Tuesday, February 17, 2009
Posted by
John Dearborn
As the lead person looking to raise funds for JumpStart to both support its operations and to invest in promising companies throughout Northeast Ohio, I am in constant contact with our funding partners, as you would imagine. Lately, with all the press about the economy, I’ve been getting a fair share of questions related to “deal flow”. We can look at this from a macro perspective, where recent data from a Ewing Marion Kauffman Foundation-funded U.S. Census Bureau study suggests, among other things, that “…while business startups decline slightly in most of the cyclical downturns, startups remain robust even in the most severe recession over the sample period (in the early 1980s).” Click here for the full detail of this report.
This is overall encouraging news, but doesn’t answer the question for those of us involved in these activities locally. The questions I’ve been getting lately have focused on the rate (i.e. number of companies applying to JumpStart) and quality of what we’re seeing – right here in our own back yard. Since the beginning, we have kept detailed metrics on the activity that we are engaged in from the most open part of our “funnel” all the way down to the individual companies that we’ve invested in and everything in between (e.g. meetings held with entrepreneurs, business plans vetted, formal presentations, etc.).
These statistics inform us that we’re seeing a rate very similar to what we’ve seen during any period since inception. As an example, at the front-end of our process where entrepreneurs from the 21 county region that we serve first come in contact with JumpStart, our activity for the last 4 months ending in January is up nearly 10% over the same 4 month period last year. One could argue that the rate has increased since some people may have been laid off and now want to control their own destiny. I am sure part of that is true. While knowing what motivated someone to “take the plunge” might be interesting, I think the more salient insight from us would be “what is the quality of what you’re seeing during these times”?
To that end, I informally polled each of our team members, who deal with our portfolio companies each day and are charged with finding the next best companies to invest in. This is a very thorough process, much like what a Venture Capital firm would go through (we refer to what we do as venture development), with a great deal of effort to try and take subjectivity out of the process.
They each described that the companies they have seen in the last 60 days (which are finalists for funding from JumpStart) are as good as any they have seen at any point in our history. Attributes such as management strength, well thought out business plans, protectable IP (such as patents) and other elements were all highly rated, through a fairly exhaustive set of vetting activities.
To me, this is very encouraging news and speaks highly to the people who want to start businesses not being daunted by what they read about the economy, where funding is going for startups and all of the other press that could persuade one to hold off on their dream. Understanding more of our quantitative aspects as well as the qualitative ones gives me great motivation to continue to believe we’re on the right course as an organization that plays a role in the overall “ecosystem” and that, if we stay the course, we’ll continue to see a vibrancy in entrepreneurism that we once only dreamed of.
John Dearborn is the Chief Development Officer of JumpStart and brings experience as an entrepreneur, founder and CEO at companies across the US and Europe over the last 25 years to the pursuit of economic transformation in Northeast Ohio.