JumpStart: IdeaExchange Blog

Since this is the first time I’ve ever posted a blog, please allow me to introduce myself. I’ve had the pleasure of working at JumpStart since January 2006 helping our entrepreneurs identify capital sources for follow-on funding. In addition to working with early-stage venture funds throughout the country, I am always on the prowl to uncover prospective angel investors who have a passion for entrepreneurship. It’s a terrific job. I get to spend my time working alongside entrepreneurs with fascinating ideas and smart investors who are dedicated to building our region’s most promising companies.

Recently, I read a great posting in PeHub about the importance of Angels in the early stages of a company’s funding (Angels are the New Rock Stars). Author Dan Primack touched on several things that our portfolio companies experience all of the time in Northeast Ohio.

First and foremost, Angels are loved! Angel investors usually work closely with the entrepreneurs they’ve invested in. Most angel investors want to invest more than just their money, they are passionate about helping other entrepreneurs build a successful company. I find that a lot of dedicated angel investors have the luxury of choosing how to spend their days. Most angel investors joke that they would rather work with entrepreneurs than golf every day. Our entrepreneurs welcome the valuable guidance and support that isn’t as prevalent with institutional investors.

Angel investors can be impulsive. In some regards, this is still true. However, over the past several years, the organizational efforts in Northeast Ohio have added structure to a majority of our region’s angel-funded rounds. The North Coast Angel Fund (NCAF), Akron ARCHAngels and the Medical Growth Fund  are examples of angel groups that actively invest with screening committees, approval processes, and due diligence teams in place. Also, JumpStart launched IdeaCrossing to connect entrepreneurs with investors and service providers. This tangible progress leads to a better investing environment overall and early-stage entrepreneurs are benefiting from our community’s increased knowledge of what it means to be an angel investor. 

Angel investors are loud. There has been a lot of press lately about the increase in organized angel groups and angel funding. Angel investors should spread the word — especially Ohio Angels! Ohio is home to over a dozen formal angel groups and the Ohio TechAngel Fund’s Chairman, John Huston, recently ended his tenure as the Angel Capital Association’s Chairman. We’ve gained visibility in the national spotlight for being a state that encourages early-stage investing. State programs such as the Third Frontier’s Pre-Seed Fund Initiative and the Technology Investment Tax Credit give incentives to investors that reduce some of the risks associated with angel investing. Ohio’s dedication to early-stage investing is evident in the amount of companies that have been funded. For the first time ever, Ohio was ranked nationally in the top 10 for the number of companies that received venture investment. This includes angel-funded transactions, which accounts for a large number of the 2009 funding rounds. Regionally, 2009 was a record year for NCAF with eight new investments (the group invested in four companies each of the prior two years). 

Angels seek visibility to gain better access to deal flow. I’ve talked with angel groups and venture investors around the country and can confirm that, when it comes to accessing pre-qualified deal flow, the Northeast Ohio entrepreneurial ecosystem is recognized as a national leader in priming early-stage, high growth companies for investors. JumpStart, GLIDE and North Coast Opportunities Fund are a few initiatives that source and prepare companies for angel/venture investment.

If you were ever considering becoming an angel investor, now is the time. Angels are critical to the success of early-stage companies. Since 2004, JumpStart portfolio companies have raised approximately $114 million in follow-on capital and 32% came from angel investors. Entrepreneurs need smart angel investors to provide the guidance and support to grow their companies. JumpStart has several educational sources for prospective angel investors. Check out some of the resources in this posting or feel free to contact me if you have any interest in learning more!

Angels, we need you! Plus angel investing is a lot of fun — definitely better than golf!

Kerri Breen joined JumpStart Inc. with several years experience in capital markets and banking. Prior to JumpStart, Kerri was a Vice President in the Syndicated Finance group at KeyBank where her emphasis was on structuring and distributing large corporate lines of credit and construction loans. From 1997 to 2002, Kerri served in the Investment Banking division at McDonald Investments, where she was involved in public and private offerings of debt and equity securities, corporate mergers and acquisitions and real estate asset dispositions. Kerri received her MBA with a focus on finance from the Weatherhead School of Management and her BA in marketing from Ohio State University.

Ohioans did something bold on May 4th. By passing the $700 million extension of the Ohio Third Frontier via Issue One, they assured that the progress Ohio’s high-tech economy has made will not only accelerate, but perhaps more importantly, is going to out-accelerate not only all of our neighboring states in the Midwest, but perhaps every state in the U.S.

As we all know, most states are going to be facing tremendous budgetary challenges starting next year. Ohio is not an exception to this fact as almost all observers believe that Ohio legislators are going to be facing a budgetary deficit of $6-8 billion over the next two years. As a result of this reality, many existing state programs are going to be facing tremendous cuts. This is why renewing Ohio Third Frontier today – well before the gubernatorial election in November as well as before the budgetary challenges we will be facing next winter and spring – was so critically important. The passage of Issue One will provide resources to competitively reviewed projects that have the potential to attract or keep Ohio’s brightest individuals, and to accelerate the growth of companies that have the promise to (or already) employ hundreds or thousands of Ohioans and/or have the opportunity to attract tremendous amounts of private sector capital. Over the last eight years, Third Frontier projects created 58,000 jobs. I would anticipate that the continuation of Ohio Third Frontier will create at least another 50,000-70,000 jobs in the next five years.

