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Nearly a year later, JumpStart releases MSP REAP draft report

November 14, 2011 | by Jeff Pesek 21 Comments

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JumpStart Community Advisors MSPJumpStart is a nonprofit ‘venture development organization’ (VDO) originally formed in 2004 as a result of Ohio’s inability to retain economic importance throughout the 90′s and on into the 21st century.

The Cleveland based organization has received a combined $70m in funding (55% public, 30% foundation, 15% corporate) over the past seven years to subsidize “high growth” startups within Northeast Ohio.

A self described “non-financial return oriented investor,” JumpStart doesn’t measure results in the dollars and cents way an old school venture investor would.  Rather, the group measures ROI in an amorphously political manner:  job creation, matching/ follow-on funding and other “resources” provided for entrepreneurs.

In 2010, the VDO began talks with the U.S. Department of Commerce Economic Development Administration,the John S. and James L. Knight Foundation and the Surdna Foundation. Based on JumpStart’s self-reported “impact” from 2004 – 2009, these partners would provide $2.5m in additional funding to explore how “certain core elements of the successful JumpStart approach” could be replicated within select upper midwest Knight Foundation Communities, including: Ft. Wayne and Gary, IN; Detroit, MI; Duluth and Minneapolis-St.Paul, MN; and Akron, OH.

The resulting entity, known as JumpStart Community Advisors, has since embarked on an agenda to fulfill that commitment and “identify gaps in other regions, build a strategic plan that they can get excited about, that they can believe in, and bring the spirit and energy from our initiative in Ohio to those other regions,” said JumpStart CEO Ray Leach.

JumpStart began that exploratory process here in MSP through a series of three public forums held last winter (Dec, Jan, Feb), and a multitude of 1:1 closed door meetings. During that process, the group identified and recruited a set of  15 or so MSP  “stakeholders” who, by association and/or action, would endorse JumpStart Community Advisors and carry the mission in Minnesota while said strategic plan was formulated back in Cleveland “based on the uniqueness of the the region.”

But a long and quiet period followed as the VDO from Ohio would seemingly disappear from the local limelight.  Meanwhile, back at home, JumpStart would find itself under fire from some Ohioans increasingly concerned about what’s going in vs. what’s coming out.

Then last month, JumpStart revealed its annual retrospective Northeast Ohio ’2010 economic impact report’ that was off in both timing and style. Released six months later than expected, it deviated from previous methodology used to measure impact, secure annual funding in Ohio and convince local MSP stakeholders that the model was, in fact, as effective as claimed.  Many of the concerns emanating from Ohio remain unresolved today;  in some cases they have only intensified.

Which all brings us to a draft proposal recently authored by JumpStart Community Advisors and positioned as MSP’s suggested ‘Regional Entrepreneurship Action Plan’ (REAP).

We’ll be reviewing this recommended  plan over the coming weeks.  In the essence of transparency and facts, we intend to publicly talk through it with JumpStart, MSP stakeholders, Minnesota entrepreneurs, Ohio’s critics and fans.

After all, shouldn’t a business plan designed to help our entrepreneurs first earn their understanding and approval?

Tags: , ,

Jeff Pesek / TECHdotMN Co-founder

A product of the net generation; consumed with the convergence of tech & culture. Pursuing things that aspire to improve the quality of human life.

  • Hockeydad_2993

    I was wondering what happened to this whole Jumpstart thing.  I went to one of the meetings and it was almost insulting that a bunch of consultants, who have ZERO startup experience, were claiming that they were experts on how to help grow startup companies.  Almost laughable and I was hoping this went away.

    I just did the math and according to the report in the first 28 months, they plan to invest 49% of the $10mm directly into startups, while the rest is used as ”overhead & programs”? If you break it down on an annual basis, they want to create an org that has costs of $2.185mm a year to invest $2.1mm?  Are you serious? 

    If this thing was put together by people with actual startup experience, this thing could be put together with $500k in “overhead & programs”.  With 5-7 decent people, a group like this could do all the investment part as well as have plenty of time left over to help companies they didn't invest in.
     @i:disqus 
    My guess is the people pushing this are the ones who hope to land on the payroll of this bloated org. 

