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.

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.

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.

Not quite a resolution (because I want to avoid the “breaking” curse), these are the most important things I’m going to prioritize this year, as they will directly impact my ability to deliver success for JumpStart. 

5) Monitor marketing news and trends every day. I use NetVibes to assist with monitoring blogs, Twitter, and news updates, in addition to my RSS feeds and email newsletters, but admit sometimes I’m catching up at the end of the week. The thing is, every time I check, I see one thing that is valuable right then. I hate the idea that I’m losing days in which those ideas can prompt and enhance my thinking. After reading David Carr’s Why Twitter Will Endure - NYTimes.com from the Times last Sunday, I’m wondering if I should focus some time on following the right folks on Twitter and leave it at that…

4) Reconnect with my network. I’ve spent time re-establishing professional connections through LinkedIn, but for a while now, the list has been sitting relatively fallow. (I would hypothesize this is somewhat common unless someone has sales responsibilities or is working to obtain or fill a position). But what a wealth of people with whom to brainstorm, tackle problems, and gain best-practice examples or new ideas! When was the last time I called someone to get caught up on responsibilities, most recent business challenges, and best new thing learned? Hard to believe this wouldn’t be richly worth the 10 minutes.

3) Create a mobile plan. Yes, this has been a long time coming, and many businesses are already  utilizing mobile tools to connect richly with consumers or customers. (In fact, Knotice’s Concentri product is one of the most robust around for cohesively marketing to consumers via mobile, Internet, and other customized points of connection. (Full disclosure: Knotice is a JumpStart Ventures portfolio company). Creating a plan for our email communication and website to become more mobile-friendly has been on the list for over 6 months; now that I’ve read Morgan Stanley’s Mobile Internet report which indicates — among other things – that more people will connect to the internet via mobile devices instead of desktops within 5 years, a more thorough strategy is due.

2) Continue to evolve our social media strategy and implementation. Continuous planning, prioritization, and implementation is the way of the marketer’s world, but social media has put the disciplined, steady approach into hyperdrive. What we had decided to do 3 months ago is already worth reconsideration and perhaps even a change in approach. Given the time commitment that these tools require, monthly review and consideration is required.

1) Focus on insights. While the world is always changing, this stays the same: insight regarding the needs and wants of our audiences, consumers, customers, and constituents should drive what we do. In a small entrepreneurial firm without a formal research group, it’s easy to slip in into believing all people think a certain way because you have talked to a handful of people who share an opinion. And now that it’s so much easier than ever to gain small and large insights formally or informally on a much more regular basis, there’s no reason that we shouldn’t be asking and gaining new insights on a monthly basis. With that – look for more questions from us about how we can better meet YOUR needs. (You can start with suggestions and ideas by commenting on this blog!).

What’s on your list?

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.