CC006: tackling the Series A/B capital gap in Ohio // a coffee chat with Bill Baumel and Jill Raderstorf (Ohio Innovation Fund)

Bill Baumel : 00:00

In Silicon Valley, seed investing is 20 percent, later stage investing is 20 percentm, and 60 percent is series a, series b venture capital, you know, I think what we’re seeing in Ohio was 60 percent was a seed stage investing, 20 percent was was later stage investing, and only 20 percent was venture investing. So there’s a huge gap there.

Jay Clouse: 00:22

Startup investment landscape is changing and world class companies are being built outside of Silicon Valley. We find them, talk with them and discuss the upside of investing in them. Welcome to upside.

Eric Hornung : 00:49

Hello. Hello. Hello. Welcome to the upside podcasts first podcast, finding upside outside of Silicon Valley. I’m Eric Hornung and today I’m not accompanied by any co-host. That’s right. We’ve got a solo intro coming at ‘ya. Jay and I had some scheduling issues this month and I’ve been traveling for work. He decided to go on a 10 day silent retreat with no access to the Internet. So this episode is going to sound a little different than usual. You’re going to hear me in the intro and me and the outro, but only Jay in the interview. And this interview is going to be an interesting one. We were invited to a live event in Columbus, sponsored by the OSU College of nursing and run by Tim Raderstorf at the Columbus idea foundry. Here’s Tim to give a little insight into how nursing and innovation go hand in hand.

Tim Raderstorf : 01:38

For those of you who are new to the starting line. This is an initiative that comes and collaboration out of the College of nursing at Ohio State and the create Columbus Commission. So the question I get most when I talk in circles outside of nursing is, is why is this happening within the College of Nursing? Why? Why is this a nursing initiative? And it’s actually pretty simple. Nurses have been innovators, makers, tinkerers from the beginning of time, you know, instead of really calling our work innovations, we’ve built it under the title of workarounds and got where it lived in fear of our direct reports. Our directors reprimanding us for using tongue depressors and tape the wrong way or maybe the right way, but in a different way. So, uh, when we had the opportunity about two years ago to start a makerspace at the College of Nursing, uh, we knew that we couldn’t do that alone within the vacuum at Ohio state. We wanted to do something much bigger and create pathways for convergence across campus. So we develop a mobile makerspace called the innovation studio. So the innovation studio is actually what powers the starting line and that is a maker space that moves. It’s a 16 by 16 cubicle that moves to a different location across campus every seven weeks. And then we do something that no other makerspace in the world does. We have a pitch day. It’s not a pitch competition. It’s a pitch day. And when the right, it’s different from every other pitch day is that we fund to everyone. If you show up at our innovation studio as an OSU student, faculty or staff with an idea that can improve the health and wellbeing of the world. We’re going to write you a check that day and then you’re going to go out and do something amazing with that. And seven weeks later, we’re going to have another pitch day at a new location and you’re going to come back and showcase how you met that milestone. And if you’re doing great things with that, then we’re going to write you another check. So we keep people engaged in the system, working towards getting to whatever a meaningful outcome. Maybe it’s a makerspace first. Uh, so a lot of these outcomes may not be commercializable, but there’s also a lot of opportunities that we built into this that ended up having commercial commercial success. So that’s where the college of nursing and innovation comes together. Where we connected with the create Columbus Commission was two years ago, they had a, uh, a call out for a grant that connected a young professionals in the city of Columbus to entrepreneurship. And what we wanted to do was take our makerspace to businesses that have been founded by young professionals and then showcase that founder’s journey to and through entrepreneurship and connect those audience members to the mentorship and resources they needed to be successful. Unfortunately weren’t allowed to bring our money or our startup funds, uh, to those events. But what we were able to bring was an incredibly powerful network of mentors and provide entrepreneurs with one on one time with mentors who could help them achieve something to advance their business for the day.

Eric Hornung : 04:12

Thank you to Tim and the create Columbus Commission for having us to the audience for their participation and to our guests for joining. So who are those guests? Well, today we’re talking with Bill Baumel and Jill Raderstorf of the Ohio Innovation Fund, a venture capital fund that invests in scaling Ohio technologies. Prior to OIF, Bill was a partner with our RWI Ventures, a venture capital firm in Silicon Valley, and has over 20 years of experience investing in SAAS, big data cybersecurity in Med tech. He’s had numerous successful exits and one of his investments is currently valued. At one point 2 billion, Jill began her career as an examiner with the FDC leading risk management examinations of financial institutions ranging from $100, million to 1 billion in asset size. She doesn’t shifted to JP Morgan as an underwriter, managing a $3,000,000,000 consumer loan portfolio. She’s an alumni of Creighton and Ohio state. So let’s jump into the interview and I will see you guys after.

Jay Clouse: 05:18

So we’ve got a couple of fantastic guests here with us from the Ohio Innovation Fund and I’d love to start with you Bill talking about you’re an Ohio state alum and so it makes some sense that you found your way back here at some point, but with the success that you had in silicon valley, what brought you back to Ohio?

