Valley Growth Ventures Fund Prepares for Phase Two

YOUNGSTOWN, Ohio – This time next year, Valley Growth Ventures, a microventure capital fund based here, expects to be fully invested and ready to position itself for Valley Growth Ventures 2.

That was the message Ernie Knight, managing director of the fund, offered investors at Valley Growth Venture’s first annual meeting inside the DeBartolo Stadium Club at Stambaugh Stadium.

“Everything is going according to plan and they’re positioned well for the future,” Knight said of the four companies that have already received funding.

Valley Growth Ventures is looking to fund two more companies this year and line up three more in the first half of 2020, which would bring the fund to full investment.

Knight estimates the fund has invested or allocated 49% of its $6 million.

“It takes five to seven years to start to see the exits and the returns,” which is why he expects the capital campaign for Valley Growth Ventures 2 to be more difficult than the first round. Valley Growth Ventures was launched in 2017.

“You haven’t had an exit yet so you can’t quite do a track record of what you’ve accomplished. On fund three you’ve got that,” he said.

Knight hopes to start seeking funding for phase two in the second half of 2020. 

Ideally, he said, the funds will come from a mix of public and private investments, similar to the initial fund, which raised $3 million from private investors with a $3 million match from the Ohio Third frontier program.

The equity capital represents 44 investors. Most are from Ohio, though the fund also represents investors from Texas, California, New York, Massachusetts and Florida.

“We’ve said many times how important it is that we start to generate investment not just from local investors but from across the state and across the country,” said Barb Ewing, CEO of the Youngstown Business Incubator, one of the founding partners of the fund.

Other partners include Mercy Health, Tech Belt Energy Innovation Center, the Youngstown State University Research Foundation and the Mahoning Valley Economic Development Corp.

To date, Valley Growth Ventures has fielded 157 inquiries. Of those, Knight estimates 62% have come from northeastern Ohio and a third of those from the Mahoning Valley. Thirteen percent of the inquiries were for businesses in the health-care industry, as are three of the four companies currently funded.

During the meeting, the four companies being funded gave investors an update on their progress.

“We’re in a real growth phase,” said Matt Buder Shapiro, co-founder of MedPilot Inc., a patient financial engagement platform that seeks to transform patient billing through customized outreach tailored to people’s preferences.

“In 2018 we hit $500,000 in revenue,” he said. “We’re projected to hit $1.5 million this year and $5 million the following, so right now our money’s really going towards growth.”

Shapiro said the company, which relocated to Cleveland from New York last year, is focusing most of its efforts on marketing and building a sales team. It currently employs 30.

“We should have twice as many employees by the end of the year,” he said.

S4 Medical will start human testing on its product this summer. The device protects a patient’s esophagus during an atrial fibrillation ablation procedure, which corrects arrhythmia by scarring the heart tissue that is sending faulty electrical signals.

“There are about six million people in the U.S. that have atrial fibrillation and about 33 million worldwide,” said founder and CEO Bill Fuller.

In some cases, the ablation travels through the heart wall and damages the esophagus, which sits against the back of the heart. 

“Worst case scenario you can actually kill the patient,” Fuller explains.

Through the use of suction, S4’s device allows the surgeon to pull the esophagus away from the heart so the procedure can be performed safely.

Fuller said there are over 100,000 ablation procedures in the U.S. annually and that number grows 22% every year.

“The younger patients, they’re going to go right for ablation procedures.”

Meanwhile, MedaSync, a software company that provides real-time business data to help nursing homes operate more efficiently, is hoping to grow its client base by 600% this year.

“Our plan this year is to get into about 120 nursing homes,” said CEO Ryan Edgerly. 

MedaSync has 20 nursing homes under contract in markets including Cleveland, Pittsburgh, Chicago and Cincinnati.

“We think we can get this to a $15 million company in the next four years,” Edgerly he said.

The only company being funded that isn’t in the health care industry is DatAnchor, based in Columbus.

“If you look at a data breach, you can always find a human error or an adversarial action,” explained company founder Emre Koksal.

DatAnchor is a cyber security platform focused on protecting data as it moves across file types and applications.

The funding DatAnchor received from Valley Growth Ventures is being used for product development and feasibility studies to see which market vertical might be best, Koksal said, though that’s not the only benefit.

“Valley Growth Ventures is very diligent, so that gives us confidence that we’re doing the right thing because of the amount of diligence that they have,” he said.

Pictured: Valley Growth Ventures managing director Ernie Knight (standing) met with the leaders of the four companies the capital fund has invested in: Emre Koksal of DatAnchor, Matt Buder Shapiro of MedPilot, Ryan Edgerly of MedaSync and Bill Fuller of S4 Medical.

Copyright 2024 The Business Journal, Youngstown, Ohio.