Rocket can only hope that its track record — it’s helped create 80 companies, according to Knudson — is enough to justify more taxpayer dollars rolling into its coffers and then out again to promising early stage startups.