Tom Walker gets excited thinking about what’s next for Columbus startups — and he’s happy to know he’s not alone.
“I know several investors that are out raising funds; that’s part of the business,” says the president and CEO of investor startup studio Rev1 Ventures. “We’re always thinking about that next one.”
A strong Columbus economy has helped, spurring on M&A activity and growing the region’s venture market even faster than even Walker expected. The reception has been particularly warm for the Life Sciences Fund, which teamed Rev1 with Nationwide Children’s Hospital to launch in 2017.
“We’ve been pleasantly surprised on how industry has partnered with portfolio companies in that fund,” Walker says. “It’s been really nice to see that industry starting to grow here in Columbus.”
We spoke with Walker about funding trends, the startup climate and how Rev1 is encouraging diversity.
Deal structures
In the venture world, everything is pretty standard. You see some differences in the — and this is really inside baseball — participating preferred returns in the Midwest versus (Silicon) Valley. Although we’ve seen deals led by Valley firms that actually have that. At the end of the day, it all evens out.
Two, three years ago, people were saying, “It doesn’t take as much money to start a company today.” I’m not so sure about that. You have to advance a company a little farther today to get an exit you like. It’s taking a little bit more money; it takes a little more time.
We play in two different worlds. We’ll do software IT. We’ll also do biotech. They are similar in that they have capital challenges, but the scale is just so different. Biotech is a completely different world. It takes a lot more money, a lot more time and a lot more patience. You have to have fortitude to go there. It can have a long cycle, and it really goes in cycles in the market. Right now, it’s kind of hot, especially gene therapies, and we’re fortunate to have a lot of those technologies coming out of (Nationwide) Children’s Research Institute.
Slowdown on the horizon?
Valuations are going to stop at some point. I’m not a futurist, so I don’t know when that’s going to happen. But valuations have been high, and they’ve been rising for about the last six years or so. We see it. We’re seed investors, so we see it at the seed round. But we stick to fundamentals. What’s the IP? What’s the market you’re going in? What kind of traction are you getting?
I don’t worry about capital drying up so much. As long as the economy is doing well, and everybody’s portfolios are continuing to grow, there will be opportunities there. I’m already starting the strategy of what Rev1’s next fund looks like, and I think several investors in the state of Ohio are looking at the same thing.
We are starting to hear rumblings of new funds that are coming in. Rev1 helped Tamarind Hill, Mark Shary and his partner (Ben Trumbull) launch a new fund here last year.
Continuing challenges
Access to capital. We’ve come a long way, and I think all of us in the venture world in Columbus are proud of where we are today. But we need more, and we need more funds. And the funds that are here need more capital. We need more peers.
As there are more and more companies growing here, there are more and more job openings. And so, just like every city in America, it seems like there’s a battle for talent. But I also feel like many of our companies are coming down on the winning end of that.
Some of our infrastructure is aging in Columbus. We don’t have the right kind of wet labs to support the next generation biotech companies. We don’t have some of the IT networking space. Rev1 has it. There’s other space in town, but it’s a little long in the tooth.
Encouraging startup diversity
We try to remove selection bias from all our processes. We put our own team through inclusion training, and we’ve created a learning lab focused on inclusion that we offer to our portfolio companies. But you have to stay focused on the business opportunity.
We strive to have the balance of mentors in our network to mirror the percentages of the diverse companies in our portfolio, so that when we’re matching people, we can have people that look like themselves across the table.
We’re becoming more engaged in the community, related to inclusive- and diverse-related issues. We sit on the Franklin County Commission for a diverse economy. We’re partnering with three other partners to bring a specific inclusive-related talent accelerator initiative to town. Different things like that — there’s no silver bullet.
There’s no silver bullet, but outreach is a real key. We partner with the cities that we’re located in — the city of Columbus, Franklin County, which is the biggest county that we serve, the cities of Dublin, New Albany, Grove City, Delaware. It doesn’t matter what industry you’re in. It’s a big topic for all of us.