Bill Baumel : 05:35

Sure, thanks. Well actually grew up in Ohio. I grew up in Cincinnati, went to Ohio state, then I went to University of Michigan for graduate school. Spent about five years in Minneapolis at a venture fund where we invested primarily on the east coast, Boston, New York, Atlanta, a little bit in the midwest as well, but primarily Chicago in Minneapolis. And I spent the last, as you mentioned, 20 years out in Silicon Valley, investing in Med tech, technology, saas, cybersecurity, data science, you know, startups and about I’d say in about 2006, 2007. My family and I always came back for fourth of July weekend and, and for Christmas and such because we have a lot of family in the area and um, I started looking at what some of these seed funds we’re doing angel funds we’re doing, you’re the Heartache Angel Fund, Rev one, Cincy tech, you know, jumpstart in all those. And yet when I was looking at these companies back in, I’d say 2005, 2006, 2007. I was kind of disappointed. One of the hottest deals that was out there, it was called, it was called three x or something like that, which was a disaster recovery as a service company that was just starting to develop the product y. I knew there’s already 15 companies out in Silicon Valley that had 20 to $50,000,000 in revenue in that same market. So I kind of felt Ohio was behind the times and then fast forward to 2015 when Ohio State Ohio University are two major backers contacted me to come in and create the Ohio Innovation Fund. When I was looking around at the seed stage, companies in level entrepreneurship, things were much different, you know, from like a decade or more ago how the short north has developed German village has developed the amount of entrepreneurship, the amount of innovation and I really felt it was a good time to come back to Ohio and bring Silicon Valley type venture principles here to Ohio for Ohio’s best companies as far as allowing them to achieve their potential so the company would not just grow that company. It could grow to 20 and 50 million, wouldn’t just grow to one or 2 million and sell for five or 10 million. We could help them with capital and more importantly expertise achieve their potential and sell for 100 million, 200 million, $300,000,000 or more. And so we saw that opportunity and so far we haven’t been disappointed. We have a portfolio of 13 companies, about half MedTech, HalfTech, yeah. We have a couple of companies that are pre FDA approval, but for the most part overall our companies are approaching 100 percent growth and a majority of companies are at that type of growth level. And as we’ll talk about later, we are now finding a lot of strategic partners both nationally, internationally coming in, investing our companies here, uh, which is a great sign that the people like Facebook and, and Sanofi and, and Microsoft and those types of companies are finding value in what we’re doing here and say, Hey, we want to partner with you. We want invest in our companies. We want to lead their investment rounds. So it’s been a pleasant trip back so far.

Jay Clouse: 08:18

And you said that was about 2015 that you got this whole thing started?

Bill Baumel : 08:22

We will 2015 that they contacted me and the original concept was put forth and then we probably talked for about three, six months because I want to make sure that this venture fund was independent, that we didn’t have ties to, you know, we didn’t have ties other than the mandate to take the best 20 companies. 25 companies, Ohio put capital in them, work on their board of directors and help mentor and work with the team to allow those companies achieved their success. So it was about a three to six month process to get you know, on that. And then we kicked the fund off in the first part of 2016

Jay Clouse: 08:55

And something that you mentioned right before that question that I think is worth digging into a little bit. You said Ohio State and Ohio University contacted you, so those two universities were what kickstarter? The Ohio Innovation Fund, is that correct?

Bill Baumel : 09:07

That’s correct, yeah, I think, I think uh, there were some studies and, and other research done here by the uh, by the government as well as the universities we’re seeing, okay, we have a relatively robust or reasonable angel and seed level activity and investment. But then the companies, you know, the traditional venture capital in Silicon Valley seed investing as 20 percent a later stage investing is 20 percent and 60 percent is series a, series b venture capital. You know, I think what we’re seeing in Ohio was 60 percent was a seed stage. Investing your 20% was was later stage investing and only 20 percent was venture investing, so there’s a huge gap there in terms of not only capital but also expertise because in Ohio very different than silicon valley and Silicon Valley. You have repeat entrepreneurs. I’d had one entrepreneur back and multiple companies. He sold two companies for over $600,000,000 in a three year span. We don’t have it in Ohio. I mean we do have Mike Hovan down at a down enable injections who had taken a truck public. I mean there are a few repeat entrepreneurs, but most entrepreneurs are, are new. So I think both the state and then in particular Ohio state how university said, Hey, for you know, we, we see a lot of innovation going on here but not reaching its potential and our best and brightest students, whether they’re from instate or from out of state coming here to school, that they’re coming here and they’re leaving and they’re starting their companies elsewhere. So they really wanted to provide, you know, to provide opportunity for their students and alumni to work in high growth, innovative, entrepreneurial, you know, companies and that has been also a cultural sea change. And I look and see at Columbus, Ohio, if I look at let’s say, you know, my generation or, or, or, or, or beyond, you know, entrepreneurship is kind of important, but a lot of people happy at, at, at, at fortune 500 type companies. If I look at the millennial generation, I mean they’re, they want impact, innovation, those sorts of things. And there just hasn’t been an opportunity here. There’s really a lot of people want to get involved in entrepreneurship and innovation and we’re trying to provide that outlet with your Silicon Valley light companies here in Ohio.

Jay Clouse: 11:10

Jill, I’m going to get to, to how you join Bill here in a second. Um, what, what is it that Ohio state was, was it a commercialization effort that Ohio state and Ohio University wanted to kickstart? Was it something in coordination with the state for jobs creation? I don’t think I’ve been familiar with universities wanting to get a venture fund started before. Maybe I’m just not privy to it