    With all the bad press Jumpstart gets in its own area, i highly doubt they would be able to deliver on bringing the first $5mm in funding to this project.  Put them on the spot and ask them when we can expect confirmation of the first $5m they claim they can bring in.

  • Hockeydad_2993

    Had to follow up on my previous comment.  I am all for more capital available to early stage startups but the report claims that investing in early stage companies is too risky for “for-profit” investors.  Has Jumpstart heard of Y-Combinator, Techstars, angelpad, excelerate labs, 500startups just to name a few.  Somehow these for profit groups have had good results and I doubt any of them operate with $2.1m annual overhead. 

    At most, total non direct investment overhead should be 15% of the amount used for direct investment.  With an overhead like Jumpstart proposes, it seems that they are more interested in creating cushy jobs for the people who work at this non profit than actually using the money to help create new startups.

  • Ron Copfer

    @276fcb9cac68b3cfbed444e1bb1dee2a:disqus 

    Well, you've hit that nail right on its' proverbial head… The CEO of JumpStart actually did start 1 company as a 50% owner… sold it with maybe 10-15 employees and received just enough funding to go get himself an MBA… so now he's an experienced serial entrepreneur…! Same with the balance of most of the people at the top opf this so called “VDO!” As one of the people originally charged with founding this organization, I'm more than a little disappointed in where its gone since its been hijacked by the monied elite in our community. It's just turned into a well-greased on-ramp for other private venture funds in our community to have less at risk when they do invest in a startup. It's disgusting to see how wasteful this group has been with taxpayer dollars but as the major media outlet in this town continues to cow-tow to the powers to-be, we are not holding our breath for change anytime soon. Do MN a favor and give these guys the boot!

    Ron Copfer

  • Duluthtech

    WOW Jumpstart and thanks for such an insightful and earthshattering report.  We didn't know that  startups are good for the region and it is important for the region to have more funding sources and dollars for startups.  Did we really use $500k for a fancy report on the obvious from a bunch of well paid consultant from a questionable group from Cleveland to tell us the obvious?  It is a shame that this is what we got as one of 5 regions granted $2.5m in the name of helping entrepreneurs.
     
    Just Googled Jumpstart and found this, http://www.crainscleveland.com…. Why are we looking to this group for advice?  The last report that measured the jobs this group was responsible for creating in 2009, it showed that they spent $350k-$500k for every job created.  It is kinda sad our region just wasted a $500k grant for this report.  $500k could go a long way if it wasn’t squandered like this.

  • Johnsmithjoepublic

    Fancy report saying nothing new.  Who is the local person in charge of this and does this person have any real experience as a founder of a high growth startup or is it just another attempt to create a nice payday and cushy job for themselves and the people that work at this group?

  • Umd_bulldogs6834

    This is what happens when you let consultants and MBAs wrestle the leadership of the entrepreneurial ecosystem away from actual entrepreneurs. It is great if there are more dollars in play for entrepreneurs but it is a waste if they go to create another inefficient political bureaucracy.  It doesn’t bode well for our future or the future of any effort like this when we are looking to a group from Cleveland that has a $13m budget and only invests $3m in companies.  I gave a quick read to the critical articles written about Jumpstart from Cleveland and it seems like many of the investments they make are in companies that are far from what is considered a “seed stage” company.  It blows me away is that Jumpstart gets most of their money from the State, they pay their CEO $400k and they don’t allow an independent audit of their claims?  I can’t believe Cleveland is this gullible and it is scary that we are looking to this group as an example.

  • Someone who cares

    I just read your article and wanted to share
    some feedback:

     

    ·        
    Yes, there are some Jumpstart “haters” in
    Cleveland but many more fans. A couple of the most vocal haters are guys who
    applied for funding from Jumpstart but did not receive it, so their positions
    should be considered with a grain of salt. I spent a lot of time in Cleveland
    working on a venture with Dr. James Levine and a prominent clinical research
    team from the Mayo Clinic. The politics in Cleveland and Ohio are very
    different than in MN. Nonetheless, Jumpstart was highly respected and regarded
    by most of the business, political, and academic leaders that I encountered in
    that region.

