JumpStart: IdeaExchange Blog

The Burton D. Morgan Foundation in Hudson has an incredible asset: a Norman Rockwell print called “High Dive”. As you can see, it’s a boy leaning over the edge of the diving board, scared to jump into the pool. As Deb Hoover (President of the Foundation) told me, Steven Spielberg has the original and takes a look at it prior to starting each movie; the Foundation thinks it’s a great example of how many of us feel prior to taking a risk.

Last week, I had the chance to participate in a meeting of the JumpStart Higher Education Collaboration Council, held at the Foundation’s offices. This Council was formed in the fall of 2009 with the express purpose of increasing the connection between JumpStart and members of higher education communities across Northeast Ohio, including university, community college, liberal arts college, and technical college constituents. In addition, for me, it was a chance to immerse myself more with this thriving, dynamic set of leaders, who represent constituencies equal in size to 50% of Cuyahoga County’s residents.

While we are still in the process of pulling together both our agenda and our marketing communication approach (more to come on that in future months), I was 100% energized by what seemed obvious to me:

There is no better regional higher education network for supporting student entrepreneurs, in the country. Period.

(Perhaps that’s why the region’s Entrepreneurship Education Consortium — a group of just nine of the higher education institutions in the region — recently won the 2010 National Outstanding Entrepreneurship Pedagogy Award from the U.S. Association for Small Business and Entrepreneurship. The national award, which has always gone before to just one university, recognizes innovative teaching in the field of entrepreneurship.)

So students (and that means undergrads, graduate students, adult students, high school students, students of life), we want you! Learn more about high growth entrepreneurship. Test the waters with an idea through a business plan competition (check out IdeaLabs (info coming soon) and LaunchTown) or just devoting some time to an idea. Jump in to the myriad of opportunities across the region to learn more about starting up a company at the higher education institutions. Learn more about how JumpStart can support you by signing up to receive our email communications or reading the website. Jump off the high board. The region’s assets will help you swim.

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.

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.

I wrote in an earlier blog that everyone should regularly read the blog of one marketing guru — I follow Seth Godin’s religiously. One of his recent posts ‘Random Rules for Ideas Worth Spreading‘ hit a few chords for me relative to topics I’m often discussing with early-stage companies.

• “You can name your idea anything you like, but a Google-friendly name is always better than one that isn’t.”
  • I think this is particularly relevant, as is most of his advice, for people working on consumer ideas or businesses. That said, if you are working to rebrand or rename your company, considering the implications of search for your brand is often overlooked but increasingly critical. Criteria for a brand name: clear (or can become clear, depending on your budget) to your target audience, punchiness and memorability, and helps in organic search.
• “Figure out how long your idea will take to spread, and multiply by 4.”
  • This seems like a good benchmark, especially as my gut reaction was “no way, 4x as long?” That’s probably why delays tend to be such bad surprises. I would much rather have to deal with the challenges of too much momentum, more quickly than planned. That might actually be fun.
• “Seek out apostles, not partners. People who benefit from spreading your idea, not people who need to own it.”
  • Along these lines, I was talking a few weeks ago with JumpStart Venture Partner Ted Frank about finding customers whose own profit, or sales strategy, or value proposition is made better with your product. If you are trying to get your channel to sell something that inherently won’t help them accomplish their goals, it’s much harder. Very obvious to write, harder to do, I realize.
• “Prefer dry, useful but dull ideas to consumer-friendly ‘I would buy that’ sort of things. A lot less competition and a lot more upside in the long run.”
  • Loved this idea of “dry, useful but dull” ideas — and that idea that these are, in fact, sexy businesses. A few of these to a consumer marketer like me: microprocessors, enterprise solution systems, clean energy technologies to sell to energy companies…     no big businesses there, right? Realizing this is a challenge. I wish mainstream media wanted to cover these technologies and innovations more, thinking about how to make them interesting for everyday consumers.
• “Surround yourself with encouraging voices and incisive critics. It’s okay if they’re not the same people. Ignore both camps on occasion.”
  • Amen! We’ve had our own critics — or should I say, challenging voices — lately, if anyone has been reading them on Cleveland.com. In fact, we’ve had lots of people challenge our thinking throughout our history. Their points of view definitely make us better, as we listen to the questions and concerns, learn from their perspectives, and double-check our own thinking. This thought is also why our culture at JumpStart is about being both honest and fun (equal parts incisive and encouraging?).

Check out Seth’s blog - or suggest another one your favorites here.

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.

Why don’t more minority entrepreneurs, particularly African American and Hispanic entrepreneurs, attend the array of technology based workshops, seminars, and events throughout the region, or join more of the organizations focused on emerging industries and technologies? While this is somewhat of a rhetorical question given that I’m not completely unaware of why this phenomenon exists, I pose the question nonetheless as I believe the variety of responses to this question can inform some larger strategies around inclusion for our region, state and nation. JumpStart recently put on a groundbreaking event in collaboration with a host of regional and national diverse partners entitled – Transforming the Landscape of Business In America: A Minority Business Early-Stage Capital Summit, which attracted over 250 diverse entrepreneurs, investors and stakeholders to a world class event focused on preparing more minority entrepreneurs for high growth ventures that are likely to attract angel investment and venture capital. We had a terrific mix of ethnicities, genders, and backgrounds present for the event, which got me thinking about why this rich diversity doesn’t take place on a more regular basis. A few thoughts came to mind:

• Minority leaders must create a sense of urgency around the need to get involved in the industries and opportunities of the future.
• Event planners and tech-based organizations must jointly promote their events and activities with media partners that cater to unique audiences.
• Guest speakers, panelists, or participating members must consist of and represent the diversity that exists within the community.
• The messaging as to “who should attend” must speak directly to the variety of “pain points” that different audiences are experiencing or are likely to experience if they fail to act.
• Minority entrepreneurs and stakeholders must be far more proactive in seeking out and attending events or joining organizations that are not necessarily “minority focused” but address universal issues and challenges that impact all constituents.

While the above list is by no means all inclusive, and each point could easily consume volumes of information on its own, I’d like to pay particular attention to the final point which basically places the responsibility on each individual to simply get involved. 

Ultimately you are responsible for you –- period. To the extent that you recognize that learning is continuous, and we all must continue to broaden our skills, competencies and relationships, I urge those of you who have not historically been proactive in joining associations or attending events focused on emerging industries, technologies, and strategies to do so at your earliest opportunity. To assist you in this effort, please refer to JumpStart’s event postings frequently for upcoming events taking place throughout the 21 counties of Northeast Ohio, and beyond.

I also urge event planners and “mainstream” associations and organizations to rethink your promotional campaigns to ensure your partners, messaging, and strategies are as diverse as the communities that you serve.

Collectively we can truly make a difference in better engaging more of our diverse community. 

Darrin is Chief Economic Inclusion Officer of JumpStart and President of JumpStart Inclusion Advisors. He founded and ran his own strategic planning and management assistance firm and spent 16 years in the commercial banking and finance industry. Darrin has an MBA from Baldwin Wallace College and an undergraduate degree from Mount Union College. He has led a series of workshops and seminars on matters of economic development and diversity.