Bill Baumel : 11:32

Both, uh, university of commercialization efforts. So they have those there. I mean to the extent that either Ohio state, Ohio University have a top tier, top 10 percent companies coming through that we do invest there, but this is specifically mandated to take the best companies don’t have because if you look at it 10, 20 years from now, if we’re still selling insurance, if we still have restaurants, insurance companies, you know, consumer package goods and, and financial services and that’s all we have and we’re not leaders in Med tech and data science and artificial intelligence, machine learning and cyber security and all the emerging industries. That’s not, I mean those are, that’s where the growth is at. And that’s where for the current generation and the next generation, it’s really at I think Ohio state and high university and Kent State and now others are recognizing that for their students. I mean, I was talking to the president of Kenyon College and he told me, you know, 10 years ago they had 10 percent of their students were in state, 90 percent out of state and that’s basically when it’s all said and done, probably 95 percent one out of state. Now they still have your 80, 90 percent from out of state, actually international as well, 10, 20 percent in state, but they now have 40 to 50 percent of the students wanting to stay here in Ohio. They love Columbus, Ohio, you know, they love what’s been being done here. And so I think universities are recognizing that, but we do also have success stories at our universities. You Take Ohio university down in Athens. I’m over the last 10, 15 years, there have been, there’s been one company that grew to 100 employees down there is solid liquid l, a Dave [inaudible] who’s on the, uh, trustees down. There was a CEO that we now have two companies down there that are doing tens of millions of dollars in revenue and approaching Oregon eclipse. 100 employees over the next three to six months. Um, as they’re building facilities and, and, and adding and those sorts of things. And these are your leading edge companies with customers such as Amgen, Jeanette Tech, pfizer. I’m actually one of the companies actually as Ohio state as a customer as well. So we are finding, we just actually spun out of another company out of Ohio state recently. Jonathan from Thompson Hine helped us with that. It was a, it’s data anchor and that’s a cybersecurity company. Emory Coxal is the, uh, a CEO. He’s a professor in the engineering department, MIT, Phd, NSF funded and we’ve been working with him for about six to nine months in, in incubating the idea, you know, and bring it out. So that is a direct investment. We’re actually partnering with TCO on that. We brought in some out of town money as well, some other venture funds to cede that to, to north of a million dollars investment to get that cybersecurity company off the ground. So, but it is, it is the best of the best in Ohio because if we have great growing companies in these emerging industries, that’s good for Ohio state. It’s students, it’s alumni, same with OU and Kent State.

Jill Raderstorf: 14:13

Just to add to that, really OSU and OU are really champions in this space of understanding. Again, like they’ll mention that the seed stage level had really been pretty well developed in Ohio, you know, at at 2015, but there needed to be that next stage and they really saw the opportunity to capitalize on that by investing their venture dollars here in the state rather than kicking it to the coast because they were already investing in venture. Why not do it here in their own communities so that we can create this cycle here in Columbus or in Ohio in general.

Jay Clouse: 14:41

That’s a missing link that is mostly new to me. I knew Ohio State had invested in drives first one when they came here. I didn’t know how prevalent that was at a university level that they had venture funding that they were putting into these funds already.

Bill Baumel : 14:55

Typically, I mean typically a university, and again there’s different investors at Ohio University is the foundation at different places at the university itself or our foundation, but if you look at the average, you know, foundation, they’re going to put 10 percent alternative assets, you know, and, and right now that’s going to a buyout fund in London, a Softbank in Japan, um, Kleiner Perkins on the West Coast, which is great. But what is that doing for Ohio? What is it doing for the students? What is it doing for the faculty that are working on cutting edge research and MedTech Pharma? You know, cybersecurity is such, not, do much. So I mean we do as a fund, I have to have competitive returns. So our mandate, we are not economic development so we have to have competitive venture returns. We have to have the same similar type returns to other venture alternatives. But the other benefit like we talked about is we’re doing it here in Ohio. So we’re creating the industries of the future here in Ohio. We’re mentoring the first or August, second generation or first generation, actually probably of entrepreneurs here in Ohio for high growth, successful companies. And the other thing is we’ll work with the students this year. Joe Runs our internship program and she could talk about that, but we’ll probably have 16 students either as summer interns or shadows or some places have flash turns into our you endo high innovation fund and, and one of our companies we’ll be talking later at a wiretap I think had nine interns, summer interns, uh, mostly from Ohio state this summer. So we’re also working with the students to mentor them, get them acquainted with and involved in the entrepreneurial and innovation ecosystem here in Ohio.

Jay Clouse: 16:28

So Jill, how did you get involved in this effort as it got started in 2016?

Jill Raderstorf: 16:33

Yes. So, um, in 2016 I was actually finishing up my mba at Ohio state as a working professional and I had decided to go through the MBA program because I was interested in doing something different. I have a very corporate background, um, as you all heard and I was interested in entrepreneurship. I wanted to try something different and I’ve always been really fascinated by value creation, both on kind of the quantitative side of how specifically in venture, how companies are valued, how people make investment decisions, those types of things, but then also qualitatively, how does a venture capitalist add value to a company outside of their dollars? And that’s what really fascinated me. And I had the opportunity to work with bill, um, during the summer as I call myself intern number one, even though I don’t think I was, I still take that title and um, I got to join him and learn about what he was doing. And very quickly I think we both agreed that it was a good fit. And so I stayed on and it’s been incredible ever since. So I’ve been with oif for about 18 months and, um, I’ve been able to get my hands into all kinds of things, including work with our portfolio companies, helping them with market strategy, series b raises and all kinds of things like that. We also do, I do a lot of the due diligence and lead that. And like bill mentioned, I started an internship program so we’ve decided to develop that and really expand the offering to students who are interested in entrepreneurship and venture capital. So that’s what we’re working on.

Jay Clouse: 18:00

I imagine when you have funds to deploy, word travels pretty quickly, but I’m curious how you guys got kick started for letting people know that you were open for business and that you’re looking to talk to innovative companies here in Ohio

Bill Baumel : 18:13

It was a lot of travel so we spent and we still do a lot of travel this month or let’s say the last 30 to 45 days have probably been to Cleveland multiple times to Akron once or twice to Toledo once, to Cincinnati two or three times yet we’re traveling the state. So it’s really getting out there and meeting with all the seed stage funds, the angel stage funds, the other venture investors. Are you getting involved with different organizations and really also getting to meet some of the key business, your entrepreneurial leaders here in Ohio. So it’s really a lot of networking for the first year and it took about six months to a year to get that network in place. And, and now you know, as we continue to now we’re up to. I think we have the most. We probably are the largest as far as you know, even drive here. I don’t think they have 13 companies in Ohio. I mean we probably are the venture firm with a most series a, series b traditional venture capital companies here in Ohio and that’s strictly what we’re focused.

