JumpStart: IdeaExchange Blog

It’s that time of year, the State of the Union/State time of year. And while I won’t give you a State of JumpStart address here, it’s become obvious to me that:

The State of Cleantech In Northeast Ohio is booming.

The Governor of Ohio, Ted Strickland, visited a JumpStart Ventures portfolio company yesterday, rexorce thermionics (in the process of changing its name to Echogen Power Systems). Aside from the company’s accomplishments including the installation of its commercial pilot for its heat engine and the creation of 20 engineering jobs, the Governor was visiting because it’s the perfect example of the growth of the cleantech sector in Ohio. A few other examples showing this is real growth, not just rhetoric, from The 2009 Venture Capital Report for the Cleveland Plus Region:

• Cleantech companies are the fastest growing segment of companies receiving venture capital or angel investment in the Cleveland Plus region. While they received only 3% of the dollars 5 years ago, they received 20% of the dollars in 2009.
• 33 cleantech companies have received venture or angel investment in the last five years.

One of those companies is VADXX Energy, whose CEO, Jim Garrett, presented its business plan yesterday at JumpStart to the Oberlin Entrepreneurial Scholars. VADXX Energy, which transforms waste plastics (such as the seats of old cars) back into synthetic crude oil, set up its first production facility in Akron recently, and will shortly be starting its first commercial pilot production.

Another of those companies is Phycal, a JumpStart Ventures portfolio company creating algal biofuel. Aside from the algal pool in its Mayfield Heights location, the company is in the process of setting up its first pilot production facility in Hawaii. Phycal was identified as one of BusinessWeek’s 25 Most Intriguing Companies last month.

With the Federal and State initiatives that will ultimately be funding Northeast Ohio cleantech companies in the future, with the new advanced energy incubator in Warren moving forward, and with the continued support of Ohio Third Frontier, there’s no better place to be for a cleantech company.

Cathy Belk is the Chief Marketing Officer of JumpStart. She specializes in branding, marketing communications, and business management. She brings 16+ years of experience in a variety of marketing and business roles, but gets her energy from working daily with entrepreneurs and their growing companies.

Albert Einstein once said “If, at first, the idea is not absurd, then there is no hope for it.” Here is my list of the top ten most absurd and hopeless ideas I have heard about in my lifetime:

1. Coffee shops? The world hardly needs more coffee shops. Plus, coffee shops don’t scale.
2. A Maine-based line of natural products that are made with bees wax? Last time I checked, the “bee” supply chain wasn’t that scalable.
3. Overpriced, finely made historically accurate dolls that will teach children about history? Seriously? I don’t even know where to go with that.
4. An algorithm that will improve upon Yahoo’s web search technology? Fatal flaw: why couldn’t Yahoo just do that themselves?
5. Packages overnight? The infrastructure required to make that happen is prohibitively expensive. Nice idea, but too much capital risk.
6. Growing a technology business in Seattle? Cow town, and too far away at that: investors want to be able to drive no more than four hours from their home. Plus, there’s no entrepreneurial talent in Seattle.
7. You want to trade collectibles and knick-knacks on the web? That’s maybe, like, a $1,000 market on a good day.
8. Your children have an “orphan disease” for which you want to find a cure? OK, so what don’t you understand about the healthcare industry(?): orphan diseases are unfundable.
9. Sell books on the Internet? People want the experience of touching books, opening the covers, being in a bookstore. Sorry, but the need just is not there.
10. You don’t want to develop computers but you do want to (basically) assemble them? There’s nothing novel or even very protectable about that. If you had invented a new microprocessor or something, I might be interested. But just putting the boxes together isn’t going to generate sustainable gross margins.

These are unassailably awful ideas. Every one of them. Laughable almost. I wonder what the poorly thought-out, misguided, ill advised…OK, can we all just agree to call them patently absurd?…ideas of the next decade will be:

• Making cost competitive oil out of algae (been there, tried that; plus, the whole algae industry is too capital intensive, don’t you know)?
• Competing with Google (ok, can you say naïve)?
• Starting a great company in Cleveland (too cold; no talent — seriously: none, anywhere in the entire state in fact)?

I confess that I do not know. But, I have the time of my life working with entrepreneurs trying to figure it out.

(So, the terrible ideas listed above are examples so well known to most Americans — never mind you fair, brilliant readers steeped in innovation history and always seeking contrarian ideas — that they are almost trite. But, to my mind, they bear repeating because they remain stalwart, iconic reminders of how visions and dreams become great companies in spite of a slew of reasonable obstacles and well reasoned protests. In case you didn’t recognize one or two, here they are:

1. Starbucks, founded in 1971 and a market cap of $17.2 billion today
2. Burts Bees, acquired by Clorox for $913 million in 2007
3. American Girl, founded in 1986 and acquired by Mattel Inc. for $700 million 1998
4. Google, founded in 1998 and a market cap of $184 billion today
5. FedEx, founded in 1971 and a market cap of $27 billion today
6. Microsoft, founded in 1975 and worth $274 billion today
7. eBay, founded in 1995 and a market cap of $29 billion today
8. Novazyme, acquired by Genzyme for $225 million in 2001; see Extraordinary Measures, which came out last week
9. Amazon, founded in 1994 and a market cap of $55 billion today
10. Dell Computers, founded in 1984 and a market cap of $28 billion today

Also, it should be noted that angel and/or venture capital investors believed in and invested in almost all of these companies. Each entrepreneur in question was able to get someone, and in some cases numerous someones, to believe in and put money behind the entrepreneur’s harebrained, crackpot — and I mean that with all due respect — idea.)

