Archive for Tech Ecosystem Update

AT&T Creating $200 Million VC Fund

AT&T recently announced that it has formed a partnership with venture capital firm Coral Group to invest up to $200 million in a new venture fund. The fund will seek to identify technology start-ups focused on connected services and platforms and to more quickly develop solutions for AT&T and other carriers.

AT&T’s venture capital fund will provide investments into technologies that are running on the Open Network Automation Platform, an operating system for software-defined networks. ONAP is rapidly becoming the standard for virtualized networks and is the result of a platform created in AT&T Labs and an open source existing effort.

AT&T and Coral Group will work together to identify other companies to potentially invest in the fund and to share connected services and platforms solutions developed through their partnerships. Coral Group, based in Minneapolis and the fifth largest VC firm in Minnesota, will run the fund.

This new $200 million fund represents AT&T’s latest innovation program and builds on the company’s current AT&T Labs and Foundry innovation centers.  Launched in 2011, the Foundry innovation centers work closely with the start-up and open source communities to develop solutions for a host of technology-driven businesses and industries, including automotive, healthcare, and sensors. AT&T’s centers include the IoT Foundry in Plano, Texas; the Drive Studio in Atlanta; and, the Healthcare Foundry in Houston.

JobsOhio Targets Funding of Middle-Market Companies

Growing and prosperous companies in the middle market, defined as those companies with annual revenue between $100 million and $1 billion, face numerous challenges as they decide to expand their business and market. The two most often sited challenges to growth by these companies is:

  1. Financing their expansions
  2. Recruiting and retaining talent

JobsOhio, the private sector economic development corporation for the state of Ohio, has helped many middle market companies solve the first challenge, and grow in Ohio through its JobsOhio Growth Fund Loan. From June 2016 through May 2017, JobsOhio invested $37,700,000 of loan proceeds into 12 projects that leveraged $453,551,994 of private capital investment. Because of these investments 1,632 jobs will be created with a cumulative payroll of $59,204,836 and the retention of 814 jobs. The average loan size was $3,140,000.

Through the JobsOhio Growth Fund Loan Program, middle market companies can utilize other sources of capital, from both internal (cash) and external (banks) sources to generate more jobs and capital investment than would otherwise be possible without funding from JobsOhio. Through this program JobsOhio is helping to solve one of the main issues that middle market companies have experienced since the Great Recession, access to capital.

First Quarter 2017 Venture Capital Investments Grow

Access to venture capital is a critical measure of a region’s success with technology based economic development as early stage technology companies struggle to gain funding from traditional sources such as banks. U.S. venture capital investments saw signs of growth in First Quarter 2017 versus investments in Fourth Quarter 2016 based upon reports from PricewaterhouseCoopers LLP, the National Venture Capital Association, and PitchBook.

In Quarter 1 2017, venture capitalists deployed $13.7 billion to start-up companies through 1,104 deals, up fifteen percent in dollars and two percent in deals over Quarter 4 2016. An increase in mega-round funding (investments over $100 million in size) helped contribute to the growth in quarterly dollars invested, although the $13.7 billion is the second lowest quarterly total over the past two years. Regional trends were mixed, with LA/Orange County being one of the few major hubs experiencing an increase in both dollars and deals from Quarter 4 2016. Seed investments continued its two-year decline as a proportion of all deals, coming in at 25% of all deals in Quarter 1 2017, while later-stage deals were at eleven percent of all deals. Additionally, the Internet sector deal share decreased to a two-year low of forty-four percent during Quarter 1 2017 while Healthcare increased to a two-year high of seventeen percent and surpassed Mobile and Telecommunications as the second place sector for deal activity.

A summary of Quarter 1 2017 shows:

  • Regions – The Midwest came in eight out of the eighteen regions, preceded by San Francisco in first ($3.47 billion), Silicon Valley, New England, New York Metro, LA/Orange County, Southeast, and the DC Metroplex. In order, Colorado, Northwest, Southwest, Texas, San Diego, North Central , Upstate New York, Philadelphia Metro, Sacramento/Northern California, and South Central rounded out the rest of the regions.
  • Sectors – Internet, Healthcare, Mobile and Telecommunications, Industrial, and Computer Hardware and Services comprised the top five investment sectors. The additional twelve investment sectors include Business Products and Services, Software (non-internet/mobile), Electronics, Automotive and Transportation, Consumer Products and Services, Energy and Utilities, Food and Beverages, Leisure, Financial, Media, Agriculture, and Risk and Security.
  • Development Stages – Expansion Stage led with investments of $5.352 billion followed by Later-Stage ($4.844 billion), Early-Stage ($2.47 billion), Other ($760 million), and Seed ($433 million).
  • States – Top 10 investment states were California ($7.379 billion) followed by Massachusetts, New York, Colorado, North Carolina, Maryland, Texas, Washington, Virginia, and Utah. Ohio came in at nineteenth, with $81 million (down from $142 million in Quarter 4, 2016).

