CINCINNATI - The Cintrifuse startup initiative picked one firm from Boston and one from Cincinnati as its first venture capital partners in a "fund of funds" venture that aims to bring more investment capital to Cincinnati area entrepreneurs.
Allos Ventures Fund II of Cincinnati and Sigma Prime Venture Fund IX of Boston received recent investments from the Cintrifuse Early Stage Capital Fund I, LLC, a $51 million investment pool formed by some of Cincinnati's largest companies. Cintrifuse did not disclose its investment amounts but previously said its average investment size would be $5 million. Combined, the Allos and Sigma funds have about $160 million to invest in early-stage companies. They're not required to invest in Cincinnati startups but they've already met with local entrepreneurs whom they consider candidates for future investments.
"Their actions proved that they had some serious interest in having a real presence" in Cincinnati, said Tim Schigel, manager of the Cintrifuse fund of funds. "They understood the value of what Cincinnati had as a region, in terms of a strong branding, consumer insight and marketing hub and to some degree the Cintrifuse model itself they really found interesting."
Cintrifuse is a business-led effort to spur innovation and new company formation by giving entrepreneurs access to business mentors, customers and investment capital. The year-old initiative raised $51 million from the University of Cincinnati and nine local companies, including Procter & Gamble, Kroger and Castellini Management Co.
Allos Ventures is a venture capital firm with offices in Cincinnati and Indianapolis. It targets Midwestern companies with early-stage software ideas or technology-enabled business services. The Cintrifuse investment enabled it to close its latest investment fund at $41 million. It has already made two investment from the fund in Indianapolis and Pittsburgh.
"We'd much rather invest close to home," said John Mcllwraith, an Allos Ventures managing director.
Allos Ventures is well-connected to the Cincinnati entrepreneurial scene. Mcllwraith is the chairman of one of the region's most celebrated startups, Assurex Health, where Allos Ventures' first fund became an investor in 2012. He sits on the board of Northern Kentucky University's Entrepreneurship Institute. Allos Ventures partner Dov Rosenberg serves on the Technology and Commercialization Advisory Committee of Cincinnati Children's Hospital.
Schigel is counting on Mcllwraith to be an ambassador of sorts, extolling the virtues of Cincinnati's entrepreneurial climate to venture capital firms in other cities. Mcllwraith is eager to introduce his portfolio companies to executives at P&G, Kroger and other Cintrifuse founders.
"We look forward to working with Cintrifuse's team and impressive group of partner companies as we help our companies and other navigate the often challenging road to success," Mcllwraith said.
Sigma Prime is a 29-year-old venture capital firm that has a reputation for being good company operators, with 10 companies in which it provided executive leadership generating a combined $4.2 billion from initial public offerings or buyouts. Most of its investments have been on the East Coast, but the firm had recent success in Indianapolis and Atlanta. Schigel said Sigma Prime was exactly the kind of firm he was hoping to attract with the Cintrifuse fund of funds, an experienced investor with limited exposure to Cincinnati but a willingness to consider deals here.
"We think there will be some opportunities to help and build some hugely promising startups in the region and we hope to be an important part of this activity," said Sigman Prime Managing Director John Simon, in a prepared statement. "Whether by being a mentor in the Brandery ecosystem, by being an advisor to Cintrifuse and significant startup efforts in the community, and/or hopefully being a key investor in change-the-world kind of startup companies in the region, we hope to engage and make a difference."