The recently launched Palo Alto-based OVO Fund III has closed after reaching its goal of $50 million. And it achieved that mark with help from an Ohio syndicate of investors whose combined $8 million for OVO Fund III makes them one of the more substantial investors in the Silicon Valley-based OVO Fund.
Adam Kaufman, a senior advisor to two venture capital firms and founder of the Up2 podcast, is a link in a chain that’s connecting Silicon Valley to Northeast Ohio startups, driving investor attention to the area.
“There’s an increasing interest in venture capital in Northeast Ohio,” Kaufman says. “These are all Northeast Ohio investors investing in Silicon Valley. It’s pretty exciting, from a Cleveland economic development goal standpoint, or from a venture capital standpoint, that we’re seeing some momentum. And this is one more metric for that.”
The Ohio OVO Fund III LLC syndicate is composed of 40 Northeast Ohioans investing in what is considered to be a high-performing fund. OVO Fund typically provides the first professional money in a venture after a founder exhausts his or her own personal capital. Investments are made pre-revenue and often pre-product launch. Its credibility through past successes, Kaufman says, is why investors here responded so positively to OVO Fund III.
“If there’s one reason Fund III fundraising was so productive, it’s because of the track record of the first two funds,” he says. “That’s always what people look at. So, we have now had many successful exits.”
Through two funds, OVO Fund has made more than 100 high-risk, high-reward investments, mostly in Northern California. It has backed six unicorns and four “soonicorns,” ventures that are on the path to becoming billion-dollar valuations. Among those successful investments were wish.com, as well as several companies that went on to be acquired by Salesforce, Microsoft and Google.
The OVO Fund III’s investment thesis is sector agnostic but carries a bias toward repeat entrepreneurs in high-tech ventures, i.e. data analytics, artificial intelligence, machine learning — anything but crypto. The syndicate wrapped up its fund investment in April through only existing LPs, and the fund itself closed a few weeks later.
Success breeds success
OVO’s investment decisions are largely made by Eric Chen, a partner at OVO who co-founded Tiny Prints, a company that was bought by Shutterfly for $333 million in cash and stock in 2011. Chen recently visited Cleveland, Kaufman says, because he’s impressed with how much money has come from investors here and wanted to visit with the syndicate responsible.
Given Kaufman’s connections to both OVO Fund and JumpStart, he and Chen have gotten to know each other and are collaborating (Chen, for example, is now an LP in JumpStart venture funds). Kaufman says it’s meant stakeholders in the Northeast Ohio startup community and Silicon Valley are sharing investment ideas and best practices.
“It’s a nice, eight-year symbiotic relationship between JumpStart and OVO,” Kaufman says.
Already, he says, two companies in Northeast Ohio have received investments from both JumpStart and OVO Fund: vitalxchange, founded by Charu Ramanathan, whose CardioInsight was bought by Medtronic, and Unify Jobs, Steve McHale’s startup, which he launched after his previous company, Explorys, was acquired by IBM.
Bigger picture, investors from the coasts are noticing not only the sources of capital in Cleveland, but more money from the coast is now backing entrepreneurs here.
“Success breeds more success,” Kaufman says. “So, when JumpStart’s portfolio company, CoverMyMeds, gets acquired by McKesson, that creates more local successful venture investors and early employees of CoverMyMeds. Or in the Charu Ramanathan example, her company being acquired by Medtronic, that creates more local capital success, and that leads to more confidence in backing these types of people again. It’s not just hyperbole to say the excitement is growing because of merit, because of success.”