Helping Entrepreneurs Build the Future

Mike Venerable, managing director of Software/Digital/HealthTech, and Bob Coy, president, lead CincyTech’s effort to create wealth in the region.

Photo by Brian Ambs

In January 2015, Jason Grill of The Huffington Post wrote that one particular Midwest city "is proving that startups can be successful and receive funding to seed their founders' biggest dreams. Cincinnati, take a bow." 

CincyTech, take a bow as well. The startup accelerator is cultivating an atmosphere of growth and opportunity in the Queen City. If Cincinnati is on its way to becoming a startup wonderland – and we think it is – then CincyTech deserves much of the credit. 


Flyover Country No More

Cincinnati is defying the conventional wisdom that says firms in a city like Cincinnati can't get enough funding or support to get off the ground. According to CincyTech's analysis of data from CB Insights, a venture capital and angel capital database, Cincinnati had the second-highest number of startups funded at the seed stage in the Midwest, behind only Chicago between 2007 and 2013. Seed stage companies are those that have not generated material market revenue in excess of $1 million. 

The future is happening now at CincyTech. Actually, it’s been happening for about a decade, but it’s moving faster these days.

The public-private seed-stage investment firm supports entrepreneurs and startups that are developing applications, products and businesses that will add value to people’s lives.

Created in 2001, CincyTech has financed and guided dozens of new businesses in fields as diverse as consumer applications, enterprise software and bioscience products. The seed-stage companies generally are able to reach concept validation for less than $1 million and reach sustainability for less than $2.5 million. As the startup companies grow, CincyTech also participates in raising capital for further investment. As of December 2014, those companies employed 670 workers in the region – and are set to employ more than double that amount by 2016. 

Thanks to CincyTech, Cincinnati is excelling in the startup scene. Between 2007 and 2013, CincyTech alone invested more than $25 million into 54 portfolio companies, generating $435 million in eventual funding and $139 million in revenues. In 2014, the firm raised a whopping $227 million in investor capital. 

More than 40 venture capital funds have invested in CincyTech companies. Almost a third of those investors are from the east and west coasts who came to Cincinnati because of its growing reputation as a startup town.

Demonstrably, CincyTech is positioned better than ever to carry out its mission: “To create jobs, wealth and a return on investment by providing guidance and driving talent and capital into the most promising technology companies in Southwest Ohio.”

“We are flyover country no more,” said Bob Coy, CincyTech president and CEO, at the firm’s annual Startup Showcase event in December 2014.


Starting Up the Start-Up Accelerator

As CincyTech was developing its investment model, "we spent about a year talking to a lot of people in the community," said Coy in a 2013 interview with LEAD Magazine. “One of the lessons we learned ... was high-potential companies found it difficult to raise much more than $750,000 in a seed round.

“And if that wasn’t sufficient to give them enough capital to demonstrate their value proposition, then they either petered out and went out of business or maybe they left the region. The inability of the region to aggregate much more capital than that around a start-up company probably deterred a lot of people who are with established companies now with good ideas from taking the risk of leaving that company because they weren’t confident that they were going to be able to raise enough money to really prove out their business model.

“So what we set out to do was put together investor syndicates at the seed stage that could invest up to $2 million or more in one company, if it’s progressing and meeting its milestones. That has really served us well in so many ways.”

In August 2013, CincyTech closed its third investment fund. At $11 million, CincyTech Fund III is the organization’s largest to date, combining a $5 million Ohio Third Frontier investment with $5.9 million raised by CincyTech from eight local institutions and 53 individual investors. The individual investor count is notable because the previous fund, CincyTech Fund II, which closed in 2011, included just nine individual investors. The firm's fourth fund is slated to get off the ground in 2015. 

Ohio Third Frontier is a technology-based economic development initiative that is changing the trajectory of Ohio's economy. The renowned $2.1 billion initiative provides funding to Ohio tech companies, universities, nonprofit research institutions and other organizations to create new tech-based products, companies, industries and jobs. CincyTech is one of six Enterpreneurial Signature Programs (ESPs) within the state initiative, working to strengthen the regional environment for new growth industries by enhancing the climate for technology startups. 

