JumpStart: IdeaExchange Blog

In late 2004, Lynn-Ann and I sat with our computers one night at a cafe at Cedar-Lee and put together a five year projection of how much additional capital the companies JumpStart would invest in might be able to raise. The first year showed $3 million. The second showed $6 million. We had benchmarked against Innovation Works in Pittsburgh, a phenomenally successful venture development organization; we would try to use their success ratios for our projections; no sandbagging. The third year showed $15 million. Year four showed $20 million. And year five showed $30 million. These numbers (totaling $74 million*) seemed huge at the time, especially since we projected that 25-50% of the companies we invested in would likely fail; it’s inherent to Imagining, Incubating and, to a lesser extent, Demonstrating stage investing. As we sat at our computers that night, JumpStart had only invested ~$300 thousand in two companies, Stanton Advanced Ceramics and PreEmptive Solutions. 

Suffice it to say, $100 million seemed light years away.

About three weeks ago, the companies in JumpStart Ventures’ portfolio officially surpassed the $100 million in capital raised mark (almost $103 million to be precise, or nearly 7 times the $15.7 million we have invested in 45 companies). By the numbers, 32 of the portfolio companies have raised follow-on capital over 127 fundraising rounds, with the average total amount raised by those 32 companies being $3.2 million and ranging from $50 thousand to $20 million, and the median timeline from our investment to next investment being 15 months (and trending downwards). Twenty-three companies raised over $1 million dollars. Cleantech companies have slightly edged out Healthcare companies, with the former totaling $41 million in follow-on funding raised, and the latter at $39 million. Phycal and Echogen (fka rexorce) have led the charge in Cleantech, and in Healthcare, Juventas, CardioInsight, and Synapse Biomedical have also raised significant capital. By type of investor, venture capital investors have carried the day, with angel investors close behind; grant funders (especially from the federal government) rose as a percent in 2010, but we expect that to even back out in 2011. Also, $100 million represents about 10% of the total amount raised in the Northeast Ohio region over the past five years of $1.1 billion.**

That’s the numbers, but as we all know, this is not about “companies” raising “capital”: too cut and dry sounding in so many ways. It is human beings, namely Northeast Ohio entrepreneurs, telling a story about innovation and how that innovation will somehow make the world a better place. And these entrepreneurs being resourceful enough to find people with money who happen to love their particular story – whether these people are former entrepreneurs turned angel investors, associates at investment funds, or even sometimes government officials who provide grants. Sure, while it’s not really “companies” and “capital” and various takes on the numbers, it is also no love story. Anyone who’s raised money knows that it is due diligence, term sheets, a whole lotta elbow grease, and, eventually, return on investment. It’s about taking something that is a science project and turning it into a product that customers want, which, if the revenues at our portfolio companies are any indication, is happening consistently, with ever more customers buying what these portfolio companies are offering.

$100 million is more than a number. That’s the point. So, regardless of which number or ratio holds meaning to you, here’s to the entrepreneurs who lead the companies in the portfolio and to whom “capital efficiency” is way more than a buzz word: Andrew, Arnon, Bill, Bob (3 of them actually), Brad, Brian, Chad, Chris, Craig, Dan, Dana, Dave, David, Dean, Elliot, Ethan, Fred, Gabe, Jay, Jeff, Jeeva, Jim (2), Jodi, Jon, Karl-Heinz, Ken, Kevin, Krzysztof, Lance, Laura, Len, Mark, Mike, Nick, Phil, Rahul, Scott, Steve (2), Sue, Tony (3), and Wendell. And here’s to the hundreds of investors who have put their hard-earned money behind these growth stories, from Arboretum to Charter Life Sciences, from Draper Triangle to Early Stage Partners, from North Coast Angel Fund to Ohio TechAngels, and from the Ohio Department of Development to the U.S. Department of Defense.   

Now before year’s end, the JumpStart Ventures team will sit and project out the path to $1 billion for JumpStart Ventures portfolio companies. It’ll feel like as much of a SWAG as $100 million did five years ago. But at least now that path has faces, names, relationships and the other things that make a spreadsheet more than a spreadsheet: they make it an ecosystem.***

Notes:

* These numbers then increased by about 25% because we increased our investing budget from $3 million per year to $3.75 million per year, hence giving us the $100 million number.

** This is a slight apples to oranges comparison since our follow-on funding numbers include some grant funding and the overall region’s numbers include angel and venture capital only.