Jay Clouse: 19:08

Can you list off some of your investments at this point? I’m sure some of the folks in the audience here familiar with at least some of them.

Bill Baumel : 19:14

Yeah. I’ll try and talk about some of the more interesting one is kind of just a on the medical side as well. So down in Cincinnati we have a few med tech companies. One is called enable injections and so this is for people that need high volume drug delivery and instead of going in on Saturday after a full week of work, and I’m getting an ivy for a few hours, then going home and blowing your half your Saturday. It’s a device about that big. The vial automatically puts the drug, the drug in there, you put it right here, you push a button. The needle is from Cincinnati Children’s hospital. Very small needle. It has a little almost like angioplasty type balloon that titrates the drug. So it puts them at a pressure that gets it out. It gets into your system but doesn’t, you know, do it too quickly to cause pain and then the button pops off and you’re done. And that’s the one that Sanofi has, has partnered with. And I think, uh, you know, we anticipate, you know, quite a few of the top 10 Pharma companies in the world being partners with us in that company. We have another one called geneticists down there. Actually the founder was from Ohio state and that is re reading electromagnetic images from the heart in 90 seconds to give it very cost effectively as well to give you a, if I come in for chest pain, um, rather than doing all the different tests and nuclear stress tests, all that you’d this test, they’ve done some studies at Mayo and elsewhere where with very high accuracy that can tell you, okay, you have blockage of zero to 50 percent a year. Okay, go home. You have blocked a 50 to 70 percent, we better get you on some drugs. You have blocked us. Blockage is 70 percent or more. We better get you have the cath lab. So we’re not sending people up to the cath lab that should be going home because that’s not just a fun extra thing to do and we’re not actually sending people home. That should’ve gone to the cath lab. And, and that is another company. Our third company down there is called [inaudible]. And that is, there’s a lot of this, I’ll call it a, uh, it’s, it’s, it’s using sweat as a biomarker. And right now, most of the Times people think about that, think they have a, a patch that might go on your arm. I’m there almost as like a, almost like testing the Ph level and a pool in terms of it’s green or I’m sorry it’s purple or red based on know how hydrated you are. This is also actually almost a little mini lab on your arm. It’s actually just a little pod that goes on there. There’s a strap around it and it takes the sweat and it can determine sweat rate, changes in sweat rate, a sweat temperature and other biomarkers such as biomarkers for stress, dehydration, you all sorts of things for different applications. Obviously dehydration, stress and what have you. The technology came out of date and air force research labs as well as University of Cincinnati and um, and, and they are doing quite well right now and informing some major, major partnerships. Uh, we have quite a few. So we have quite a few of that in Cincinnati. We have a lot of enterprise software here. Wiretap you’ll hear from later this afternoon. They’re basically looking at the next generation of collaborative, um, uh, social networks within enterprise, slack, Yammer, Microsoft teams, Facebook workplace, and helping to both secure those, making sure there’s not inappropriate activity going on there or, or leakage of confidential information, but also gives you a full view of your social network, kind of who’s interacting with who, what’s the overall level of interaction? Is it positive, negative, trending positive, trending negative. And I don’t want to steal their thunder. So we’ll talk more about that later. We have a data science company here called a Muda that recently had a series b led by Citi ventures, Dell ventures, dom ventures and draper growth out of the west coast at double the price of our series a. We have other companies here. We actually have data anchor that’s one from Ohio state where emory, the, uh, the, uh, actually embed security in a data. So instead of putting firewalls around the nursing school and around the medical school and all of that and, and, and all. And you still have that in all the access controls in terms of, you know, this is actually encryption in bed in the data, so you may be all the data you’re using is encrypted but you can still use it and the minute you are, you no longer should have access to that. Turns off automatically. So even if someone steals. Yeah, if someone were to steal your laptop and they’d go off, you can say boom, we’re to all that data gets encrypted, they can’t use it. So it’s a really neat thing. And then we have another company up in Cleveland that is focused on clinical trials, so they started at case, now they’re at Duke, Rochester USCSF, emory, northwestern uneven ascension health where they take all the binders out of clinical trials because they have a workflow document management system that handles clinical trials, takes make sure there’s compliance and then stores all that in an FDA compliant cloud environment. And that’s growing quite rapidly as well. And we have a few, a few others as well. I mentioned the two down in a silicon valley bio repository for storing lab samples for researchers at negative 80 degrees c that has grown to $35,000,000 over the last couple of years, probably when the largest private venture back companies or the largest venture back private company in Ohio that’s growing quite rapidly. Genentech, Amgen and in many others as as as customers and then we actually have a 503B compounding company down there as well. I’m making shortlist drugs and others that’s growing quite rapidly and they are just opening a new large facility in Albany which is outside of Athens down there that has capacity for $100,000,000 in revenue and we’ll probably have 100 people working there by, by middle of next year.

Jay Clouse: 24:34

So I hear a lot of enterprise saas. I hear Med tech, which is a little bit your background already.

Bill Baumel : 24:39

Yes, yes.

Jay Clouse: 24:40

Do you think that Ohio is uniquely positioned to start and grow those types of companies or is that what you’re most familiar with and so you’re kind of finding those more naturally?

