JumpStart: IdeaExchange Blog

Issue 1 is a statewide ballot measure that would authorize renewal and continuation of the highly successful Ohio Third Frontier (OTF) program. OTF is a visionary public-private partnership created in 2002 with bipartisan legislative leadership and support as well as widespread editorial support.

The purpose of OTF is to firmly establish Ohio as an innovation leader and to fuel long-term economic growth and create jobs in our state. OTF targets state investments to promising industries, technologies, and entrepreneurs. The initiative is directed by a bipartisan, appointed advisory board and commission. Funds are awarded through a competitive process in which independent experts review proposals and assure a base level of excellence for all projects.

With a 10 year initial life and an initial commitment of $1.6 billion, OTF has emerged as the centerpiece of Ohio’s technology-based economic development and job creation efforts. The bond funding mechanism for OTF, approved by Ohio voters in 2005, expires in 2012. On February 3, 2010, the Ohio General Assembly authorized a bond measure on the May 2010 ballot at a level of $700 million over four years. Support for placing the bond issue on the ballot was strong and bipartisan (30-2 in the Senate, 83-14 in the House).

OTF also has proven results including helping to:

• Create over 48,000 jobs.
• Attract or capitalize 571 startup companies.
• Attract $3.2 billion in follow-on dollars (from federal, state, local, private, and foundation funds) on top of the $473 million it has expended (through June 2009) on technology-based programs.
• Produce more than $6.6 billion in total economic impact in Ohio (through December 2008).
• Produce a total return on investment that has averaged 22% per year over the life of the initiative.
• Grow product sales from OTF-funded projects to $440 million per year (through June 2009) and are estimated to total at least $900 million by 2013.
• Double licensing income earned by Ohio’s leading research institutions from 2002 to 2007 it rose from $16 million to $40 million.
• Increase Ohio’s research base, from 2002 through 2008, it increased more than 60 percent, from $1.1 billion to $1.8 billion.
• Increase venture capital investment in Ohio. From 2003 through 2008, venture capital investment in the state grew almost 2.5 times faster than the U.S. average – 20.4% per year compared to 8.6% per year.
• And, 50% of the State’s OTF investment to date (through December 2008) has been repaid through tax receipts. The original investment, now projected to be $1.35 billion, is forecast to be fully repaid by 2014.

Most importantly for JumpStart and the entrepreneurs across Northeast Ohio and the State, OTF provides the opportunity for future potential critical resources which will leverage significant non-state resources for both direct investments into companies and for additional resources that may support the work of all of the Edison incubators in the region. The incubators include the Akron Global Business Accelerator, BioEnterprise, Braintree in Mansfield, GLIDE in Elyria, MAGNET, and the Youngstown Business Incubator, in addition to our local research-focused Universities and innovative established companies in the state.

Please read more about Issue 1 and please join everyone at JumpStart to help accelerate the progress of innovative companies in Ohio!

In the above blog, Ray is expressing his personal views as a citizen of the State of Ohio.

Ray Leach is CEO of JumpStart and brings his energy and leadership experiences from founding five high growth entrepreneurial and intrapreneurial endeavors in the last 20 years. Ray is a Sloan Fellow and earned an MBA from the MIT Sloan School of Management. He also earned a BA in Finance from the University of Akron.

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.

If you’ve missed the first two parts of ‘Getting It Done’  - check them out: Part 1 on BioEnterprise and JumpStart Ventures, and Part 2 on JumpStart TechLift Advisors and JumpStart Inclusion Advisors. And, here’s Part 3 — highlighting two more organizations doing incredible work to help fund our region’s startups.

The Innovation Fund

The Inovation Fund was formed in 2007, with funding provided by the Third Frontier Entrepreneurial Signature Program and the Lorain County Community College Foundation, and administered by the GLIDE Incubator. It plays a key role in Northeast Ohio’s early-stage funding climate.

How it works: The Innovation Fund provides early-stage funding to qualified technology companies in the form of grants (‘A’ grant — $25,000) and repayable grants with a funding replenishment right (‘B’ grant — $100,000). Both require the awarded company to provide an educational experience to a local university. The process is competitive, and is collaboratively administered by GLIDE, JumpStart TechLift Advisors, Youngstown Business Incubator, the University of Akron Research Foundation, and a high quality selection committee. It serves the entire 21 county Northeast Ohio region, a real show of vision by the president of LCCC, Roy Church.