Exit activity continued to be slow, with 169 VC-backed exits during Quarter 1 2017, with corporate acquisitions and buyouts continuing to be the leading exit routes. Software, biotech, and commercial services sectors accounted for approximately seventy-three percent of the total exits. Finally, venture capitalists raised $7.9 billion across 58 funds in Quarter 1 2017, down approximately twenty-four percent from last year’s Quarter 1. Nine first-time funds were closed during this quarter, the most in the last five quarters.

Smart Transportation at the Centerpiece of Governor’s ODOT Budget Line Item Veto

Ohio House Bill 26, the Ohio Department of Transportation’s bi-annual budget bill was passed by both houses of the General Assembly and signed into law by Governor John Kasich.  Under the Ohio Constitution, the Governor has the authority to “Line Item Veto” individual provisions from state appropriations legislation.  House Bill 26 is the product of a joint House-Senate Conference Committee. Several controversial provisions were vetoed by Governor Kasich that included language that would have created a Smart Transportation Action Advisory Team that would have provide advice to ODOT and JobsOhio on the development of smart transportation initiatives.  Kasich’s veto message stated the provision was “well intentioned” but would create a “bureaucratic barrier” and harm efforts to implement future smart transportation projects.  Senator Matt Dolan from Cleveland lead the charge on the insertion of the Smart Transportation Action Advisory Team in what appears to be some concern related to state spending on these type of high-tech, transportation projections.  Kasich also vetoed provisions that would have changed the frequency of local bridge inspections, required the Ohio Department of Transportation to install interchanges on limited access highways every four miles in certain urban areas; and a requirement for a second observer on ski boats.

HB 26 highlights include:

  • Permitting pilot programs that will allow the ODOT director to vary speed limits during peak traffic times on Interstate 670 in Columbus, I-90 in Cleveland and I-275 in Cincinnati;
  • Funding an additional $10 M for public transit over each year of the biennium – bringing the total to $33 M;
  • Increasing the portion of a district public works integrating committee’s allocation that can be used for grants from 85% to 90% freeing up $7.85 M for infrastructure projects across the state;
  • Permitting the proceeds of the sale of timber from national parks to be distributed to county from which it is derived, 50% of which must be used for maintaining roads and bridges;
  • Requiring that the Registrar establish by rule the service fee that is paid to a deputy registrar;
  • Creating a six-county pilot program to lower commercial vehicle registration fees from $30 to $15;
  • Funding an additional $1 million in funding each year earmarked for Transportation Improvement Districts;
  • Increasing the current limit for a natural gas company infrastructure development rider for economic development projects from $3 per calendar year to $1.50 per month; and
  • Granting townships and municipalities the authority to enter into an agreement to jointly provide for the maintenance, repair, and improvement of township and municipal roads.

HB 26 is an important source of infrastructure funding for roads, highways, bridges, airports and mass transit but it lacks true and substantial direction on promoting Ohio as a leader in the autonomous vehicle marketplace.  That leadership will come through other planned legislation.

 

Venture Capital Investments Decline in 2016 But Ohio Continues Progress

According to preliminary venture capital investment results compiled by Pitchbook, a company that provides comprehensive mergers and acquisitions, private equity and venture capital data and analyses, 2016 investments saw a decrease versus investments in 2015.  According to Pitchbook, approximately $68.3 billion was invested in 2016 across 7,966 deals.  Funds invested were down 14 percent versus 2015’s high of $79.2 billion across 10,486 deals.  Funds invested in 2015 were the second highest full year total in twenty years, while 2016’s deal count is likely to be the lowest since 2012.  Also, the number of venture capital backed exits were down almost 25 percent (719 in 2016 versus 935 in 2015) while nearly $40.5 billion was raised, an increase of 16 percent over 2015.  A majority of the new funds raised were by mega-funds for large, later-stage investments.

