success of venture capital firms shows that ohio is a leader in investment opportunities
Athenian Venture Partners
has offices in Boston and San Diego and partners in Europe. Yet its headquarters are nestled in the foothills of the Appalachian Mountains in Athens, Ohio.
Yet to Karl Elderkin, founder and Managing Partner of the successful, 15-year-old venture capital firm, being in the Midwest is less of an inconvenience than an opportunity. Athenian has invested in five Ohio startups as well as companies in San Francisco, Boston and Salt Lake City.
"When we first started, we felt that it was necessary to have a footprint on the Coasts because everything in the Internet space was happening in those two places at that time. We knew that we'd be lost if we weren't," he says. "Yet over time, we've found higher quality and more numerous deals in the Midwest."
It helps that Elderkin has his pilot's license and Columbus and Cincinnati are close by. "It takes 45 minutes to fly to Cleveland. It's a matter of getting out there."
Recently, Athenian's 2003 AVP Ohio fund was ranked the top fund of its vintage by Preqin
, a leading provider of data and research on venture capital and other types of investments. Athenian currently holds the highest ranking of the 2003 U.S. venture capital funds in both net return multiple (4.95x) and IRR (31%).
Athenian invests in companies across the U.S., yet the AVP Ohio Fund is a focused fund, with 90 percent of its capital invested in Ohio companies: namely, Manta
, Akebia Therapeutics
, Aerpio Therapeutics
and Comet Solutions
“This is an important recognition that Ohio is a true innovation state where investment opportunities are yielding outstanding results,” said Christine Schmenk, Director of the Ohio Department of Development
, in a news release. “The acknowledgment is a strong signal to the venture capital community nationwide that Ohio is a place where profitable investments can be made.”
According to the most recent Ohio Venture Capital Report
, venture capital in Ohio was up more than 80 percent in 2010 -- outpacing the national average of 20 percent. Untapped investment opportunities, attractive deals and the state's support for its entrepreneurs have been cited as reasons behind the upswing.
Athenian has achieved success by tapping into high-quality, regional deals that may be too small for other VC firms, says Elderkin. Athenian also draws on its partners' backgrounds in engineering, health care and information technology. Finally, the firm takes a patient, hands-on approach with its startup companies, drawing on local, national and international expertise to help them succeed.
The company was founded in 1997 with a loan from the Ohio University (OU) Foundation
. OU has been very successful at commercializing its technology, but officials there grew frustrated when some of its companies left for California and New York in the '90s. The OU Foundation loan convinced Elderkin to move to Athens from his job in London, England and start Athenian Venture Partners.
Although VC firms are perhaps best known for investing in dot com companies, Athenian often invests in more traditional industries. "We may have been missing the boat on high valuation dot com companies, but we felt more comfortable operating in a space we understood," says Elderkin. "That's paid off for us."
Comet Solutions is an example of a company that Athenian has invested in that has become successful. Comet has developed unique software that allows companies to complete product simulation tests early in the design cycle. Ineffective product simulation is one reason behind the recalls of automobiles and other consumer products, and it often costs companies a lot of money. Comet offers "get-it-right-the-first-time engineering," says founder Dan Meyer.
"Athenian became an investor at the very end of 2009 and led that round of B financing," says Meyer, whose customers include Tangshan Locomotive in China, one of the leading developers of high-speed trains around the world. "We approached a bunch of different investors regionally and nationally, and we struggled to get attention because many investors view the manufacturing space as a lot less exciting than social media or next generation web applications."
"Athenian took the time to dig in and did not make any superficial assessments," he adds. "They have a real technical depth, market knowledge and aptitude for that."
Meyer, who moved with his family from the West Coast to join Comet Solutions a few years ago, says that the Midwest is a great location for the company to grow. "It's where our customers are located, it's where talent is located," he says. "Early on, we received an Innovation Ohio loan from the State of Ohio, and we used that loan as a catalyst to grow our operations here. It was crucial to our survival."
Meyer has no regrets about moving back to his hometown of Cincinnati. "There's a changed risk profile here," says the Princeton University and Stanford University graduate. "It used to be perceived as risky and it was harder to recruit people."
He says the VC world has evolved a lot since the dot com bubble of the late '90s. "Back then, every lawyer and accounting firm was jumping in, thinking that there might be gold in the hills. Now it's a true ecosystem. You have second and third generation entrepreneurs who know now what they didn't know a decade ago."
As Ohio Third Frontier
enters its second decade, Ohio will become increasingly attractive to VC investors, Elderkin says. Earlier this year, Manta received a $44 million investment from Norwest Ventures
, which is the VC arm of Wells Fargo.
Elderkin agrees that Ohio's VC environment has come a long way in the past two decades, and says that Athenian's success is reflective of that. "We're looking at 10 times the deal flow we were looking at around 2000 or so," he says. "Investors here tend to be problem solvers and stick with companies. Persistence pays off."