On Wednesday October 7th, #StartupCincy came out to Union Hall to hear about the progress of The Cintrifuse Syndicate Fund. Attendees heard from keynote speaker Jon Medved and were treated to panel discussions on the Internet of Things, Telemedicine and Omnichanel Marketing but more on those later.
This post is about what’s new with the Cintrifuse Fund.
From Fund of Fund to Syndicate Fund
If you are familiar with the Cintrifuse Fund, then you probably noticed we moved away from calling it a “Fund of Funds” to calling it “The Syndicate Fund”. And there’s an important reason for that.
Our fund was set up for a strategic purpose. The entire reason for its existence (outside of financial returns for our LPs) is to create a network of syndicate partners and co-investors in Greater Cincinnati startups. Its purpose is to create relationships that will last for decades with VCs from across the country.
Since its inception, The Syndicate Fund has increased the depth and breadth of our network through our investments in venture capital funds. So what does that network look like?
Over the last two and a half years, we met with over 200 venture funds, many of those coming to Cincinnati to meet with us and the #StartupCincy community. We have committed $40 million of capital to 10 venture funds locally and around the country. Collectively, these funds manage $2 billion of investable capital and have a portfolio of 155 startup companies. This is a massive and powerful network.
So what originally was a “Fund of Funds” became a network and a platform that many #StartupCincy programs benefit from. Our fund went beyond a smart financial decision and became a syndicate of investors and startups that the entire City of Cincinnati will benefit from.
The Triple Net Bottomline
The Syndicate Fund creates value for our city and our startup community in three crucial ways.
- Innovation – Cincinnati corporations benefit from a national innovation pipeline
- Community – The fund creates a community that benefits Cincinnati entrepreneurs
- Financial – It creates attractive financial returns for investors and generates investment in Cincinnati startups
Corporations are concerned about being innovative. Big companies are constantly on the look out for new business models that could disrupt their industry or they’re trying to unlock innovative growth that will take their business to the next level. In order to survive in today’s economic climate, BigCos need a way to source this innovation. Enter the Syndicate Fund.
For corporations who don’t have the capacity or financial means to hire a full time innovation executive or create an investment fund, the Syndicate Fund offers a unique and compelling way to leverage corporate dollars to be a part of a larger fund that creates similar access to innovation.
And we have an example of how this happened right here in Cincinnati. Cincinnati Children’s Medical Center (CCMC) needed an innovative solution to increase their supplier diversity. Through our network they found, evaluated and chose a solution from an emerging leader in this space. That company happened to be ConnXus, founded by Rod Robinson right here in our city.
It was because of Cincinnati Children’s willingness to try new solutions that ConnXus has grown their healthcare business over 5x, and has since attracted millions in venture capital, including money from TechStars in Boulder, CO, one of the funds in our network. This is how it is supposed to work – this is real leverage!
And there are significantly more opportunities like ConnXus for those who are ready to engage.
In order to foster a startup community, we need to create an environment conducive for entrepreneurship. What does a favorable environment for entrepreneurs look like? It looks like the best talent from around the world developing big ambitious ideas that have the potential to make make a lot of money.
And Austin Allison is a perfect example of what the product of a thriving ecosystem looks like. The founder and CEO of DotLoop, which was just acquired by Zillow for over $100 million, had an ambitious vision to change the way residential real estate transactions worked in a mobile, digital environment. As a result of his hard work, DotLoop became the standard platform for 8 of the top 10 real estate companies in the country.
So how does this benefit our community? Not only do the founders and employees do well but the local angel investors have made 17 times their investment in 5 years! And guess what, they want to do it again, investing their proceeds in more startups in the region. This is the positive, reinforcing cycle that we set out to create.
The Fund is, of course, designed to provide financial returns to the investors and generate funding for our startups. So how are we doing on that front?
Well, after two and a half years, we committed 71% of the fund to ten partnerships. We have drawn down $11 million as of Q3, or approximately 19% of the committed capital. We have a very good pipeline of funds to consider. Our criteria has been consistent and we continue to target funds based on performance first and regional engagement second. At this pace, we expect to be fully committed by next year and will consider a second fund sometime in 2016.
But the best way to know that the Syndicate Fund is having an impact is to look at the One Metric That Matters. We benchmark ourselves against other regions across the country by looking at one number – the amount of capital that is raised by local startups through the network, divided by the capital that we have invested from the fund. This number tells us whether or not we are maximizing the leverage of the Fund ’s capital.
So we’ve made commitments to 10 funds, totaling $40 million. To date the capital outlay or the dollars invested over time is approximately $11 million. Those dollars are put to work in over 155 startups around the country, producing growth and increasing in value. That’s pretty exciting, right?
What’s even more exciting is that for every $1 we’ve invested, our local startups have raised over $7. That’s over $80 million invested in our startups, in under two and a half years. That’s leverage!
The Triple Bottomline Win
Corporate investors sourcing innovation, improving our community and producing an attractive financial return. That’s the triple bottomline win.
And the more our corporations and startups engage with our Venture Network, the financial performance of the fund will only increase. The access and benefits are clear. The Syndicate Fund is one of the smartest investments Greater Cincinnati has made and we should all be proud!
That brings us to today. Recently we announced a partnership with OurCrowd based in Israel, the #1 equity crowdsourcing platform in the world. Crowdfunding has become a legitimate and important source of fundraising for startups and now Cincinnati startups will have access to OurCrowd.
We look forward to increasing the returns of this first fund and we are confidant that as time goes on, the business community, the startup community and the City of Cincinnati will see the Cintrifuse Syndicate Fund as the smartest investment we have ever made.
As fund of funds manager, Tim Schigel oversees the Cintrifuse Early Stage Capital Fund I, LLC, which will invest in early-stage venture capital funds regionally and nationally. He is responsible for growing the fund of funds and guaranteeing it delivers on its mission to support funds which funnel investment to startups. Schigel oversees the fundraising strategy, including development of work plans and tactics. Schigel is responsible for growing relationships with potential donors and regularly updates the Cintrifuse team on new funding opportunities.