Bill Baumel : 24:49

Typically venture is about 80 percent technology and 20 percent Med tech and quite frankly med tech goes in and out of favor. I mean, back in the late nineties when the internet was booming, most venture firms got rid of their med tech and then there’s a crash, the p and there’s always some specialized med tech firms. But I think in Ohio with our universities, Cleveland clinic, those sorts of things, Med tech will definitely be 40 slash 50 percent what we do, just because of the, you know, how it is in Ohio, it’s very strong here. Um, so I found that technology wise, so a lot of enterprises here, one thing I’d like to do is get more of the enterprise. I mean, if you look at, we have, I mean 100, 200 or more of the fortune 500 as customers of our companies. We have most of the leading universities as customers. That company. I mentioned a few of those before. Harvard, MIT, Caltech are all customers of multiple of our companies. Um, we, we, you know, the Midwest has an area with a lot of fortune 500 lot of areas like finance, Med tech and insurance that were data security and data science or issues. So it’s, it’s natural so far actually it’s been easier to get customers outside of Ohio than in Ohio, which is interesting. I think there’s, those two areas I think are ripe for Ohio and there’s a couple other areas I’m actually surprised we’re not better at. One is autonomous vehicles because when all the companies, I’m an advisor to one in California that grew to a couple of million dollars in two years and you know, so I know that most of the technology being used in autonomous driving vehicles and all the tests are being done in Ohio and Michigan, but all that technology is coming from the west coast. So I’m a little bit surprised there. We haven’t taken more advantage of that. And the other thing is there’s so much manufacturer in Ohio and I’m surprised that we don’t have more Internet of things, you know, software and, and devices and sensors, you know, being, being done here in Ohio because Ohio in the midwest are buying all the iot stuff, but it’s all being done in silicon valley. So I think there’s beyond, I think those are two strong areas, but that, those other two areas, Iot and autonomous, you know, are two areas where I think we, I know we do have this smart cities and all that as far as actually producing the technology ourselves that, that drives that. I think those are some other areas of opportunity.

Jay Clouse: 26:58

So Jill, you guys have investments in
Columbus, Cincinnati, Cleveland, Athens I’ve heard. I’m guessing there might be something in Dayton too

Bill Baumel : 27:06

With air force research labs. Yeah.

Jay Clouse: 27:08

Can you talk to me about those different cities in the Ohio ecosystem and how they are similar and dissimilar from one another?

Jill Raderstorf: 27:17

Yeah. So like you mentioned, we, we definitely have coverage in Cincinnati, Cleveland and Columbus and Athens, but we are definitely reaching out to the other areas we’ve worked with date and we’ve been there a little bit and we still need to get, I think a little bit more deeply embedded. But in our pipeline we have opportunities in the Akron area, in the Toledo area and other areas of the, of the state. So that’s exciting and we’ve been spending, as bill mentioned, we’ve been spending a lot of time kind of building our infrastructure and understanding the expertise of the different universities in different communities. As Bill mentioned, nearly all of our med tech is in Cincinnati, so they’re creating quite a health corridor down there. And when you think about how you can create this cycle of success, Cincinnati is really showing it, right. Mike Kuvan, as bill mentioned, is the CEO of enable injections. He was a former CEO of a trickier. Bob Beach is the CEO or the chairman of the board, I’m sorry, a Akron systems. And he had in trex on prior to that, um, and Mike Kuvan is helping with geneticists. He’s on their, on their advisory board as a, as the independent board members. So we see Cincinnati really focusing on kind of the health corridor. We have some tech companies there as well. Uh, Columbus being focused again, a little more, at least in our portfolio on cybersecurity and enterprise saas and Cleveland, you know, we’re starting to see some really cool companies pop up there as well. And, and we, we travel up and down 71 quite a lot as far as advanced manufacturing. Both of our companies in Athens would be qualify as that, which is really exciting because that’s particularly an area of Ohio that we can really be useful for. Like bill mentioned, we’re not out for economic development, but we realize that the work that we’re doing and the investments we’re making art do you have a social impact as well and we’re really excited about the opportunity that, that presents in those types of communities.

Jay Clouse: 29:01

Okay. So you guys identified that post seed stage funding was a gap that we had here in Ohio and that’s one of the thesis, part of the thesis of OIF. What else do you see as a need here in Ohio to continue to grow our entrepreneurial ecosystems all over the state?

Bill Baumel : 29:18

Part of it is just the mentality of Ohio. In Ohio I think thinking bigger, it’s important. One of my companies, infant era grew from zero to $500,000,000 in revenue in three years. I don’t think I could convince any Ohio entrepreneur to come with a business plan that grows from zero to $50,000,000 in three years, so I think that’s a big part of it. Thinking big and actually Greg is going to be here today, but Jeff Shoeman, the CEO Wiretap thinks big and so yeah, there are. That is starting, but we’re trying to get people to think big and then also along with thinking big is a sense of urgency. You know, if you have a great idea to think, hey, I have five to 10 years to execute on this. Let’s just kind of keep going. Incrementally. You’re assuming that there aren’t people in Silicon Valley, Boston, Austin, London, Tel Aviv, China, India, that aren’t going to come up with the same idea or already are working on the same idea. So I think both the big ideas, a sense of urgency. Obviously what we’re trying to provide is that expertise. We even at one company like, Oh wow, we’re starting to have some sales issues. Well that, yeah, that’s good because we were the first two or three salespeople who had never managed anything before and there are capacity. We need to bring a manager here and same with operations, all that. So that’s a big piece of it. And the other piece I’d say is, you know, really be careful in who you choose as your board members. Uh, we’ve been involved with, with some great board members. We’ve been involved with some that maybe think that uh, uh, a startup should be race should be run similar to maybe how Procter and Gamble’s running. Those are very different enterprise startups are all about yet why can we succeed, right? Because we have a fraction of the people, a fraction of the money as compared to established competitors, right? We have, we’re raising $5, 10 million dollars. They have maybe hundreds of millions of dollars in the bank. We have 10, 15 people. They have hundreds of engineers. They have all the customers locked up. How do we disrupt them will because we’re, we’re, we’re working faster or working quicker. We don’t have politics, we don’t have bureaucracy. We’re making it happen and naturally we tend to attract the best and brightest who just want to make things happen and having an impact. And so I think really choosing your investors and board members wisely is, is very, very important.