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.

Over the past month or so, I’ve taken you through some of the organizations behind the transformation taking place in our region around entrepreneurial development. These last two round out the group quite well — and bring some very unique strengths to the table. And, if you missed parts one through three, make sure to check them out too.

Akron Global Business Accelerator

Akron Global Business Accelerator (AGBA) was formed in 1983, and in its nearly 27 years of service, has provided business assistance, highly effective space, and a superb entrepreneurial environment to Akron area technology companies. AGBA’s longevity is largely due to its ability to react to changes in the environment.

How it works: AGBA offers very nice, edgy office space in a converted, 7 floor manufacturing facility. In addition to low rent, AGBA offers on-site entrepreneurial support, provided in partnership with JumpStart TechLift Advisors. The facility has been popular — it has truly become a “place to be” for entrepreneurs in the area. The large number of tenants creates an extremely robust and energized entrepreneurial environment, where companies are learning from each other, and leaning on each others’ expertise and experience.

Results: In terms of state defined follow-on funding and revenue metrics for its clients, AGBA leads the group of Edison funded incubators in Northeast Ohio. The incubator has grown to include nearly 50 companies, and its expansion plans continue indefinitely. AGBA was awarded the National Business Incubation Association’s 2008 Incubator Innovation Award as one of the nation’s best incubation facilities.

Why it works: AGBA works because it keeps innovating, pays attention to the facility’s environment, connects with funders and other support mechanisms, and is highly supported as a community resource by the city of Akron and other stakeholders. AGBA actively reaches out to companies when they receive funding from early-stage structures like JumpStart Ventures, North Coast Angel Fund, and works closely with JumpStart TechLift Advisors, The University of Akron, and others.

Youngstown Business Incubator

Youngstown Business Incubator (YBI) is a key community resource for entrepreneurial rebirth in the Mahoning Valley area. It has achieved spectacular results by focusing on one area: software.

How it works: YBI offers office space and business mentoring services to its clients involved in one business area: business to business software. The modern facility is in downtown Youngstown, and is the centerpiece of the city’s revitalization. The initial rent is very reasonable: free. Once a company has gotten some traction and achieved some success, they are asked to pay reasonable rent. Also, “veteran” companies are expected to coach and help “rookie” companies.

Results: YBI has seen a great deal of success, not only in receiving national attention (The Wall Street Journal, and others) for its efforts, but also in the success of its companies, Most notably, Turning Technologies has raised $8 million in capital, hired over 150 employees, and was named “the fastest growing software company in America” by  Inc. magazine. YBI has opened a new 30,000 sq. ft. facility, and continues to lead Youngstown’s downtown revitalization.

Why it works: YBI works largely because of focus. Since it only caters to business to business software companies, YBI is very good at working in that area, understanding the nuances, and how to be successful. Also, through focus, YBI creates tremendous synergy amongst its tenant companies, and a noticeable sense of energy and purpose in the facility.

This brings the ‘Getting It Done’ to an end. I hope that you enjoyed digging a bit deeper into a few of the entrepreneurial support structures that are transforming Northeast Ohio’s entrepreneurial landscape. As I mentioned at the outset, these are not the ONLY successful structures, just some notable ones. If you’d like to share others successes of note you know of — comment here to let us know. We’re always looking for more great stories to tell about the positive transformation taking place in our region.

High growth entrepreneurism has really caught fire in Northeast Ohio, and I really believe that if we aren’t there, we are well on our way to becoming “the best place in America to start and grow a small technology company.”

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.

Last week, Jeff Bussgang had a very interesting post on his own blog and peHUB: Why Do VCs Blog (and Tweet)? As you know, JumpStart is blogging and tweeting too - for many of the same reasons Jeff mentions. It’s great to hear the perspectives of other VCs as the industry continues to change. I shared a few of my thoughts on the topic as well:

Jeff, thanks for the post. Blogging definitely makes information more readily available to the masses and has helped to demystify the topic of venture capital. As a seed-stage venture investor with a focus on companies in the Midwest, I enjoy reading posts from my brethren around the country - it helps me keep abreast of current trends. (Just last month I highlighted 12 great VC-related blogs worth reading). I think you make some great points about why people blog. I know at our firm we started a blog not only to provide an outlet for personal viewpoints on various venture-related topics but also as a PR opportunity for the firm and the individual bloggers. That said, keeping a blog timely and relevant is hard work. Keeping the material fresh is a challenge and I’m impressed (and thankful) that so many VCs take the time to post. I wish I were as diligent. Active blogging by a VC may get them increased deal flow and definitely gets them enhanced name recognition which, for the amount of time and effort a blog requires, is more than deserved.

Lynn-Ann Gries is the Chief Investment Officer of JumpStart Ventures. She previously worked in the investment banking departments at both McDonald Investments and Smith Barney (now part of Citigroup), and in the sales and trading area at Morgan Stanley. She received her MBA from New York University’s Stern School of Business and her BA in Economics from Smith College. She currently serves on the board of the Fund for the Future of Shaker Heights, the Great Lakes Science Center and Summer on the Cuyahoga (SOTC).