JumpStart: IdeaExchange Blog

I wrote recently about the Warrior Entrepreneurs of the North Coast, and I’m here now to write about the North Coast’s Phenomenal Founders. Initially, I wanted the criteria for Phenomenal Founders to be more about serial founders, that special breed of entrepreneur who has founded multiple wealth creating (for themselves, their employees, and investors) companies. But, I found too many phenomenal one-time (non-serial) founders that I didn’t want to limit it.

So, I expanded the criteria to include people who have founded at least one company (just one will do) that created wealth in the past ten years. Note that I did not do extensive VentureSource/VentureXpert/Dun & Bradstreet data downloads, comb through SEC filings, and conduct Martin Bashir-style in-depth interviews to get this information so I should emphasize that these are companies that seem to have created wealth. Also, you might ask: why the obsession with wealth creating exits specifically? Because it is wealth creation (through IPOs or acquisitions) that changes communities for the better: employees and investors make more money than they dreamed of, and they plough their money and their knowledge back into more early-stage ventures in a proven, well documented process called entrepreneurial spawning (see this article also). This spawning helps to create growing, dynamic communities whose workers enjoy growing average salaries. Think Microsoft, which, basically, turned Seattle/Redmond into something other than a sleepy western outpost because in-the-money employees left Microsoft and created more software startups. Take Mark Woodka at BSK Live in our portfolio. He was at TMW Systems and then Flashline and now he’s leading StaffKnex — a great example of serial entrepreneurship and entrepreneurial spawning all rolled into one.

So, back to those Phenomenal Founders — people who have founded companies that (it seems) created wealth for themselves, employees and shareholders alike. Here is my Phenomenal Founder list:

• Brian Deagan and Bill Landers (600 Monkeys)
• Stu Fishman (All Wound Up)
• Sam Gerace (Be Free)
• Chuck Hallberg (MemberHealth)
• Bruce Harris (Conferon)
• Peter Jacobsen (Dream Waffles)
• Trevor Jones (BioMec)
• Bob Lasser (Management Reports International)
• Carol Latham (Thermagon)
• Tim McCarthy (Workplace Media)
• Kevin McHale (Everstream)
• Dan Moore (Dan T. Moore Company)
• John Osher (Cap Toys/Spinbrush)
• Kenn Ricci (Flight Options)
• Geoff Thrope (NDI Medical)
• Ed Tromczynski (PlanSoft)
• Andrew Vaeth (ExpenseWire)

This is a fun list; I like it; when added to the Warrior Entrepreneurs list, and knowing that both lists are far from complete, it definitely feels like we in the North Coast have a solid entrepreneurial culture. Of course, seeing the extraordinary Carol Latham on the list, my mind naturally ambles to the question of: ladies, hey ladies, where ARE you? Yoo hoo, can some female Phenomenal Founders please stand up, come forward, don’t be shy now, if you got it flaunt it, know what I mean? I know there are many complex variables in the not-enough-female-technology-entrepreneurs issue, trust me I really, really know, but come on now. Won’t you puh-lease tell me about some women who founded high growth, wealth creating companies in the North Coast who are just not being celebrated here?

On a different note, I want to end by mentioning that I failed to include JumpStart’s very own former venture partner, Sam Gerace, in my prior post about warrior entrepreneurs. He co-founded Be Free, Inc., merged it with a public company (ValueClick), and then moved to Cleveland. We were lucky to have him spend a year with us at JumpStart, guiding first-time entrepreneurs. He is an entrepreneur through and through, and so he left us to head up another startup company here in town, Veritix, and my bet is that he will create another success. Sam is a Warrior Entrepreneur and Phenomenal Founder all rolled into one.

Okay, enough said: please let me know who you think should be added to the list of Phenomenal Founders.

Becca Braun is President of JumpStart Ventures. She founded and led a number of early-stage companies and organizations, as well as worked as a private equity investor and management consultant. She received her MBA from Harvard Business School and her BA in Linguistics from Harvard University. She is keenly interested in the intersection of wealth creation and broad-based regional economic growth.

