How to make Cincy a leader of the Silicon Nation

Posted at 6:01 AM, May 12, 2016
and last updated 2016-05-12 06:01:35-04

Under the bright lights and Cirque du Soleil-like razzle-dazzle of the massive Crossroads Oakley auditorium, the co-founders of nine OCEAN accelerator startups from the 2016 class share their stories in front of venture capitalists, angel investors and fellow startup colleagues from across Cincinnati and throughout the country.

The goals are as diverse as the startup leaders themselves, from testing their mobile platforms to establishing company identities and beginning to build awareness.

Most of all, these graduating OCEAN startups, including data-collection app Liquid, the talent recruitment platform We Love Work, and Spatial, an innovative map platform that empowers popular travel sites like PoshPacker with local intelligence, have one priority in mind.

This latest class of Cincinnati startups aims to acquire the necessary funds for testing their digital services and scaling their businesses to the next level. Basically, they want to become “more real,” and they need capital investment to do so

Local startup leaders know that lack of capital will kill a startup ecosystem — even one as increasingly vibrant as Cincinnati’s.

Each time a Cincinnati startup launches, like, say, the music discovery app Hive, there need to be more angel and institutional investors ready to seed early entrepreneurial success and keep those companies in town.

“Fund leaders in Cincinnati need to do two things to ensure our startups have access to the capital they need,” Vine Street Ventures Director Marina Dedes said, speaking at the Angel Investing: What To Do After You Know The Basics summit at Union Hall in Over-the-Rhine. “We need to continue to grow and invest in Cincinnati startups and attract outside investors to Cincinnati.”

Dedes and her fellow Cincinnati fund leaders are shifting investment goals and strategies into tangible actions. CincyTech, a public-private seed investor located in Union Hall, aims to invest in 25 additional startups and add 600 jobs to the local economy via their fourth and largest fund to date at $30.75 million. Meanwhile, Drive Capital, a venture capital firm based in Columbus, looks to invest an additional $200 million in Midwest startups via a recently announced second fund.

‘Keep Building Successful Startups’

Dedes and her fellow investment leaders believe that more investors will take notice of Cincinnati when you combine these locally sourced funds with sizable outside investments attained by rising Cincinnati-based startups such as Ahalogy, a marketing solutions company, and Strap, a wearable-tools platform.

Rob McDonald, partner at both Taft Stettinius & Hollister and Vine Street Ventures and a co-founder of The Brandery, and Vine Street Ventures Director Marina Dedes are working hard to bring more capital to Cincinnati's startups.

Sharing ideas at the recent Angels Investment summit, these investment leaders agree that local companies can’t keep returning to the same investors if they want to grow. Basically, Cincinnati’s startup engine needs to grow with additional funds from insiders and outsider VCs and growth funds alike.

Toss into the mix the business mentoring, sponsored events like the Cincy Roadshow and overall networking support provided by The Brandery, Cincinnati’s largest accelerator, and the startup support network Cintrifuse, and Dedes grows confident that Cincinnati will seal its status as a true Midwest startup hub.

Look to the growing list of startup success stories such as Everything but the House (EBTH), an online estate-sales company, and Losant, an IoT platform company launched in 2015 from co-founders Charlie Key and Brandon Cannaday. Key and Cannaday are experienced leaders in Cincinnati’s tech ecosystem, as the co-founders of Modulus, a company that helps businesses manage websites and apps.

Losant co-founders Charlie Key and Brandon Cannaday bring a second startup to Cincinnati's tech ecosystem with Modulus, a company that helps businesses manage websites and apps.

“Having a local support system and resources to build a startup has allowed us to stay local, where we’re benefiting from the large concentration of our target industries,” said Key, who credits the successful acquisition of Modulus as a key factor in successful fundraising for Losant.

He and Cannaday are bullish about Losant and Cincinnati’s startup economy continuing to grow. Yet, in addition to funds, they also want local companies to do more business with startups.

“We need both local and outside VCs to buy into the growing startup economy and fertile industrial area here in Greater Cincinnati,” Key said. “We also need local companies to look to continue to startups for projects that will help them drive disruptive innovation in their industries.”

‘Keep Successful Startups in Town'

Granted, there are few moments more exciting than a successful demo day like OCEAN and its class of 2016 startups and listening to startup co-founders from across the globe who have chosen Cincinnati as a place to launch their businesses.

Kyle Schlotman, chief investment officer at Covington-based Connetic Ventures, adds that there’s another reason to bring more capital investment to Cincinnati. What happens when a startup company like CompleteSet, a collectibles platform that allows fans to track, buy and sell pop-culture collections from action figures to trading cards, receives an attractive offer to relocate but would prefer to stay put and hone their service?

Thanks to a $500,000 convertible note round raised by Connetic, KTECH Capital and other investors, Gary Darna, co-founder and CEO of CompleteSet, says they’re not only able to stay in their Over-the-Rhine offices but can also hire additional engineers to launch an Android app and begin monetization strategies.

“Cincinnati is the best place for CompleteSet to grow, not only because of the thriving startup community, but also the role our city played in the creation of so many memorable collectibles,” Darna says. “Despite opportunities to relocate the company, we remain loyal to Cincinnati and can’t imagine building the company anywhere else.”

Still, Darna agrees that their recent investment round is something of a stopgap.

CompleteSet needs at least $2 million in Series A funding to successfully scale its development team, user base and test revenue models, and Darna’s hopeful that Cincinnati’s startup economy will soon be able to provide that level of financial support. Then, perhaps only then, can Cincinnati truly claim itself to be a leading startup hub in Silicon Nation.

Maybe landing startup funding is about being in the right time at the right place. That’s one of the OCEAN 2016 keynote takeaways from Don Lothrop, formerly a managing partner at Delphi Ventures and founder of RomaniaOne, a digital-media company in Bucharest, Romania.

Timing. Are you ready to take the stage before thousands of people at Crossroads Oakley Auditorium and successfully pitch your business?

Timing. Is Cincinnati’s startup community ready to embrace you and support you from early seed capital through sizable investments if your startup’s strategies prove to be successful?

Maybe 2016 is the right time to launch a startup in Cincinnati after all, and the chance to grab the spotlight is at hand — as long as people remember that important work takes time.

“I think Cincinnati is quickly catching up with places like Austin and D.C.,” says Dedes. “However, in terms of startup years, we’re young. Over the next five to 10 years, as more capital comes into the city and seasoned entrepreneurs stick around, I think we’ll start seeing some big exits that will level the playing field. One thing I’d love to see is another late-stage fund set-up shop in Cincinnati, someone who can really put big dollars to work.”