Jill Raderstorf: 31:26

That I’d like to add to that. Just on the investment piece and really understanding who is investing in your company. We’ve had several companies that I’ve, I’ve talked with and looked at, you know, they’re in our pipeline, you know, they have great seed investors, but none of those people are really able to connect them to the next group of people that they need to grow their business or their. Again, they’ve given them money and they’re super supportive, but they don’t really have the expertise to explain to them or help them learn how to scale and as an entrepreneur, as a CEO, you don’t have all the answers and it’s helpful to have somebody to talk with about that and have someone that can connect you to that next level of people to grow your business.

Jay Clouse: 32:04

I looked a ladder into that because since you guys see companies that a little bit of an advanced stage, they’re getting ready to hire, I assume is something that I’ve kind of seen as I talked to more entrepreneurs in different areas of the state is when it comes to talent, putting aside engineering talent because that’s a need everywhere. It seems like there’s a need for executive level talent or people who have seen hyper growth so they can help people understand what growth and thinking big looks like. Do you guys see that or am I making that up?

Bill Baumel : 32:33

So we see a lot on the sales side. I would say quite a few of our sales executives brought into Ohio and so we’re hoping is because there just aren’t a lot of sales VP’s of sales or a VP’s of sales that have grown companies from 1 million to 50 000,000,000 here in Ohio and the tech or med tech area, so a lot of times like in the case of of strong ultra cold, we brought someone in from Silicon Valley. They had sold a company to HP for $300, million by the sales executive there, but we have them here in Ohio and they then are mentoring, you know there are three, three to five direct reports that are running, you know, international, east coast, west coast, the middle, middle section. And so hopefully through that process then we now have four candidates for vp of sales the next time around. So like you’re saying, engineering wise, check operations wise, check tactical marketing, check, sales. We do need to bring in some outside expertise. The other area is really product marketing, strategic product marketing in terms of product roadmap and that’s one area we have trouble with people that have that can kind of manage the intersection of, Oh, what’s happened the future, what’s the sales side saying, what is the engineering side sales side say we need was entering side, say we can do, how do I, what’s the competition look like? And putting all that together. That’s a very tough position and in some cases, like in the case of stored in the ultra cold, we actually worked with the CEO and founder and jointly and Jill led this effort. We jointly created their product roadmap, which by the way, when we showed the Genentech, they loved it. So congratulations.

Jill Raderstorf: 34:04

Yeah, so we do a lot of that work of, of kind of identifying some of the roadblocks that we see coming and trying to help remove them. So again, I’m not gonna take credit for sterling ultra cold product roadmap, but definitely bringing it back to light and reintroducing it to the board as a, as a key priority. Those are the types of things that we’re doing to help our portfolio companies grow.

Jay Clouse: 34:23

Jill, you mentioned a little bit ago that you were really interested in some of the things that have fund can do to help a startup besides just the funds, so two years into this, two plus years into this, what are you guys finding as some of the value add that you try to bring to the table to your entrepreneurs?

Jill Raderstorf: 34:39

Yeah, so one of the reasons that I wanted to get into the investment side of things in this whole ecosystem is because when I was a bank examiner with the FTC, I got to go into a lot of different institutions and through that you, you create these best practices, right? You see the model of, of something that’s successful and I was really hoping as an investor to get that same experience, right and see multiple companies scale well and successfully and be able to understand that model and apply it to different businesses for them to be successful. And one of the ways that we do that is through the work that we do with our portfolio companies. So sterling ultra cold, great example, revitalizing their product roadmap, right? They had created that when they started the company back in 2007, but they really had tabled it because they were focused on production of the market they decided to enter. So reintroducing those new market opportunities. It was one example compliant up in Cleveland. That’s our healthcare it company working in the clinical trial space. We did something similar. They had identified their market when they had, you know, done their seed fundraising, but they hadn’t really gone back to it and they’re really creating the market that they’re in. So I did a lot of research to identify what is the current market opportunity look like and what are the best prospects going forward. Another great example of some of the work that we do is on the strategy side, right? Working with companies as they raise their series B or their next round of fundraising. It’s really hard to create a deck as as the CEO and founder, you know exactly what you do, but it’s really hard to explain it to somebody who’s never seen what you’re doing before. So as investors we can look at those things and really give our perspective and and help them fine tune those messages so that they can be more successful when they go out to investors here locally or on the coasts.

Jay Clouse: 36:20

Last question to me before I open it up to the audience here, you guys help companies get connected to partners outside of Ohio, sometimes on the coasts and otherwise. What are people saying about Ohio when they have the interaction of you or some of these Ohio companies?