In order to see what kind of robustness we (we = Northeast Ohio) have in the warrior entrepreneur front, I am trying to build a shortlist of the top innovation-oriented entrepreneurs in Northeast Ohio over the past 30 years. Here are my criteria for what constitutes a warrior entrepreneur. He or she needs to have:

• Innovated from scratch through either finding a technology or a new way of doing business. There are many great business people who have grown companies, but I’m talking about that rare breed that finds or develops an innovation at the earliest stages, and
• As CEO, grown this innovation into a company that employed a lot of people (say, 100+ people). Separately, I’m planning to compile a list of serial founders, which is different from this list — it’s people who found a technology and then move on to their next technology and then move on to another one after that. But this list is about people who found a company and grow it to create many jobs, and
• Achieved an exit (IPO, recap, or acquisition) that created significant wealth for investors, employees, and themselves. This does not mean that all investors and employees made a lot of money, since there are all kinds of factors that come into play here, but rather someone in addition to the entrepreneur founder has to have gotten rich enough to retire quite comfortably.

Here are some people who I think fit all three criteria and therefore are warrior entrepreneurs:

• Monte Ahuja (Tran star Industries)
• Ray Dalton (OneSource Services, National MD)
• Tom Embrescia (Independent Group)
• Michael Feuer (Office Max)
• Bruce Harris (Conferon)
• Jim Hummer (Whole Health)
• AJ Hyland (Hyland Software)
• Jack Kahl (Manco)
• Mike Kennedy (LDI)
• Peter B. Lewis (Progressive)
• Steve Lindseth (Complient)
• Sydell & Arnold Miller (Matrix Essentials)
• Mal Mixon (Invacare)
• Bill Sanford (Steris)
• Charlie Stack (Flashline)
• Gil Van Bokkelyn (Athersys), and
• Tom Weisz (TMW Systems).

These are the “who” of entrepreneurship in Northeast Ohio and as we build our entrepreneurial culture, they are well worth celebrating. Indeed, I’d like to dedicate a wall (similar to what existed at the old EDI here in town) in our building to having their names and companies on it (I know, a website is the new “wall”, but I also like the concept of having a physical wall). This wall could use a few more people, though, so please tell me whom I have missed (I am sure there are many). By the way, there are about 15 additional people who I originally had on this list but a close look at the criteria didn’t quite put them on the list; they’re extraordinary entrepreneurs, but don’t quite fit the criteria for this specific list because either they did not start the company from scratch, they sold the company and created wealth before it reached 100 employees, they have not yet exited, or their success was not within the past 30 years. In any case, I am curious as to who else in Northeast Ohio should be on this “warrior entrepreneurs” wall. 

My goal is to have a wall of nearly 60 names within 10 years. Why? I don’t exactly know (this is a blog, not a whitepaper, ok people?) But, I suppose my calculation is this: with maybe 25 people on the list today (if you include a bunch of people I forgot), 50 equates to the addition of two to three warrior entrepreneurs per year that the pipeline is building. In Northeast Ohio over the past 10 years, an average of about four technology/innovative companies per year have reported exits, and maybe about half of those are significant wealth-creating exits. So, say two per year historically, which leads to 20 new on top of the 25 that are already there, if we remained in steady state with the past 10 years. Since the capital and innovation pipeline has shown itself to be building nicely over the past five years, then it makes sense that we should be able to increase the number of new warrior entrepreneurs with great exits over the next 10 years to, say, three per year, or 30 total. Twenty-five existing plus 30 new = 55, plus a little more stretch to reach round numbers = 60 (a very whitepaper-type calculation indeed…). 

What specific new additions will be made to this wall over the next ten years? Well, we (Northeast Ohio) have a crop of potential warrior entrepreneurs in people like:

• Rahul Aras (Juventas Therapeutics)
• Laura Bennett (Embrace Pet Insurance)
• Kevin Berner (Logos Energy)
• Mike Broderick (Turning Technologies)
• Don Brown (Arteriocyte)
• Bill Nemeth (Mirifex), and
• Mark Woodka (StaffKnex).

