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Cleveland+ Region Attracts $318 Million in New Venture Investment in 2007

Tuesday, January 22, 2008 General News J E 4
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CLEVELAND, Jan. 21 Last year the NorTech Venture CapitalAdvisory Task Force reported in its inaugural 2006 Venture Capital Report thatthe region would need to generate and attract over $1.2 billion in venturecapital by 2011 in order to meet the capital needs of companies located inNortheast Ohio. According to the findings from the recently completed 2007Venture Capital Report of the Cleveland+ region, to be released in print midFebruary, Northeast Ohio has made significant progress toward reaching thisgoal. With $318 million in new investments, compared to $157 million in 2006,the region saw a doubling in the amount of capital invested into its growingcompanies as well as a 40 percent increase in the total number of investmentsmade during 2007.

(Logo: http://www.newscom.com/cgi-bin/prnh/20060209/CLJUMPSTARTLOGO )

The most noteworthy industry sector detailed in the Report was bioscience,comprised of biopharmaceuticals, medical devices and healthcare services andIT, which accounted for approximately 75 percent of the capital raised. Inparticular, biopharmaceuticals accounted for just over 50 percent of allcapital investment for the region. Deal size for this sector was exceptionallylarge, with an average deal of $15.4 million. Significant wins for companiessuch as Athersys ($70 million), Franklin & Seidelman ($25 million), as well asRicerca, contributed to much of the total. Other average industry-sector dealsizes ranged from $1 to $7 million.

"2007 was a record year for the region's bioscience start-ups. Thecompanies are achieving major milestones and thus continue to draw significantinvestor attention. In addition, the number of seed and early-stage financingsdemonstrates that the pipeline of developing biosciences companies remainsrobust," commented Baiju Shah, President of BioEnterprise.

A rise in the number of investments was also noted, with an increase from48 in 2006 to 71 in 2007. While most industry sectors saw growth in the numberof deals, the fastest growing sector overall for 2007 was advanced materials.The Report also shows that Information Technology (IT) remains a strongsector. When all IT-related companies, both bio and non-bio-related, areviewed in combination they comprise 39 percent of all investment dollars since2004.

The Report also examines the type of companies that received funding bystage of investment and business maturity in the following categories: seed,early and growth. The Report reveals that dollars invested in early andgrowth-stage companies have more than doubled since 2006 while the number ofinvestments made in these companies has nearly doubled. At the same time theseed-stage has remained a robust area for investment as a result of thesupport of Ohio's Third Frontier Program and the activities of venturedevelopment firms, angels and risk-friendly investors.

"Seed investments are critical to the formation and growth of newcompanies in an innovation economy," said Ray Leach, President and CEO ofJumpStart Inc. "The increased rate of investment at the seed level isencouraging news. We need to continue to encourage the support of currentactivities that focus on this segment as well as the creation of new andexpanded angel, seed and early-stage funds to ensure that we maintain capitalin NEO that has the appropriate appetite for risk at the earliest stages ofcompany formation and development."

In 2007 there were a number of successful exits in the Northeast Ohio. Twoof the most significant wins were the exits of MemberHealth ($630 million) andHyland Software. The Hyland Software exit is of particular interest as it isamong the largest IT company deals that Northeast Ohio has seen in recentyears. Private equity firm Thoma Cressey Bravo agreed to acquire 58% of Hylandin a deal valued at $266 million. Hyland Software is a strong example of aNortheast Ohio-founded company that has reache
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