Bill Baumel : 36:38

I think one of our partners is Mike <inaudible>. Mike was the senior vice president of worldwide marketing at Barracuda. That grew to become a $1.5,000,000,000 cybersecurity company. He now, and we see them some times here in Ohio, but much more in California where when I’m out there is that he’s now running the company if sales and marketing for the company that does all the electric car charging stations that are popping up all over the place to charge electric cars, which. And so he’s a very successful executive and now he’s a advisor to wiretap. He’s on the board of data anchor and hey, he actually went to Miami of Ohio but has spent his career out in silicon valley and he’s been very, very, very impressed with, with what’s going on here in Ohio compared to 10 years ago. Um, he asked now one son that’s up at University of Michigan I think is Darren’s going to university of Miami, so he spent a lot, a lot, a lot of time here now wants to get back yo to Ohio. And he thought, Oh, maybe I’d find, I mean he is now finding more than he can handle in terms of high quality companies that are similar to or better than the companies he could work with in Silicon Valley. I think right now the difference, I mean, I take our portfolio and what we’re looking at and stack it up against most silicon valley yo based portfolios. Uh, from that perspective, we don’t have the depth, right? I mean, in Silicon Valley you have firms that say, Oh, we just do med tech. And Within Med tech we just do Pharma or we just do diagnostic devices or we don’t do diagnostic devices or we just do saas or we just spoke a lot, specialize in AI and machine learning and stuff like that. There’s not enough companies here in Ohio in each of those areas to build a robust portfolio. So you have to be somewhat opportunistic. I mean I had no idea I’d come to Ohio on my first deal would be a biorepository. You’re storing lab samples down in Athens, but you kind of pick the best of the best. So I think it’s really the level we have right now is very strong, but similar. Silicon Valley were fair shot summit conductor. Out of that came Intel I that came Kleiner Perkins out of that can natural stomach doctor. Out of that came Apple out of, out of one company, Silicon Valley. It used to be, you know, Santa Clara County is now Silicon Valley that, that was from one company. I think the same thing here. People realize and I think that’s. We have to realize when there’s an acquisition of where companies. It has to be a coach will acquisition where they leave some development but maybe move everything out that’s not a loss because if we have success here only through success companies being acquired for her million dollars or more and having people like, oh I and others you will the coast invest because they want to know number one we can, we can make money and number two, we have a local partner that knows what they’re doing because you know, venture is a very hands on activity. You can’t, if you’re looking to Boston, you can’t be there every day. Right. So I think the impression is very strong. Like I said, we’re seeing the strategic partners come first and we mentioned a lot of those. Now we’re seeing the venture firms fall the strategic partners and so I think it’s been very optimistic and I think for each company the successful or even unsuccessful, you learned from that. Hopefully there’s five or 10 spinouts from that. And so it’s kind of a, you know, a multiplier effect from there. I think that’s what’s going to happen here.

Jay Clouse: 39:37

Jill, have you heard anything from people outside of Ohio talking about Ohio, Ohio?

Jill Raderstorf: 39:41

Yeah, I mean, any kind of exposure that we’re getting right now is good, right? Because if there’s. One thing I’ve learned as an entrepreneur is it’s really hard to have your message heard above the noise, right? The Internet is amazing, but there’s a lot of things going on there, so being able to find the work that we’re doing here is really important and so I think we’ve, we all see it, right? Venturebeat has a heartland weekly, weekly article every week, so I mean it’s happening, but people are still still trying to see if it’s proving itself out. Right. And we’re all trying to do that. We have to have some exits. We have to have those really visible signs of success to really solidify our presence, but people are listening, people are hearing and people want to know what we’re doing. I’m a part of a group called NexGen and we do a deal flow call once a month and it’s grown from 15 of US locally here in Ohio to now we have, I think over 50 to 60 people that call in once a month and they’re from all over the midwest and we’re really creating a presence here and um, you know, data anchor being, I think a great example for us that we were partnered with a VC firm in Omaha, Nebraska, which is actually my hometown, so it’s kind of fun for me, but bringing dollars into Ohio is again, just kind of a further outside validation of the work that we’re doing and the work that our entrepreneurs are doing here.

Jay Clouse: 40:55

If people in this room or listeners to the podcast, I want to learn more about Ohio Innovation Fund or get in touch with you after the show. Where should they go?

Jill Raderstorf: 41:03

Yeah. www.ohioinnovationfunds.com. We keep it pretty easy. You can find us there and we have an info@oif that you can certainly email to and then you can find us both on Linkedin, Generator Storefront at Bill Ball Mill and we are pretty responsive there so either way

Bill Baumel : 41:18

Also on twitter but yeah.

Jill Raderstorf: 41:20

Oh I have on twitter but again we don’t, we don’t check that as often. So might not be your best avenue.

Jay Clouse: 41:25

Can you guys join me in giving a hand to our guests here today?

Eric Hornung : 44:05

So Jay just spoke with Bill and Jill from OIF and this was definitely a different type of episode specifically we focused on a state versus a city and full disclosure, Jay and I are both from Ohio. If you’re a long time listener, you might know that I am from Cleveland originally and Jay is from a little town outside of Columbus. Jay still lives in Columbus and I have recently moved back to Cincinnati and I think it’s a fair criticism to say that the podcast can be a bit Columbus and Ohio centric, but I think bill’s recent move from Silicon Valley shows that there is something happening here and that Ohio is really in an interesting position. My own take on Ohio is that its demographic makeup is so much different than other states. Three cities are practically tied for first place in population and GDP and when you look at most other states, there’s usually one dominant city, I think of Chicago and Illinois or Minneapolis in Minnesota or Indianapolis in Indiana, and in some cases there’s one dominant city and one queen city with the exception of Ohio, Florida, and Texas. So I think that’s a natural competitive advantage for Ohio and that they can be a little more resilient and not dependent on one city. Another thing is that Ohio is a tone down mix of the east coast, the south and the Midwest, all in one state. So by examining Ohio you can learn a lot about America. Again, this is my opinion, so jay and I are fans of Ohio, but that doesn’t mean we’re going to stop exploring other cities outside of Silicon Valley. In fact, it probably means that we’re going to do so with more Gusto just like all people. We may have a little home country bias and it’s good to know that. So thinking back to the episode, what did I take away? Primarily I took away that in comparison to silicon valley, the Ohio ecosystem is in its infancy and it’s evolving. Bill made mentioned to Fairchild, and we still haven’t had our fair child in Ohio yet. I think that OIF is unique and it’s a semi focused mid tier fund which is different from a lot of the VC’s we talked to who maybe are earlier stage and aren’t doing this 20 to 25 lead investment strategy. Maybe they’re doing something more like an incremental check for 50 to $100,000. So this is definitely filling a gap. I think that we’re going to see this shift. The 60 percent that bill talked about that in Ohio is currently an early stage and in Silicon Valley is in the series a to series B. I think that that shift is going to start and it starting with things like OIF. And also I took that. We are growing up a bit in terms of our institutions. So Yale invested in its first venture capital fund in 1976, now, yells, known their endowment, is known for being a bit aggressive and being a bit of a trendsetter in the endowment space. It’s good to see things like Ohio state and Ohio University investing directly in venture capital as an asset class, specifically venture capital as an asset class outside of the coasts. So I think that that is a positive sign that institutions are contributing to their ecosystems in more ways than one. We left a little bonus content on the end here for you. Hope you enjoy it. It’s the follow up questions to the presentation at the Columbus idea foundry. If you want to chat with either Jay or I, please reach out to us on twitter at upsidefm or send us an email at hello@upside.fm. Look forward to speaking to you next week.