They bring their own unique signature styles to what they do at their technology companies – with some consumed by developing technologies that might change the world, others laser focused on the blocking-and-tackling of growing a small business, and others obsessed with fulfilling clear and compelling customer needs all day, every day. It is hard to tell who among these, and many more, will become the warrior entrepreneurs of 2019, but it is fun working with them as they grow their companies.

So, with a pipeline building and a goal in mind, imagine the list being 60 true warrior entrepreneurs strong (and hundreds more extraordinary entrepreneurs, to boot) by 2019. Imagine the wall full of familiar and new names, all having achieved actual, real successes in growing companies and changing the world. (When I’m particularly ambitious, I even dream that it has some more immigrants, women, Hispanics, African Americans and the like, but, well, that’s a whole different topic, ain’t it?). Regardless, the companies these warriors grow do and will employ many among us, including our children and grandchildren. The companies they grow will be our shared future. This warrior-wall-in-my-mind belongs to all of us.   

Next time:  I will write about a Phenomenal Founders wall that celebrates those people who founded a company that created wealth for employees and Northeast Ohioans, but for various reasons achieved great exits before they got to the 100 employee mark.  

Note: Thanks to my colleague Lynn-Ann Gries for her very lengthy and well thought out list of warrior entrepreneurs. She knows entrepreneurship in this town like the back of her hand!

Becca Braun is President of JumpStart Ventures. She founded and led a number of early-stage companies and organizations, as well as worked as a private equity investor and management consultant. She received her MBA from Harvard Business School and her BA in Linguistics from Harvard University. She is keenly interested in the intersection of wealth creation and broad-based regional economic growth.

Everyone is aware that this is a tough economic year, and that job prospects for new college graduates are not great. This has severely affected student internships, which provide not only short term talent for companies, but also important work experience for students, a long term talent pipeline for companies and vitality for our region. These issues and opportunities are particularly key to the continued entrepreneurial development of Northeast Ohio. A number of programs, three of which JumpStart TechLift Advisors either manages or promotes, are driving student internships into our entrepreneurial companies and organizations: 

• The JumpStart TechLift Business Intern program is in a pilot phase this year, thanks to a generous grant from the GAR Foundation. The goal of the program is to place Northeast Ohio students in business applications at entrepreneurial technology companies in the region, with a focus on the Akron area. The program is completely filled for the 2009 season. Sixteen students from nine different Ohio universities and colleges will work with a wide variety of technologies including software, internet marketing, new energy solutions, clean technology, advanced materials, robotics, military electronics and medical devices. The internships are in human resources, marketing, market research, accounting and intellectual property. In addition to their work experience, interns will attend events to learn about venture capital, entrepreneurship and business networking. 
• In 2008, JumpStart TechLift Advisors announced an exciting new program with Purdue University called Interns for Entrepreneurship for internship experiences at Northeast Ohio entrepreneurial technology companies. Four students, two from Northeast Ohio, one from India, and one from New Jersey will participate in the program, which, in addition to their work experience in medical devices, nanotechnology and advanced manufacturing, includes in-depth studies in entrepreneurship, business planning and venture capital.
• Ohio’s Third Frontier Internship program is one of the best in the nation for its flexibility and resulting success in placing science, technology, engineering and math students into Northeast Ohio technology companies. JumpStart TechLift Advisors was involved in helping at least 30 of these internships happen in 2009 alone. 
• Additional interns are working in economic and entrepreneurial development organizations, including JumpStart, NorTech, the Ohio Fuel Cell Coalition, BioEnterprise, Entrepreneurs EDGE and others, through various other internship programs, most notably Summer on the Cuyahoga.

So what is the benefit of all of these programs and internships? In order for Northeast Ohio to develop and grow a self sustaining, fast moving, entrepreneurial culture, we need a constant supply of young talent, exuberance and creativity. Programs that are helping to make this happen are making a real difference and are probably among the best “bang for the buck” opportunities for growing the talent pool in the region.