If Issue One had not passed, Ohio would have likely quickly fallen back into the pack of neighboring states trying to find resources to accelerate innovation and entrepreneurship initiatives – and given the budget situation – almost all of the state’s budgetary cupboards would be nearly bare.

Over the last three recessions, Ohio did not perform well coming out of the downturns. With the help of the recent successful Issue One campaign, Ohio can break this trend in the next couple of years.

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.

Over the past few weeks, we marked an anniversary of sorts in the Northeast Ohio entrepreneurial development ecosystem. Three years ago, funding began to flow to create the Northeast Ohio Entrepreneurial Signature Program (ESP), and its flagship new program, TechLift. This funding came from Ohio’s Third Frontier Program with the explicit goal of significantly enhancing entrepreneurial outcomes in Northeast Ohio as well as other regions of the state. Interestingly, I am writing this “look back”, just as the voters of Ohio “look forward” to decide on May 4th whether to approve future funding for Third Frontier that would continue to support such entrepreneurial development programs into the future. 

The TechLift concept was influenced by my experience as a part time Entrepreneur-in-Residence (EIR), coaching companies through the JumpStart ASSIST process. Through this process, we worked with companies to ensure that they were “putting their best foot forward” in presenting to JumpStart for funding consideration. We helped the companies hone their message, coached them through strategy, key plans, milestones, market considerations, and other issues facing startups. Three things jumped out at me from this experience that became key to TechLift’s approach:

• Coaching Counts — Companies could make significant progress working with someone who has “done it before”, even in a relatively short period of time.
• The Technology Matters — A coach or mentor who understands the technology or market area that a company plays in can help them progress much further and faster.
• We Needed To Do More — The reality of JumpStart’s funding and model meant that, by definition, we couldn’t possibly fund or provide ongoing support to all of the companies who showed promise.

With a modest amount of funding from Third Frontier, as well as the Burton D. Morgan Foundation, TechLift hired five EIRs focused on Ohio’s five key technology areas: Energy, Electronics, BioSciences, IT, and Advanced Materials. To be considered as an EIR, a candidate had to have the following:

• Significant experience in the specific technology area
• Been a founder or CEO of a startup
• Raised money, preferably venture or angel funding, for a small company

TechLift’s first EIR started in May 2007, and the other four were added throughout that year. One, Ron Zieske, subsequently became CEO of a local company and was replaced by Vinny Gupta. The results have been stupendous: over $25 million in state verified follow-on funding, and over $50 million if you count the companies that were coached by TechLift and went on to receive or be considered for JumpStart Ventures investment. Additionally, the TechLift group has been a centerpiece of the tremendous growth of the Northeast Ohio technology entrepreneurial ecosystem, working with many others including: The Innovation Fund, Cuyahoga County’s North Coast Opportunities Fund, the incubators of NEOinc, BioEnterprise, and many others. This central role was made stronger in 2009, when TechLift became a part of JumpStart, as JumpStart TechLift Advisors. As a result, JumpStart’s offering to the community has been significantly broadened.

By far, the biggest contribution made by JumpStart TechLift Advisors is the direct coaching of entrepreneurs — helping them to define their business plan and approach, guiding them through the funding opportunities in the region and beyond, and sometimes telling them the things they don’t necessarily want to hear (but need address in order to grow). Here are just a few examples of real scenarios that show the difference JumpStart TechLift EIRs have made. They:

• took a materials company that was generally thought to be “stale, with no chance for funding” and helped them re-define themselves, attract capital, attract new management, and start over. The company has raised money, and could be one of the region’s ‘bright stars’ in the future.
• identified a great cleantech technology at a university, connected them to the right people to get started with commercialization, and helped them acquire seed capital. Since then, the company has attracted a new CEO and significant capital, and is also on the way to being one of the regions ‘stars’.
• helped an electronics company, that had previously been turned down for capital, to re-form its capital base, turning debt into equity, and giving the company a new lease on life.
• recognized a high potential CEO and idea in an IT company. Then, the team worked with the company to hone the message and tighten the business plan, so it could go on to raise the money it needed to develop the idea.
• coached a medical device company to attract capital from both inside and outside the region, after they had previously been turned down by some of the early-stage funders in the region.

These are just a few examples of how the coaching from JumpStart TechLift EIRs has lead to measurable results, and a better entrepreneurial climate for Northeast Ohio. The great thing is that I could list 10 times as many examples. The coaching and the process works!

Economic development positions can be somewhat fleeting, somewhat by definition. What the best economic development people bring to the table is their ‘real world’ experience. Paradoxically, the longer someone is in one of these positions, the more removed that experience becomes. When one does a job where you ‘give back’ to the community, you mostly hope that what you do during that time actually makes a difference. The TechLift EIR team of Kent Kristensen, Ron Zieske (TechLift alumnus), Donna Richardson, Chuck Birchall, Dave Nestic, and Vinny Gupta, can look back at the TechLift experience with pride, knowing that they have truly “made a difference” for Northeast Ohio, its economic revitalization, and its entrepreneurial community.

As you contemplate your vote on Issue 1, to renew and continue the Third Frontier program in the May 4th election, please consider how important Third Frontier funding is to programs like TechLift Advisors, as it enables JumpStart and others to provide such support and funding to Ohio’s current and future entrepreneurs. Vote YES on Issue 1!

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.

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.