Thursday, September 15, 2011
Posted by Leah Yomtovian
In 2002, the State of Ohio planted the seeds to grow a statewide entrepreneurial ecosystem, and over the past nine years the State has invested $1.1 billion through the Ohio Third Frontier to help efficiently and seamlessly move great ideas from the lab to the marketplace. Ohio is realizing the beginning of a high tech renaissance, and State support for entrepreneurs is stronger than ever.
In fact, officials are doubling-down on their support of entrepreneurial ventures, increasing funding and assistance to innovative startups that they hope will drive Ohio’s economic revitalization. At the beginning of this month, the Ohio Third Frontier Commission approved a portion of the investment plan for fiscal year 2012, which includes approximately $184 million of investments in technology-based economic development efforts this year, of which $76 million is expected to be directed toward entrepreneurial support programs. This proposed plan represents a shift in Ohio Third Frontier’s past investment activity.
In a discussion with Norm Chagnon, Executive Director of the Ohio Third Frontier Commission, I learned why the State has decided to make some changes to this highly effective program. The goal of the Ohio Third Frontier “was never to make Silicon Valley work in Ohio,” Chagnon told me. Rather, it was to put enough resources behind entrepreneurs and innovators to move the needle and revitalize the state’s economy. Chagnon said initially Ohio’s idea creators needed pre-seed and seed stage funding to determine the technical merit of their technologies and ideas and to develop prototypes. In light of the demand, Ohio Third Frontier funneled 60 percent of its investments into research and development projects and infrastructure, 25 percent into the entrepreneurial space, and 15 percent to talent and cluster development.
As the fledgling companies grew and the state succeeded in developing a strong pipeline of early stage companies, entrepreneurs ran into a new constraint—access to later stage financing so they could hire employees, develop their products, and perform initial marketing and branding. In response to the progress of the state’s entrepreneurial ecosystem, Ohio Third Frontier is placing more emphasis than before on making later stage investment dollars available to these growing companies while continuing to support R&D and earlier stage companies. Whereas the program’s prior, very heavy support of research projects and infrastructure weighted it to expect major financial and employment returns in seven to 10 years, Chagnon indicated the State is shifting its focus to areas that might pay off in three to five years.
“It has become necessary to support entrepreneurial investment and assistance programs that are a little farther downstream so that our state’s highest potential companies can continue to grow and hit the marketplace,” said Chagnon.
Here are some of the changes, sure to positively impact the state’s entrepreneurs, that the Ohio Third Frontier Commission approved:
- Entrepreneurial Support Program (ESP) - $40 million (over 2 years) Funds will be used by six existing regional ESPs, including JumpStart, to provide assistance to entrepreneurs throughout Ohio.
- Pre-Seed funds - $25 million Capital will be used to leverage private sector investment into early stage investment funds that make investments in new and existing entrepreneurial ventures.
- NEW Micro Fund - $1 million This new fund will provide awards that range between $5,000 and $25,000 for new community-based non-profit investment funds, each of which will have to match the State’s monies dollar for dollar.
- NEW Growth Fund - $10 million This new fund will make two investments of $5 million each into investment funds. It requires a private match of $3 and an SBA match of $8 for every $1 of Ohio Third Frontier money. Thus, the state's $10 million investment will make $120 million of new capital available to Ohio companies.
- ONE Fund – TBD in the next few weeks This program provides young entrepreneurs with the opportunity to work under the guidance of seasoned entrepreneurs, industry experts, and investors and then pitch their ideas to investors to launch a new Ohio business venture. The ONE Fund will continue and expand in fiscal year 2012.
- NEW Commercial Acceleration Loan Fund - $25 million This new program provides loans to companies moving products and services into the market. Loan amounts will range from $500,000 to $3 million and the program will include forgiveness of principal, deferred and/or balloon payments, and low interest rates.
- Open Innovation Incentive - $8 million This program provides for-profit enterprises (“seekers”) vouchers to spend with other for-profit enterprises or non-profit research institutes to address a problem prohibiting the seekers from launching products. Voucher amounts will range from $200,000 to $400,000. Seekers must contribute $2 for every $1 of Ohio Third Frontier money.
Ohio has led the nation in building regional entrepreneurial ecosystems that include and support educators, innovators, investors, and non-governmental organizations providing technical assistance and mentorship to entrepreneurs. In Northeast Ohio, entrepreneurs can access the assistance and capital they need to grow and launch their businesses from a variety of state-supported organizations including the Youngstown Business Incubator, the Innovation Fund of the Lorain County Community College Foundation, the Akron Global Business Accelerator, and JumpStart.
As Ohio Third Frontier shifts its focus to entrepreneurs commercializing innovative technology, startups will have greater access to capital and technical assistance via these state-supported organizations. The bottom line for entrepreneurs looking to launch and grow their companies is increased funding and support for their ventures.
Leah’s primary focus as JumpStart’s Market Analyst is developing a deep understanding of the key challenges and opportunities facing entrepreneurs and early-stage companies. Using her experience leading research projects and framing problems to identify creative solutions, Leah works to build stakeholder relationships, ensure the growth and success of client and portfolio companies, and drive organizational strategies. Additionally, Leah brings her insights to life through communications and advocates for and connects entrepreneurs to additional capital and service resources beyond those provided by JumpStart.