*** Thanks to Kerri Breen who took the spreadsheet I referenced at the beginning of the post and who has not only successfully supported many entrepreneurs on their fundraising efforts but also runs the numbers like it’s nobody’s business.

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.

Recently, I was asked to give a talk to a group about JumpStart TechLift Advisors, JumpStart, and the support network for entrepreneurial companies in Northeast Ohio. In preparing, I took a look at where we have been, and where we are today in terms of a fabric of funding and support resources for entrepreneurial companies. The progress since 2002 has been incredible. 

First off, I apologize in advance to any organizations who I may slight or overlook — in 2002, I was running a company in Boston, and wasn’t all that aware of Northeast Ohio’s efforts to encourage and support entrepreneurs. At that time, we had a few organizations, like EDI doing some entrepreneurial support, and some premier funds like Morgenthaler and Primus, but Northeast Ohio certainly wouldn’t have been described as a great place to be an entrepreneur. Largely due to the catalyzing work by NorTech, its predecessor, Cleveland Tomorrow, along with tremendous support from the Fund for Our Economic Future, the Greater Cleveland Partnership, the Ohio Department of Development and others, things started happening:

• BioEnterprise came along in 2002, with its bold model of harnessing our region’s bioscience research strengths to spur the growth of venture fundable companies. BioEnterprise is now recognized as a national model for such efforts.
• Early Stage Partners was formed in 2002 to begin to address the early-stage capital needs of the region.
• JumpStart was formed in 2004, with a focus on funding and mentoring high growth, venture capital fundable companies. It too, has become a national model for doing this.
• NorTech convened its Early-Stage Capital Task Force in 2005 to understand and address the projected capital needs of the region.
• Two angel funding groups, The Akron ARCHAngels, and the North Coast Angel Fund, along with a statewide group, the Ohio TechAngels Fund, were formed to connect entrepreneurs with angel investors.
• The State of Ohio formed The Ohio Capital Fund, which provides incentive for venture funds to locate in the state. A number of funds take advantage of this as well as well as the growing deal flow environment to locate here, and names like Arboretum Ventures, Bridge Investment Fund, Chrysalis Ventures, Draper Triangle Ventures, Radius Ventures, Reservoir Venture Partners, and RiverVest Ventures were added to our list of locally based funders.
• In 2006, the state challenged the region to design a program to take our entrepreneurial support system to another level. NorTech took the lead, and the result was the TechLift collaborative, directly supporting and mentoring the region’s technology entrepreneurs, providing financial support for important initiatives in the current system, and increasing the investable capital in the region. Like JumpStart and BioEnterprise before it, TechLift has gone on to become one of the best models nationally for growing, supporting and funding early-stage technology companies.
• The Innovation Fund at Lorain County Community College and Cuyahoga County’s North Coast Opportunities Technology Fund came about largely as a result of this effort, and they have since become integral parts of Northeast Ohio’s funding map, investing in ventures even before JumpStart and the angel funds, and are outstanding examples of productive public/private partnerships.
• The region’s Edison Program funded incubators, the Akron Global Business Accelerator, MAGNET in Cleveland, Braintree in Mansfield, GLIDE in Lorain, and the Youngstown Business Incubator came together as NEOinc to provide a broader set of incubation services. These incubators were also part of the TechLift collaborative, which provided for expanded entrepreneurial services.
• In 2009, TechLift joined JumpStart as JumpStart TechLift Advisors, to create a broader, more seamless entrepreneurial support network. JumpStart Inclusion Advisors was also formed at this time to provide world-class support and eventually funding to our minority and female led entrepreneurial companies as well as those committed to growth in our inner cities. Through these additions, JumpStart becomes the premier venture development group.

As mentioned before, apologies to any people or organizations I left out, but, I guess, in a way, that is a good thing, since we have had so much growth in our entrepreneurial support system that it’s tough to list all of the contributors. Over the past nine years, this progress is startling:

This in 2002:

To This in 2009:

When we started TechLift in 2007, our stated objective was “to make Northeast Ohio the best place in the U.S. to start and grow a technology company”. From the above, clearly, JumpStart TechLift Advisors plays a role along with many others. Are we there yet? Probably not — we still have work to do. Despite our superior support structure, we still don’t have the funding climate of Boston or Silicon Valley. We haven’t had enough “home runs” — companies that start in Northeast Ohio, get funded and exit with success. Are we on the way to becoming the best place in the U.S. to start and grow a technology company? We are on our way, should be proud of how far we’ve come and must keep pushing this remarkable transformation of our economy.

Chris Mather is President, JumpStart Entrepreneurs-in-Residence. 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.