Ohio surpassed national average for VC investment in 2010

Ohio outpaced the national average in venture capital investment in 2010, up 81 percent over last year, according to a recent report from the Center for Entrepreneurship at The Ohio State University’s Fisher College of Business.

Nationally, there was a 20 percent increase over 2009, with $23.3 billion in venture capital investment. In Ohio, $567.4 million was invested in early-stage businesses, according to the 2010 Ohio Venture Capital Report.

Ohio accounted for 2.5 percent of venture capital investment nationwide.

The bioscience and information technology sectors continued to represent the largest shares of venture capital investment in the Buckeye State: $216.8 million (or 38.2 percent) and $164.2 million (or 28.9 percent), respectively. The advanced specialty materials and chemicals  sector replaced the energy sector in the third place spot with $73.4 million (or 12.9 percent).

In 2010, venture capital investment was up by more than 80 percent with more than $567 million from private and state sources invested in 341 Ohio companies. Of that capital, $184 million (or 32 percent) was invested in seed stage companies.

“Due to the strength of angel groups and the success of state programs, including the Ohio Capital Fund and the Ohio Technology Investment Tax Credit Program, Ohio saw more investment in seed-stage companies in comparison to most other states,” according to the report.

Total investment in later-stage deals jumped to $295.3 million in 2010 on the heels of a 46.2 percent drop one year earlier.

The amount of pre-seed and seed stage investment also increased in 2010− by 78.1 percent to $183.8 million.

As the number of Ohio pre-seed and seed-stage companies garnering venture capital continues to rise, the report’s authors contend that the demand for follow-on venture capital will rise as well.

“A simple follow-on funding model estimates that Ohio will need as much as $5 billion over the next decade to support the development of companies that are just now being founded,” the report says. “And while the $567 million invested in 2010 in Ohio companies across all stages seems to indicate that the Ohio venture community is on track to invest at this level, it is important to stay focused on the long-term availability and sustained flow of venture capital for new venture development.”

At the local level, funding for entrepreneurial activity reached new heights last year.

In Central Ohio, a record 117 young companies received $307.56 million in innovation capital to fuel their growth− a 72.6 percent increase in funding over 2oo9 and, when excluding the outlier Skybus, is the biggest increase in innovation capital on record. (Innovation capital includes funding that supports the formation, acceleration and growth of innovation-based private companies, such as venture capital, angel investments, loans, grants, and mergers and acquisition.)

Thanks to the region’s long-standing legacy in advanced information processing, information technology remains a stronghold. In fact, more than $16.21 million (or 14.3 percent) of innovation capital invested in the earliest stage companies (seed, early and growth) went to IT ventures.