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.

National Awards. Global Product Launches. Lifesaving Products. New Investments. Here’s a rundown of some progress in the JumpStart Ventures portfolio in just the past week or two:

• BusinessWeek named two JumpStart Ventures portfolio companies — Phycal and Freedom Meditech – to its inaugural list of the Top 25 Most Intriguing Startup Companies in the World. I really like that Phycal founder and CEO, Kevin Berner, is not only commercializing a technology (its lipid extraction process is projected to make algae an economical biofuel), but he also is building an enduring company. From day one, he has built into the company culture certain values based on his experiences and life beliefs, values such as discipline, charity, and intelligence.
• Microsoft featured PreEmptive Solutions in two separate keynotes on two continents (in Berlin and Las Vegas) as part of the launch of PreEmptive’s Runtime Intelligence Service (RIS), a cloud-based service that monitors application usage and user behavior. RIS has the distinction of being the only part of Visual Studio not written by Microsoft. Given this powerful, unique “in-the-box” position, I think RIS’s global product launch could take PreEmptive, which is already profitable and growing, to a whole new level as a leading company in the application lifecycle management industry.
• China suffered a mining tragedy over the weekend and in China alone, 3,000 miners have died this year in mining accidents. Our portfolio company, InSet Systems, has a technology that helps find miners within ten feet instead of within 500 or so feet (which is the approximate accuracy of existing technologies). Noting that it could save many lives in a very dangerous industry, Popular Science magazine, in 2008, named InSet’s inertial tracking and wireless communications technology “one of the Top 10 technologies” of the year. The InSet system will be ready for pilot installation in a working mine in a few weeks; the company has a software development partnership with the renowned Draper Labs as well as a distributor relationship in the Far East; and the company needs angel investment to get to the next steps. I hope the early-stage capital markets will support this company so that it can get this product to market and save lives.
• We made a new investment in Checkpoint Surgical which has developed a neuromuscular locator/stimulator. Checkpoint is a spin-out from NDI Medical, which was founded in 2002 by Geoff Thrope. NDI spun out its MEDSTIM bladder pacing system technology a few years ago and shortly thereafter the product line was acquired by Medtronic, which provided a nice “early exit” to the NDI team and others. The excellent Checkpoint team, led by CEO, Len Cosentino (former VP of Business Development at NDI), and Chairman, Geoff Thrope, is well positioned to do a repeat of  MEDSTIM: develop a differentiated product, build a good company, forge strong partnerships, and get acquired. Easy, right?

About as easy as sailing across the Atlantic on a cargo ship and arriving in unfamiliar territory at the start of winter. And on that note, I wish these entrepreneurs and all the metaphoric pilgrims of the North Coast technology scene (OK, I know that brand-wise I’m supposed to say “Northeast Ohio” not “North Coast”, but go with me here: my literary side is trying to get a coastal angle on this pilgrim thing) a happy Thanksgiving!

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.

I know you were impressed about the progress being made in Ohio when you read my colleague John Dearborn’s blog just a few weeks ago. Maybe you were even a little surprised! After all, it’s not entirely intuitive (not yet, anyway) that Ohio’s venture capital activity would have grown at double the national average for the last five years, or that the state’s Ohio Third Frontier program would have already created more than 41,000 jobs.

After so much good news on our progress such a short time ago, it might be surprising that I have three more reasons Ohio should be on rooftops, shouting about its progress. I’m not surprised, because the velocity of Ohio’s growth is accelerating; it’s why we continue to have success after success to talk about. So — that said — here are three more reasons why you can brag about progress in Ohio:

• #1 in the country in deals supported by the government. ChubbyBrain’s new report on government funding was just published by FastCompany, and included a look at where the government funding going into company deals was allocated. Ohio was #1 based on number of deals, followed by California and Massachusetts. The fact that California and Boston were second and third on the list shows that the government isn’t funding companies where nobody else is funding them; on the contrary, government funding — like private sector funding — goes where the companies are most competitive and promising.
• BusinessWeek’s inaugural list of World’s 25 Most Intriguing New Companies included Phycal and Freedom Meditech, both of which have received JumpStart Ventures investment. Check out the current publication for the profile of Phycal, one of just five companies with a longer writeup. (You don’t want to miss learning about the CEO’s “romance with algae”!) These companies had to compete with global companies on both the originality of the idea and the progress that’s being made in order to make it on the list.
• My own experience at the NVCA meeting in Palo Alto, CA. When meeting with other communicators to be briefed on VC policy and communication issues, the head of marketing of a well-known venture capital firm said to me directly, “What is going on in Ohio? I can’t believe how (they’ve) seemingly come out of nowhere and now, (they) seem to be everywhere.” Given all the “braggin’ rights” we have, you can imagine how I answered that!

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.