1Mby1M Virtual Accelerator Investor Forum: With Bill Baumel, Managing Director of Ohio Innovation Fund (Part 1)

Bill Baumel, Managing Director at Ohio Innovation Fund, is one of the pioneers of the Ohio startup ecosystem.

Sramana Mitra: Let’s start with some introduction to where you are with your work with Ohio Innovation Fund. What’s happening in Ohio as an ecosystem?

Bill Baumel: Since we’ve last spoken, we’ve invested in about 20 startups, primarily in Ohio. We do look towards the Midwest as well. We typically invest at the Series A level. We invest at the seed level selectively. We get involved with companies when we invest a million dollars to own 10% to 15% of the company. Then we work very actively with them.

Unlike Silicon Valley and some other areas, there’s not a huge cohort of previously successful entrepreneurs or even the understanding of startups in general whereas, in Silicon Valley, everyone understands what it’s all about. There’s a lot of strategic, operational, and educational working with the companies. We’ve been pleased with our success so far.

Most of our companies are relatively capital-efficient. We realize that for every dollar you put in, you better create $10 million to $30 million value if you want to have a strong return for the founders. We’ve been pleased that over a third of our companies have already graduated from our initial seven-digit valuations in the seed round or Series A round to nine-digit and, in one case, unicorn status in subsequent rounds. Also, the business momentum is behind that.

Here in the Midwest, there’s a lot of operational and strategic help and making the teams think bigger to realize what their potential could be and try to fulfill that potential. At the same time, you have a very capital-efficient model here. Not only are the valuations lower, but the amount of money to take them anywhere is also lower. We have companies scaling to $20 million-plus in revenue off of their one or two financing rounds. The returns we are seeing are very strong.

We have had three exits so far. One in HR tech, one in the MedTech area, which is interesting. Only $10 million went into the company in total and it exited for north of $400 million. That’s what’s nice here. You can have a few hundred million dollar cybersecurity companies sold and you can make a large amount of your money.

Overall, we’re on track to return a little bit over 5x on the fund. Most of our investments are only about three or four years in. When we talked a few years back, I was just getting started. I had come from Silicon Valley. I spent 20 years out there and had a number of exits. We’ve seen that develop in the Midwest. It’s been a lot of fun as well.

Sramana Mitra: How big is the fund?

Bill Baumel: Our LPs are sensitive to anything being disclosed outside of SEC forms. We typically don’t go over a hundred million dollars. In terms of capital-efficiency selectivity, that becomes an issue. There are a couple of things. Too big of a fund, you start getting motivated by management fees. Your interests are not necessarily aligned with companies in terms of that focus on overall return. The second piece is we are doing more capital efficiently. We don’t want a huge fund size that gives us pressure to deploy more capital to more companies. We’ll typically invest about $5 million at a time.

This segment is part 1 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Bill Baumel, Managing Director of Ohio Innovation Fund
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