Looking ahead in 2017, analysts are indicating a potential upswing in venture capital investments likely mainly driven by the initial public offering (IPO) market.  Potential factors impacting analysts’ outlook include companies that have continued to mature in the deal pipeline, increased calls by investors for companies to go public, and the slowing down of late-stage start-up financings by hedge and mutual funds.  Also, many venture capital firms are well capitalized and will likely take a more cautious approach of investing in smaller, early-stage start-ups instead of start-ups that have received valuations at $1 billion and higher.

Concerns for venture capital investments in 2017, though, are present and focused more towards the industry’s congestion, fundraising efforts being lessened by a challenging deal environment, the worthiness of companies designated as IPOs, and continued emphasis on mergers and acquisitions of young start-ups by Fortune 500 companies for augmenting and growing their current business and technology strategies.

Ohio Third Frontier’s Focus on Venture Capital

Ohio Third Frontier, the state’s $2.1 billion technology-based economic development initiative to create high-wage jobs through the accelerated growth of high-tech start-up and early-stage companies, has maintained a strong focus on providing venture capital funding to organizations and companies across Ohio for nearly fifteen years.  Third Frontier’s Pre-Seed Fund and Seed Plus Fund Program has been designed to increase Ohio’s number of professionally managed Pre-Seed Funds, create additional support for developing, retaining and attracting technology companies, increase early-stage capital investments in tech-based Ohio companies, accelerate the growth of high-potential tech companies as well as high-paying tech jobs, and continue building a deal flow pipeline that attracts venture capital firm resources from both within and outside of Ohio.

In 2015 and 2016, a total of $74.1 million was awarded through the Pre-Seed Fund and Seed Plus Fund Program for increasing the availability of professionally managed capital and associated services to accelerate the growth of early-stage Ohio technology companies.  Investments are supporting accelerated growth of high-tech start-up and early-stage companies across multiple technology industries, including Third Frontier’s preferred sectors of Software/Information Technology, Biomedical/Life Sciences, Advanced Materials, Sensors, Energy, and Advanced Manufacturing.

Ohio Third Frontier has invested in the following Pre-Seed Fund organizations:


Northeast Ohio

  • JumpStart – focuses on an array of technology sectors, including companies founded and led by women and minority entrepreneurs
  • Cleveland Clinic – focuses on medical devices, products and companies spun out from the institution’s researchers
  • Lorain County Community College – focuses on tech-based companies that are in the imaging or incubating phase of development  with special focus in the Northeast Ohioregion
  • LaunchDen Capital Fund – primary focus on orthopedic companies
  • North Coast Angel Fund – focuses on healthcare (medical devices and diagnostics), biotechnology and software sectors
  • Bizdom – focuses on web- and tech-based start-up companies
  • Case Western Reserve University – focuses on medical technology, business software, advanced materials, fuel cells, and energy storage
  • Impact Angel Fund – focuses on bioscience/medical, advanced materials, automation, energy and power management, surveillance, and information technology sectors
  • Mutual Capital Partners – focuses on healthcare (medical devices and diagnostics) and information technology (business-to-business and mobility software) sectors
  • North Coast Venture Fund – focuses on biomedical, pharmaceutical, and software sectors
  • Valley Growth Ventures – focuses on software, energy, advanced materials, and additive manufacturing sectors

Northwest Ohio

  • Rocket Ventures – focuses on medical technologies and software applications which include imaging, surgical  instruments/equipment, implant devices, regenerative medicine, and software applications developed for business and healthcare

Central Ohio

  • Ohio Tech Angels – focuses on information technology, advanced materials and life sciences sectors
  • NCT Ventures – focuses on adtech, big data, enterprise software, heath information technology, logistics, and marketplace and retail technology sectors
  • Rev1Ventures – focuses on life sciences (specifically in the areas of pharmaceutical, biological and gene therapies and spin-out companies from Nationwide Children’s Hospital’s Research Institute), software, information technology, additive manufacturing, alternative energy, and other sectors

Southeast Ohio

  • TechGROWTH Ohio – focuses on digital interactive media, biosciences, bio-agriculture, and advanced energy sectors
  • East Central Ohio Tech Angel Fund – focuses on companies in rural Southeast Ohio with new proprietary, barrier-to-entry technologies

Southwest Ohio

  • CincyTech – focuses on a variety of Ohio Third Frontier targeted industries, including software, medical technology, life sciences, consumer digital, and other aligned sectorsin the region
  • Cincinnati Children’s – focuses on the biomedical sector
  • Queen City Angels – focuses on advanced materials, aeropropulsion power management, fuel cells and energy storage, medical technology, business and healthcare software, sensing and automation technologies, solar photovoltaics, situational awareness, and  surveillance systems sectors