Last year, Ohio Third Frontier awarded $9.1 million to the Southwest Ohio ESP for these purposes. The award will fund the  program through the end of 2016. The ESP award amount is administered by CincyTech, but provides funding for many organizations in the region’s startup ecosystem, including The Brandery, Centrifuse, The HCDC Business Center and the University of Cincinnati Technology Commercialization Accelerator – names that are quickly becoming as recognizable in the Cincinnati business scene as Proctor & Gamble, Western & Southern, Kroger and GE. 


Cultivating the Halo Effect 

Mike Venerable has sat at each seat around the entrepreneurial table. He co-founded a data warehousing company, was a consultant for a technology firm and is now managing director of Digital/Software/HealthTech at CincyTech. He points to a key moment in the timeline.

“I would say the turning point might have been when Assurex ran out of money and came to us,” Venerable says. Assurex is a Mason company  specializing in pharmacogenetics that help physicians determine the right drug and dosage for patients. “We were really challenged to go out and raise a million dollars. I knew it was here, it took a little work and we were fortunate to have a couple of lead individuals who put groups together.

“That was really the first time that we found something that had a ton of potential and was stuck. And stuck for that reason: they had gotten all they could get from the existing syndicate and those guys couldn’t go on by themselves. So we came in and ended up raising more than we thought we could.”

That new capital helped keep Assurex in business. In December 2014, Assurex secured $30 million in financing. 

The process of raising the money for Assurex opened new doors for CincyTech as well. It was a classic win-win situation. The success of Assurex led to an investment in the company by Sequoia Capital, which is like LeBron James saying he thinks you’ve got game. It raises your visibility, creating what Coy calls a “halo effect.”

“The first time we saw that was when Sequoia (a Silicon Valley venture capital fund) invested in Assurex. Sequoia is one of the most famous funds in the world,” Coy says. “I think it was the first time they had ever made an investment in the state of Ohio.

“That created the halo effect. There were more people who could be potential investors, and as these stories keep happening, as more venture funds keep coming in, more people are curious about what’s going on, want to talk and want to get involved.”

One of those people who became involved was Steve Turnbull, the managing partner of Cincy Platinum Equity & Value Creation. The Madeira resident spent most of the 1990s working with national firms because he wasn’t impressed with venture capital opportunities in the area. That changed after he sold a company he co-founded in 1994 to a publicly traded company in 2008.

“I was brought in (to CincyTech) by Doug Groh (an entrepreneur-in-residence at the company) as an investor,” Turnbull says. “He brought me in to help evaluate one company called Ilesfay (which offers cloud-based data replication services) due to some previous experience I had.

“I liked it so much that I ended up putting money in myself. And since then, I’ve been evaluating a lot of their companies and have been very impressed with the CincyTech business model.”


Guidance From Idea to Success

The investors aren’t the only ones who benefit from the CincyTech model. Most entrepreneurs are people who have a good idea, but might not know how to get it from their head to market. In addition to financial support, CincyTech offers guidance, coaching and connections, all of which are crucial if a company is to succeed.

Bob Gilbreath, the co-founder of Ahalogy, saw the CincyTech support system up close. He worked at CincyTech as an entrepreneur-in-residence before starting the software service that helps big brands and small businesses use social marketing.

“What I love about CincyTech – both from working there and now having it as my investor – is that the people are incredibly helpful in helping founding teams get from the ‘idea stage’ to ‘early success stages,’ ” Gilbreath says. “No other group in the city is as hands-on helpful at the earliest stages."

While Gilbreath hatched his company from the CincyTech office, Rod Robinson, the founder of ConnXus, knew Venerable because their kids played soccer together in Mason. Robinson, whose background is in corporate supply chain, was convinced that there was an opportunity for a web-based platform that connects minority- and women-owned businesses with corporations that want to expand their supplier base and meet diversity objectives. He started building the beta model for ConnXus in 2010.