Chris Mather is the President of JumpStart TechLift Advisors. Previously, he managed a number of technology initiatives in Northeast Ohio for NorTech. Before entering the economic development world, Chris ran a number of technology companies in Northeast Ohio and New England, including Ion Optics Inc., where he raised $6.7 million in venture capital, and Apsco Inc. and Gould Instrument Systems. Prior to that, he spent 13 years in sales, marketing and management roles with Hewlett Packard after graduating from Worcester Polytechnic Institute with a BS in Electrical Engineering.

Though he was kinda slow and none too bright**, Microsoft co-founder, Bill Gates III did have one great asset: his father was a small business lawyer. Bill Jr. purportedly helped the teenage Bill negotiate phenomenally well on behalf of his fledgling software company and himself. Without his father’s guidance, would Bill have owned less than the 64% of the company that he started out with (Ballmer had 36%)? The world will never know, but I suspect so — my guess is he might have gone with the old 50/50 split that co-founders often agree on. (See this history here which I took straight from Noam Wasserman’s fabulous Founder Frustrations blog, where he discusses, among other things, the Microsoft Founders.)

Of course, most entrepreneurs have more upstairs than did/does Bill***. Despite their greater natural advantages, they should still make sure that they have a great lawyer. So, how do I define great lawyer? To my mind, for companies that are trying to raise equity capital (angel or venture capital), a good lawyer is someone who has done at least five angel/venture equity deals in the past two years, and a great one is someone who, at a minimum, has done ten.**** In other words, representing companies, founders and investors in angel and venture capital transactions should be a core part of what they do every day, rather than being an occasional thing they do when business is bad or when a friend asks them to help him/her out. Great lawyers for companies who want to take the equity-funding path are up on the latest deal terms. They have been privy to many different negotiating styles, have seen how different investors react to different “hot button” issues, and can bring this expertise to bear when negotiating on your behalf.

Also, figure out how to get some kind of a special deal from them — whether that’s having them offer extra services, like attending board meetings free of charge, taking deferred payment based upon some future funding event, or taking stock options as a form of payment. What I have found is this: lots of top lawyers are incredibly interested in working with entrepreneurs because they’ve seen how successful some early-stage company clients become, and they want to keep working with those kinds of companies. They know that the economics of early-stage companies require some special deal. And, sometimes, if you and your company truly seem high potential they’re willing to offer it. That’s a key point; top lawyers don’t offer special services for undifferentiated companies and entrepreneurs who just want a discount ‘cause they want a discount; rather, great lawyers are willing to “pay it forward” through right-sized economics and special services if they see the potential for payback in you and your business.

My final comment is that I have fully stolen this theme of hiring a great laywer from my esteemed and wise colleague, Lynn-Ann Gries – see her blog on similar subject here.

Notes:

* Disclaimer: I am not married to a lawyer nor do I have a lawyer in my immediate family. I have not been paid by the Cleveland Bar Association to post this blog. I do not get any kickbacks from lawyers. Indeed, I have practically no lawyer friends from whom I could get kickbacks, and since I recommended that you ask them for a discount for them to work for your tiny baby company (GE your company ain’t—might be one day, but it ain’t right now) lawyers probably aren’t that thrilled with me anyhow and will only give me the “kick” part of the “kickback”. Indeed, this posting is just my heartfelt and experienced-based belief about one key aspect of starting and growing a company.

** That’s sarcasm.

*** Ditto - sarcasm.

**** By the way, just because they’ve worked on at least ten angel/venture deals in the past two years (note: ask them specifically for their track record and ask for names of clients or references) doesn’t make them great, but at least it puts them in the running.

***** Here’s another article that gives some more advice on hiring good or great lawyers.

Becca Braun is President of JumpStart Ventures. She founded and led a number of early-stage companies and organizations, as well as worked as a private equity investor and management consultant. She received her MBA from Harvard Business School and her BA in Linguistics from Harvard University. She is keenly interested in the intersection of wealth creation and broad-based regional economic growth.