In 2010, 62 Northeast Ohio companies collectively raised $221 million from venture capitalists and angel investors, an increase of 121 percent over the amount raised by companies in 2009. The growth rate of dollars invested in regional companies is higher than recently released data from Thomson Reuters showing a 19 percent increase in dollars invested nationally. Like the nation, the region saw a significant increase in early-stage and growth investments. Overall deal flow increased three (3) percent in Northeast Ohio.
Healthcare is clearly a regional strength and Greater Cleveland's healthcare sector accounted for the largest share of the region's investment dollars. In Northeast Ohio, 60 percent of the capital raised was in healthcare, while nationally it accounted for 29 percent of investment dollars. Thirty-two (32) globally-competitive Northeast Ohio companies in the biopharmaceutical, healthcare services, medical devices and equipment, and medical information systems segments collectively attracted $132 million in 2010, compared to 24 companies that raised $66 million in 2009.
Capital investments in Northeast Ohio's clean technology sector increased slightly from $20 million in 2009 to $21 million in 2010. Capital raised by information technology companies significantly increased from $5 million in 2009 to $67 million in 2010, largely as a result of a single growth-stage equity investment in Financial Transaction Services, a full-service provider of electronic transaction processing services. According to the National Venture Capital Association, IT investing increased 33 percent nationally.
Investment from outside Northeast Ohio also increased in 2010. High growth firms in the region attracted capital from 40 investors from outside the region, including 24 investors headquartered outside of Ohio and five outside of the United States. The 26 Northeast Ohio companies that raised capital from out-of-region investors include Radisphere, which raised $27.5 million from investors based in Texas and Connecticut, and ViewRay Inc., which raised $20 million from five investors headquartered in Germany, New York, Massachusetts, and California.
"Northeast Ohio's deal flow includes highly competitive investment opportunities in companies with transformative technologies and quality management teams," said Joe Cunningham, MD, Managing Director of Sante Ventures, a Texas-based venture capital firm that led a $2.55 million dollar deal in Explorys, Inc. "I believe Northeast Ohio's competitive advantage is the quality of its entrepreneurs implementing plans to move innovations from product development to commercialization."
Of all exit activity occurring in the region, Northeast Ohio venture-backed exits were up from one (1) in 2009 to nine (9) in 2010, including the acquisition of SageQuest, a GPS tracking software provider, by FleetMatics of Dublin, Ireland, and the acquisition of Turning Technologies, a producer of audience-response systems, by Brockway Moran & Partners of Boca Raton, Florida.
"Northeast Ohio's strength over the last several years has been in seed and early-stage activity," says Kevin McGinty, Chair of the Venture Capital Task Force and Managing Director of Peppertree Capital Management. "As our region's high potential, innovative companies have grown, they have attracted significantly more later-stage capital, largely from out-of-region investors, that will enable them to continue on their high growth trajectories and bring their innovations to the market."