Cincinnati’s Future as a Tech Contender
Cincinnati has enjoyed a significant economic upswing after the strain of the Great Recession. Compared to other regions, however, the Midwest has seen significantly fewer initial public offerings (IPOs) for local businesses. And, among larger cities in the region, Cincinnati has lagged behind cities like Nashville and Pittsburgh.
Despite all of this, David Willbrand, a partner with Thompson Hine, feels optimistic that companies have nothing to fear in Cincinnati, and that an upswing in IPOs is on the horizon. Willbrand, who leads the law firm’s practice that specializes in early stage and emerging companies, says the rapid increase and growth of tech companies in Cincinnati could be the key to changing the statistics, not only for IPOs, but also for mergers and acquisitions (M&A) and the venture capital financings which fund companies from startup to IPO or M&A. His job in the complicated process is to represent a client company from the initial idea through the process to the exit.
Until recently, it’s been tough to find technology companies in Cincinnati with this kind of potential, but with the growth of the technology industry in regions like Mason and Over-the-Rhine, that could be changing. “What has historically happened with Midwestern technology companies, both in life sciences areas and in software, is that they die off or they have to relocate to the west coast and find money and support elsewhere,” says Willbrand. “But lately we’ve seen local companies like DotLoop, who sold to Zillow, make it through the process, and they’re not a one-off. The Cincinnati pipeline is loaded.”
Willbrand says one of the most important things that has impacted the region’s technology industry and, in turn the economic climate in Greater Cincinnati as a whole, is the intentional identification of a thriving technology sector as crucial for growth. “It’s something that’s been identified as a key priority for this region, which is important,” he says. “A vibrant technology community adds appeal for a city, and we’re seeing OTR and Mason developing critical mass in that direction. Once the flywheel starts spinning, it creates its own momentum, which is starting to happen here.”
OTR’s revitalization has been a major component in attracting entrepreneurs, and the youthful, urban atmosphere being generated in that area that has helped retain these companies. The neighborhood has earned a strong reputation for being an up-and-coming spot in Cincinnati – which is something that resonates with technology companies looking to expand and grow.
Mason, on the other hand, has a much different feel, but is managing to thrive as successfully as OTR. In particular, its proximity to Cincinnati Children’s Hospital Medical Center and other medical research facilities and as the site of the much-touted startup Assurex Health, Willbrand says Mason is perfect for life-science technology companies looking to attach themselves to a more bio-tech based community.
“Both big companies and startup technology companies are good, because you want a diverse economy,” says Willbrand. “You want massive businesses to anchor a community, but you also want smaller, high growth businesses as well. It makes for a more stable economy and more interesting communities. OTR attracts young software and tech entrepreneurs because they love its urban environment and historical aspects. Mason is good for life science companies and for more developed software and tech companies, because it provides an ease of living for entrepreneurs with families.”
He adds that another factor in the growth of technology companies is the number of “accelerators” in Greater Cincinnati. These enterprises provide financial support and mentorship for companies looking to navigate the precarious track to becoming publicly traded or sold. Often times, if an accelerator backs a company, the time it takes the company to reach IPO or M&A can be shortened.
In the region, accelerators such as Ocean and UpTech are choosing areas like Oakley, OTR, Covington and Newport for their own locations, which directly affect that region’s desirability for technology companies looking for a location.
“It’s not a coincidence that the areas that are seeing the most growth in the tech sector are also the regions where an accelerator exists as well,” says Willbrand. Frequently, these areas are friendly to small companies starting out with minimal capital: they’re more up-and-coming neighborhoods and can supply less expensive office space and an urban edge that appeals to many creative types and entrepreneurs.
Willbrand says that the growth of local funding resources is particularly important as well; among them are Allos Ventures, Connetic Ventures and CincyTech. “In a perfect system, the most-promising accelerator graduates are funded by what we call seed investors, and then those companies are later financed by venture capital firms, which then leads to IPO or M&A,” he says. “CincyTech in particular has been instrumental in this regard. Its reboot ten years ago as a dedicated seed investor has been nothing short of game-changing for the region.”
But it’s is important to keep in mind that the city isn’t alone in playing catch up to the West Coast in developing IPOs. “The IPO drought isn’t a problem that’s isolated to Cincinnati, or even Ohio and the Midwest,” he says. “It’s an issue of time. People often want to compare tech sectors to what’s happening in Silicon Valley. But Silicon Valley started in the 40s and 50s, and they have a significant head start on everywhere and everyone else.”
Another factor is a bit more obvious: the recession hurt enterprise quite a bit. Although the economy is slowly working its way back, there were casualties. “Closing the gap was always going to be a generational task,” says Willbrand. “The Great Recession was definitely a setback. But the good news is that we have largely recovered.”
The infrastructure that keeps businesses alive and moving along the path to IPO or M&A is a fragile one at times, and it takes many elements to keep it functioning and strong. There are multiple layers in place, from cities and states making plans and working towards growth to the accelerators that help businesses get started, to the accessible funding resources.
“We have a great foundation in place, which gives me a lot of hope,” says Willbrand. “We’re building a national reputation, and it’s not just about giving the current population opportunities that the growth provides, but attracting new talent and growing the population. We don’t want to stagnate – we always want to be attracting high-energy talent. That’s starting to happen”
Willbrand says his optimism for the region’s future is strong – he believes it will certainly be a city to watch for strong growth in the coming decades. “I wouldn’t want to be doing this anywhere else,” he says. “I think future generations will look back at this era here and say ‘Wow, that’s when it all came together.’ ”
Thompson Hine is located at 312 Walnut Street, Cincinnati, OH 45202. You can reach them at 513.352.6700 or visit their website at www.thompsonhine.com