Jay Clouse: 45:39

Does anybody have any questions for our guest here?

Bill Baumel : 46:03

I mean, like I said in silicon valley, 68 percent of venture capital is venture series a, series b venture capital seed and angel are very important. You know, you’re, you’re kind of spreading out to 5,100 companies and seeing what might pop up, but venture capital is then picking out each venture firm picks out 15 to 20 companies and really works closely with them to achieve their success. So I think really that area is critical. Scaling us, scaling up our efforts going forward is absolutely critical. If that doesn’t happen, it’ll, we’ll go back to where we were because growth capital is, is nice, but if you’re, if you have. I mean if I go to anyone anywhere and say my company grew from 1 million to 5 million or 10 million to 20 million and then we’ll do $40,000,000 this year. I can get money anywhere. Right? I mean it’s not like the people. If I, if I go. I mean I can get from Silicon Valley, I can get from Boston, I get from Austin, can get from Chicago, can get from Minneapolis, can get it from anywhere. Right? But were, you know, when someone says hey, like the people at Wiretap, hey, we have a, a, a cybersecurity platform here that works on Yammer. We need some money to make it work on slack and Microsoft teams and Facebook workplace. We need some help partnering with Facebook workplace and Microsoft. We have a couple of customers we need to build a sales and marketing group. That’s a much. Yeah, that’s a different decision and we’re really the, the, the firm that’s doing with 13 portfolio companies here in Ohio. We’re really doing the bulk of the work in that area and so think we’ll need a scale our efforts going forward for Ohio for when there are five spinouts from our successful companies so that we can be involved with those and, and fund those and work with those and make them more successful. No, no, it’s, it’s all arms length. Yeah. When we look at any companies from, from uh, that spun out of Ohio State or Ohio University or any of our member universities or, or, or, or our partners, it’s strictly an arm’s length transaction. They don’t interfere whatsoever. Now, on the other hand, they’re very helpful, you know, in terms of, um, you know, Ohio University, Ohio State, Kent State have a number of partnerships with major corporations. They have some great professors, they had some great research going on, so it’s, it’s very, it’s very positive from that perspective, but they are not, they’re not in there making, okay, invest in this company, in that, not that company and the other company. So it’s really. And it was, the fund was specifically, that’s why we, I started talking with them in 2015 and we launched in 2016. It took about six months to make sure we had the appropriate structure in place to exactly, uh, uh, address that issue. And so far I think, you know, Mike Papadopoulos, the CFO over there has been very supportive as has, you know, the presidents university, President Nellestein, Ohio University, the trustees have been very supportive of the president at Kent State. Cfo at Kent state have been very supportive. So I mean we’ve had strong support from the trustees and administration that all universities and basically that, you know, what they want is success. That’s what we’re trying to deliver for them. Proving that venture entrepreneurship innovation and venture capital can succeed here in Ohio and you know, for the sake of our universities, for the stake of our students, for the sake of our faculty and our alumni. So we have a finance group obviously we have finance and hr taken care of. We have, we have Jjill and myself. We have a number of advisors like, like my cues a Sarah joined us recently. She’s helping us out in the marketing side formally at adobe out in silicon valley and just came back here in the last few months. So we’re, we’re continuing to, to scale up. I mean we will as we expand, we will need to add more people like Jill and myself. So probably if you look out three to five years, maybe four of us, but that’s also, I think, you know, a miscall. There’s a misconception Ohio about how a venture capital firm looks a lot of venture firms out in silicon valley, even though they have hundreds of millions of dollars in capital, they have four, six, eight partners per fund. Typical partner can do up to nine deals. So a venture firm, I mean, you know, at the seed stage we have all these people working on helping with. Yeah, I mean, you know how it’s structured here in Ohio, very large organizations for a very small amount of capital being deployed venture is very efficient from that point of view where you typically a large venture firm is four to six partners. I mean a four to six partner firm can, can have a 300 to $500,000,000 fund.

Jay Clouse: 50:30

Great. Well thank you guys so much for being a part of this.

Jill Raderstorf: 50:35

Thank you.

Jay Clouse: 50:39

That’s all for this week. Thanks for listening. We’d love to hear your thoughts on today’s guest. So shoot us an email at hello@upside.fm, or find us on Twitter @upsidefm. Will be back here next week at the same time talking to another founder and our quest to find upside outside of Silicon Valley. If you or someone you know would make a good guest for our show, please email us or find us on twitter and let us know. And if you love our show, please leave us a review on iTunes. That goes a long way in helping us spread the word and continue to help bring high quality guests to the show. Eric and I decided there were a couple things we wanted to share with you at the end of the podcast, and so here we go. Eric Hornung and Jay Clouse are the founding partners of the upside podcast. At the time of this recording, we do not own equity or other financial interests in the companies which appear on this show. All opinions expressed by podcasts. Participants are solely their own opinions and do not reflect the opinions of Duff and Phelps LLC and its affiliates Unreal Collective LLC and its affiliates or any entity which employ us. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. We have not considered your specific financial situation nor provided any investment advice on the show. Thanks for listening and we’ll talk to you next week