West Central Ohio

  • Accelerant – focuses on advanced materials, advanced manufacturing, sensors, healthcare, information technology, aerospace,  situational awareness, and surveillance systems sectors

Listen and Learn: Autonomous Vehicles Policy and Development

podcast-episode-2

Columbus Smart City Award Creates $90 M Opportunity to Build a National Tech Model

Anthony Townsend defined “smart cities” as places where information technology is combined with infrastructure, architecture, everyday objects and our bodies to address social, economic and environmental challenges.  Just the name makes everyone want to be a “smart city”- who would want to live in a “dumb city”?  Creating that smart city is not as easy as it sounds as the technology investments often bring along substantial costs and impose dramatic changes in transportation, development and government delivery services.

Columbus, Ohio gets a chance to be a pioneer in the development of smart city infrastructure.  Columbus was awarded the Smart Cities grant from the U.S. Department of Transportation. Columbus beat out six other finalist cities to receive $50 million in grant funding from the federal government to develop Columbus into the nation’s leading example for intelligent transportation systems.  Local private sector matches and funding from the Vulcan Foundation shot this investment up to $90 M.

This $90 M project offers opportunities for technology and construction companies not just for one contract but to be on the ground floor in the development of a new transportation and development model for American cities.  The Columbus Smart City Program uses tools ranging from “big data” application as well as a range of cutting edge technology revolutionizing the transportation industry in mass transit as well as with the logistic industry.

Columbus’ application focused on the partnership and collaboration between the organizations, private and public, that are going to support and implement the Smart Cities grant. Autonomous vehicles are a major theme of the Smart Cities Grant however, Columbus’ application focused on other attainable programs that can be implemented to make an immediate difference in the community. The application focused on the following 5 strategies:

  • Smart Corridor to Provide Access to Jobs;
  • Real-time and Integrated Data for Smart Logistics;
  • Connected Visitors;
  • Connected Citizens; and
  • Sustainable Transportation Options.

The first smart corridor will be along Cleveland Avenue in Northeast Columbus. “With a network of integrated electronic signs, sensors, and other state-of-the-art elements this project will enhance safety for all road users, improve travel time reliability and reduce accidents and associated congestion.” The Central Ohio Transit Authority is working on expanding its onboard Automated Vehicle Location technology to provide accurate real time location data for its busses. To address the last mile connection issue from transit centers, self-driving vehicles will be implemented at Easton to take riders to their final destination.

Real-time and integrated data for smart logistics is focused on helping the Rickenbacker Inland Port use technology and data to become the leader in logistics innovation. The projects that will support this effort will provide real time regional traffic conditions and truck routing data via smart phone apps and current routing services. This will help improve routing service for trucks in the region. This real time data will help provide, via smart phone apps, delivery site locations for reserving sites in select dense locations in Columbus.

Columbus is a regional destination for sporting events, shopping, medical services, arts and cultural events. The Smart City Grant application made sure to address the improvements that are going to be made for the visitors of Columbus. The City plans on developing a smart phone app that provides traffic conditions and routing information, transit options, parking conditions and availability, and event information, all in real time. This app will be promoted to visitors as an added benefit to help them discover Columbus.

The underlying driver of Columbus’ application is helping to improve the isolated neighborhoods that have endured economic and mobility challenges that limit residents’ ability to access jobs, health care, and education. The projects that are proposed in the Connected Citizens section of the application address cash based citizen access to mobility services. The solution is to work with debit card type service offering while understanding other barriers such as smart phone ownership and WiFi availability.  The focus area has a low number of car dependent households, so increasing and/or introducing personal transit (Uber, Car2Go) service offerings is a proposed solution.

Lastly, the application highlights what Columbus will do to address sustainable transportation options. The city will encourage electric vehicle (EV) usage while working with the current car sharing service providers to convert to EV fleet by installing EV recharging stations. The city wants to expand AEP’s Smart Grid to other parts of the City. This Smart Grid project will incorporate EV storage capability. Columbus wants to make having an electric vehicle as convenient as possible to encourage citizens to make the change.

An additional focus of other smart cities programs have focused on the delivery of government services to promote efficiency in the use of information technology.  E-commerce for governments is a struggle in the age of Amazon as taxpayers have high-expectations for the web based government transactions.  Government struggles with security, privacy and public record laws that impact that operation.

The Columbus Smart City Program is an opportunity to learn how transportation, development and government will operate in the 21st Century and could prove an interesting model for cities across the United States.