“I met Mike for breakfast one day and mentioned what I was doing,” Robinson says. “He said he loved the idea, that it was probably a good time to do it and why didn’t I think about applying for a CincyTech Imagining Grant?

“So I applied for it and got it. That enabled me to build out the product, at least the first version of it. Mike and CincyTech had clearly expressed interest in putting more money, a couple hundred grand, into the company. Having never gone down the venture capital path, I decided I still had some things to figure about the product. People always tell you not to take venture money, outside money, until you really have all of your pivots (if ideas don’t work, turn away from them) squared away.”

Robinson could have been reading from the CincyTech fact sheet titled “Other People’s Money,” which explains in great detail the responsibility an entrepreneur accepts when he or she takes outside money.

But Venerable, who is now on the ConnXus board of directors, had faith in his friend’s vision. When Robinson decided the company was getting some traction and began bringing in some revenue, he was ready to go back to CincyTech.

“It was probably much smoother than I expected,” Robinson says of the funding process. “We already had a relationship. A piece of advice I give to entrepreneurs is you need to build relationships with people, whether it be your banker or a venture capitalist, before you need money, and that’s clearly what the case was here. 

“It is so valuable to have people around you like Mike Venerable ... who have seen the dark days on their own, because they almost know when they need to reach out to you. Mike can almost sense when I need a pep talk.”

Assurex, Ahalogy and ConnXus are just three examples of what a combination of capital, confidence and connections can create. And it’s not only the principals and employees of those and the other more-than 50 companies still in business with the help of CincyTech. The companies have created more than 600 jobs, with an average salary over $60,000.

“What we really do is create wealth,” says Venerable. “Wealth creates cultural amenities, creates new companies, creates jobs; it has all kinds of secondary benefits.”

One of those is national recognition. CincyTech portfolio companies have made presentations at the National Venture Capital Association convention in San Francisco and the South by Southwest Interactive Festival in Austin, Texas. Coy says the word is getting out about the entrepreneurial ecosystem, which includes accelerators such as the nationally recognized Brandery and the Cintrifuse fund of funds that is growing in Greater Cincinnati.

The spotlight has amply returned, and success has followed. Detroit Venture Partners led a $1.5 million round of funding for ChoreMonster, an Over-the- Rhine startup that’s developed a parenting app. Columbus-based Drive Capital led a $2.5 million financing round for Roadtrippers, another OTR startup, that has created a web-based travel planner. CincyTech was an early investor in both startups. 

Moreover, with CincyTech's help, Boston-based Progress Ventures led a $3.5 million Series A round of financing for Lisnr, whose technology uses inaudible sound beacons to push content to a smartphone. CincyTech also led a Series A financing campaign, which secured $4.6 million, for Airway Therapeutics, a biotechnology company working to prevent debilitating lung condition in premature infants. 

And the investment firm is getting its fair share of recognition, too. CincyTech won the State Science and Technology Institute (SSTI) 2014 Excellence Award for Technology Based Economic Development. SSTI is a national nonprofit organization that leads, supports and strengthens efforts to improve state and regional economies through science, technology and innovation. CincyTech won in the Increasing Access to Capital category. 

Have other areas inquired about copying the CincyTech model?

“That happens,” Coy says, “but it’s like going over to (Reds owner) Bob Castellini and asking him, ‘How do you play baseball?’ And he says, ‘Well, you get a catcher and a first baseman and ...’

“To describe what we do is almost as simple as that in terms of its components, but it’s getting the right players and putting (them) on the field. It’s easy to explain but hard to replicate because it’s hard to get the right players in the right positions.”

Especially for a company that is moving as fast as CincyTech. 



CincyTech is located at 30 West Third Street, Cincinnati, OH 45202. You can reach them at 513.263.2720 or visit their website at