Visit Cincinnati Once and You'll Want to Launch Your Startup There
Two years ago, when I started traveling to and studying startup ecosystems, I was fascinated by what cities would be “next.” I wanted to know where the talent was moving, what was attracting them and why cities like Denver, Austin and Nashville seemingly flipped a switch and became destinations for double-digit growth.
The truth is there is not one set way to grow a city. They grow for a multitude of reasons whether it be geography, an anchor company, an attitude or an airport hub. The only absolute is that none of it happens overnight.
The resurgence of Pittsburgh as a startup hub is a 40-year process. If they hadn’t invested heavily in Carnegie Mellon and its research they wouldn’t have attracted Google, Uber and others later. But at the time, you can understand why the Steel City may have been skeptical about transitioning to robotics.
All of this is to say that it’s easy to understand why places are great for startups in retrospect, after they have already happened. But the savvy entrepreneur looks for the place that’s about to hit, not the one that already has.
Cincinnati is about to hit and I’ll give you three key reasons.
1. They have their own seed funding.
In 2007, something happened that would prove pivotal: CincyTech launched its first seed fund, matching funding from the state’s Ohio Third Frontier initiative with locally raised dollars, to invest in regional startups. Outside of the coasts, funding is an issue. It’s not for a lack of talent or ideas but simply that money follows other money. People invest in what they know. In 2019, it’s a great idea to start a seed fund in the Midwest. Twelve years ago, it was a risk that paid dividends.
Since 2007, CincyTech has invested $55.2 million in 80 startups across Southwest Ohio. These companies have raised an additional $850.6 million from 90+ venture capital funds, including big wins such as Assurex Health, which was acquired by Myriad Genetics but remains headquartered in the region. Between co-investment, revenues and gains to investors, CincyTech and its portfolio companies have created $1.5B in economic impact for the region.
Now, Cincinnati is in a prime position. The region's economic backbone has long been strengthened by corporations, from P&G to Kroger to Fifth Third Bank. But now they have a decade-long history of developing top quality startups that can find funding anywhere. That’s a rarity for most regions of the country.
They have a first-mover advantage by getting in early and demonstrating success when it was hardest, before attention or track-records are there. As smart money looks for coastal alternatives it will gravitate to where success has already occurred. It’s why Steve Case ranked Cincinnati sixth in his Rise of the Rest rankings. Even the existence of that ranking shows the conversational shift on startup ecosystems.
As capital also moves to Columbus and Indianapolis it only strengthens this region. It makes me more interested in Cincinnati because they have the advantage of CincyTech, a smart investor class and proven executive talent in the region to maximize growth. Chicago and Columbus may be bigger. Cincinnati has all the right pieces and they’ve already proven they know how to use them.
2. Cincy’s model for growing diverse startups is unlike any in the country
Every region in the country will talk to you about diversity and inclusion. Cincinnati is just better at it in every possible way. They have a neighborhood, OTR, that’s a darling of revitalization but that’s not good enough.
See, Cincinnati doesn’t view diversity and inclusion as a nonprofit or corporate social responsibility effort. They view it as pass/fail. And don’t get me wrong, they have amazing programs like Mortar that educate and inspire future entrepreneurs. It is a vital first-step in the entrepreneurial journey and a great community piece.
But the talented people driving this diverse startup ecosystem aren’t worried about what looks good on paper. They are not in the business of cutting ribbons, they are in the business of taking diverse businesses public. Lending Tree ranked Cincinnati in the Top 10 for minority entrepreneurial success. Adjust that for economic disparity and they top the list.
Darrin Redus, Executive Director of the Minority Business Accelerator doesn’t come from the nonprofit world. He is a proven veteran in financial services and economic development. He manages a portfolio of 40 firms with over $1B in annual revenue.
Redus is in the process of being the first in the country to take a minority accelerator off all grant dollars and have it be fully sustainable off its own successful companies. That’s an important signal to be sending to the rest of the country.
Simultaneously Candice Matthews-Brackeen, Co-Founder and Executive Director of the Hillman Accelerator, in four years has gone from starting a monthly meetup of entrepreneurs to raising $50M in capital and starting the Midwest’s first accelerator program serving underrepresented tech driven startups. They invest $125k in eight companies per every 12-week cohort.
Matthews-Brackeen isn’t done, she’s only just beginning. She has called attention to inequalities in state funding and worked to secure a better distribution of state funds for diverse startup creation.
These amazing efforts are building a rock-solid infrastructure for diverse startups. LISNR, co-founded by Rodney Williams, has been ranked high for two years in a row on CNBC’s list of most disruptive companies. LISNR has raised considerable money from Intel Capital.
Even with all this, everyone I just mentioned will tell you there is a long way to go because their goal is not to be the city that creates the most diverse startups. There goal is to eliminate the need for the classification "diverse startups" in the first place. The work continues until everyone has the same access to opportunity, capital, board seats, government and decision-making. And that energy is infectious.
Cincinnati is not the only place trying but they are putting together the strongest infrastructure for sustained success.
3. Big partners can set even bigger goals.
Every city has to build from the assets it has. Cincinnati is rich with big brands, from P&G to Kroger to Fifth Third Bank. But unlike some other cities with equivalent assets, Cincinnati's homegrown companies are active in the startup ecosystem, and not in a superficial way. They use their money, time and resources to empower these startups.
It's a simple premise. A startup that already has P&G as a client is going to get more meetings when they pitch other companies. It took a lot of hard work and diligence by a lot of people and organizations but they are now at the point where every company bought into the ecosystem helps it grow. It's good for the city and for the bottom line. Helping startups cuts down on R&D and acquisition costs.
The 1819 Innovation Hub, which opened this year at the University of Cincinnati, is the hub for where large companies fill their talent pipelines and mentor future startups. UC President Neville Pinto's vision is to make the university a leading competitor in creating immediate opportunities for its students. The program is attracting many large companies.
Payments processor Worldpay makes nearly $4 billion annually and will be moving to 1819 in the fall to create an instant fintech hub, giving students in the area the opportunity to quickly gain experience in the industry.
3 Guides to help you navigate Cincinnati.
Step one when you are starting somewhere is finding the right people to know. Here are three who can be immensely helpful on your journey.
1. Eric Weissmann, Vice President of Communication, Community and Inclusion, Cintrifuse. Eric deserves his very long title -- he's the ultimate connector of dots. When you need to get something moving or even just some solid business advice, start here.
2. Susan Lomax, Executive Director, Source Cincinnati. If you bring Susan a bad idea, she'll tell you it's bad. If you bring her a good idea, she'll make sure it happens. She also knows literally every detail about the city.
3. Mike Venerable, CEO, CincyTech. Mike has a long and productive history of building, scaling and selling businesses. And is one of the five best people I've ever met at articulating what it takes to build a successful startup. He's a tremendous asset for the region and surprisingly approachable for someone with a busy schedule.