Analysts project a decline of 22% of startup seed-stage investing due to the spread of COVID-19. What are the plans for Cincy venture capitalists for replenishing the startup pipeline in the weeks and months ahead?
Pat Longo, President, and CEO at HCDC, the economic development office for Hamilton County, agrees that these are challenging times for entrepreneurs. Then again, as Longo points out, they’ve faced financial challenges before.
“These are unusual times, and early-stage capital is getting tighter for StartUpCincy entrepreneurs,” Longo says via email. “All of us at the HCDC business center have seen these challenges. We’ve experienced the dot.com meltdown in 2001 or the great recession of 2008. We’re working diligently with companies to create and implement business plans and models that make them increasingly attractive to revenue sources and capital providers.”
One of the key capital provider for the Greater Cincinnati startup ecosystem is CincyTech.
Immediate steps for CincyTech President Mike Venerable and his VC team include confirming adequate capital in the CincyTech portfolio and providing leadership and support to portfolio companies. Venerable is unsure if the long-term financial impact from the spread of COVID-19 will be similar to the 2008 financial crisis. However, he’s optimistic, thanks to the State of Ohio resources and key economic indicators like housing prices and a resilient stock market.
“I do not have a sense today about how much entrepreneurial behavior has stopped or slowed down,” Venerable tells us. “We’ll know in the next 18 months. However, we have great state-level resources in Ohio with JobsOhio and Ohio Third Frontier. Our infrastructure is strong regarding seed-stage funding, and we have a great deal flow out of our research institutions. Our seed-stage financing is more mature than in most places.”
Both Longo and Venerable, two of the most experienced mentors in Cincinnati’s startup ecosystem, agree that access to coaching and leadership is nearly as important as funding in the time of COVID-19. What’s the value of financing if startups leaders are unable to pivot and provide the solutions customers need in the after-Corona economy?
“There are general changes in how healthcare works and how commerce works and how people want to engage,” Venerable adds. “Some enduring trends are coming out of this. We’re working with an out-of-state collaborator who works on innovation for healthcare systems. We’re working with our companies to identify emergent problems and solve them in new and novel ways.”