Results: The Innovation Fund has shown significant results since its start in late 2007 — making 38 grants to 35 companies totaling $2.075 million. Many of those companies have gone on to receive funding from somewhat later-stage structures like JumpStart Ventures, the North Coast Angel Fund, and Series A venture investors. They have received 210 applications from 15 of 21 counties in Northeast Ohio. The educational experiences at these companies have ranged from internships to teaching classes and research associate positions.

Why it works: The Innovation fund works because it provides funding just when it’s needed. It helps make Northeast Ohio to offer funding options to qualified companies at all levels of the entrepreneurial spectrum. GLIDE and the LCCC Foundation have done a remarkable job of creating a highly effective, region-wide structure that collaborates with multiple organizations and entrepreneurs.

North Coast Opportunities Technology Fund

The North Coast Opportunities Technology Fund began in 2008, jointly announced by Cuyahoga County and JumpStart TechLift Advisors. It is a great example of a public/private partnership that works to enhance the entreprneurial and technology climate in Northeast Ohio.

How it works: North Cost Opportunities Technology Fund (NCO) is yet another vehicle to provide very early-stage funding ($50,000 — $125,000) to venture capital fundable companies located in Cuyahoga County. It makes loans that “feel like venture capital” to back a specific project designed to bring the company demonstrably closer to the next level of funding. Highly competitive company selections are made by a team from JumpStart TechLift Advisors, the MAGNET Incubator and Cuyahoga County. The unique loans are administered by the county.

Results: NCO has made six investments, from nearly 60 applicants, and has $480,000 in capital put to work. A seventh company has been selected for investment, and is in the works. NCO’s companies have already shown progress: Tremont Electric has received significant national press, SparkBase has doubled its employment, and CitizenGroove has received significant follow-on funding. Most importantly, the collaboration shows that Cuyahoga County is visionary in its plans for technology development.

Why it works: Like the Innovation Fund, NCO works because it provides critical funding to put early-stage companies in position to achieve the next level of funding. The project structure ensures that the relatively modest amount of funding is used wisely, and in a way designed to achieve results.

Next in the series: Youngstown Business Incubator and Akron Global Business Accelerator 

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.

Blogging for me is a challenge, especially when limited to the topic of early-stage investing in Northeast Ohio. It takes a long time to think of exciting topics to write about; I feel like everything’s already been said. But, since repetition is the key to learning, I’m going to risk repeating those items that are top-of-mind with the team here at JumpStart Ventures. To recap:

• Northeast Ohio needs more investment capital (Tell your legislators, friends and family to support renewal of the Ohio Third Frontier and The Ohio Capital Fund.
• Early-stage deal flow continues to grow while our investment dollars remain stagnant. JumpStart’s deal flow has grown 16% year-over-year since our inception in 2004 and, in the past year alone has increased 30%. All the while our investing budget has remained relatively stagnant at approximately $3 million per year. (See above bullet point re: supporting our primary source of funding, the Third Frontier.)
• Talent is really important. It’s a well known fact that top talent is critical to the success of any startup. All great ideas will languish without a talented and capable leader at the helm. The folks in Columbus know this and have put together a multi-faceted State-wide talent recruitment plan. This talent plan will only be realized with money from the Ohio Third Frontier (see first bullet). We have recently added our own talent guru, Robert Hatta, here at JumpStart to focus on bringing great talent to our companies.
• Exits are key. It’s a basic premise that investors want to see returns on their investments. Liquidity events generate returns. Companies that take OPM* need to continually work to position their company for an exit — an outright sale, an IPO, a re-cap, whatever. Just some type of event that provides an investor with an opportunity to make money on their investment within a reasonable time frame (like, say 5-8 years).

These are our “soapbox” issues. Issues we think about daily. Issues that need to be at the forefront of any dialogue around entrepreneurship and economic development in Northeast Ohio. So, even though it may seem like blah-blah-blah, I’ve-heard-all-this-before, we need to keep beating the drum (and repeating and repeating and repeating) until we’re heard.

*Other People’s Money

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).