     

    ·        
    I’m sorry to see that your coverage of Jumpstart
    and the regional VDO initiative seems a bit biased on the negative side. In my
    opinion, their model as outlined in the REAP would serve as an innovative, new
    approach to solving the well-known problem of decreasing venture activity and
    early-stage investments in our region. Most of the other solutions being
    discussed and developed by others, such as the MN Angel Network, have been
    tried before – multiple times. I hope all of these efforts are successful because,
    frankly, we can’t have too many people trying to solve this problem.

     

    ·        
    The leaders in our entrepreneurial and business
    communities should become increasingly aware of (and vigilant about reversing)
    a cultural tendency to be overly conservative, provincial, and passive-aggressive.
    If we continue to be pessimistic rather than optimistic, unwelcoming and difficult
    others rather than welcoming and collaborative, and competitive with others in
    our region rather than competitive with other regions, then our negative economic
    and social trends will continue. In many cases, we are our own worst enemy. The
    “rising tide raises all ships” spirit of our community has been diminished.

     

    ·        
    In my opinion, one of the reasons it took the
    Jumpstart team nearly a year to arrive at a consensus-driven REAP document is
    that much of their time and energy was utilized to establish credibility and
    plead for collaboration with members of the stakeholder group that (again, in
    my opinion) were extremely critical and difficult to work with in a positive,
    productive manner. As “outsiders,” they tried very hard to be very inclusive,
    collaborative, local, and consensus-driven.

     

    Going forward, it is my greatest professional and personal
    hope that people in our community can evolve to be more positive, progressive,
    and productive. We are clearly our own worst enemy. If we continue to think and act like losers then we will
    continue to lose. Spend ample time in Austin TX, Raleigh NC, Portland OR, Cupertino
    CA, or even Omaha NB… and you will experience a very different way of thinking
    and behavior.  

  • Ron Copfer

    Well @someonewhocares:disqus … One of he two largest critics, of which I am… has NEVER applied for JumpStart funding. I was however, very involved in the formation of JumpStart as a founding and executive board member of Northeast Ohio Regional Technlogy Coalition(NORTECH.) And, as Chairman of the Northeast Ohio Software Association, (NEOSA) I helped killed that organization to divert our state funding to getting JumpStart off the ground. The other gentleman you refer to WAS actually funded by JumpStart and became intimately aware of the waste and self-published accomplishments that JumpStart bandies about our community… despite your pleas, I'll bet the folks outside of Cleveland are ACTUALLY a little brighter than we are here!

  • http://tech.mn Jeff Pesek

    Hi John, thank you for the thoughtful response. Coming from someone who is an active member of the MSP REAP, your perspective is appreciated here. To better understand, I've in-lined some follow-up questions for your consideration:
          
    “…A couple of the most vocal haters are guys who applied for funding from Jumpstart but did not receive it, so their positions should be considered with a grain of salt.”

    *Like who?

    “…The politics in Cleveland and Ohio are very different than in MN. Nonetheless, Jumpstart was highly respected and regarded by most of the business, political, and academic leaders that I encountered in that region.

    *And the entrepreneurial leaders?
    ·        
    “I’m sorry to see that your coverage of Jumpstart and the regional VDO initiative seems a bit biased on the negative side.”

    *What aspect(s) of my coverage of JumpStart above seems a bit biased on the negative side?

    “In my opinion, their model as outlined in the REAP would serve as an innovative, new approach to solving the well-known problem of decreasing venture activity and early-stage investments in our region.”

    *What part of the model do you consider innovative? What are your sources for the 'problematic' funding assertions made?
       
    “The leaders in our entrepreneurial and business communities should become increasingly aware of (and vigilant about reversing) a cultural tendency to be overly conservative, provincial, and passive-aggressive.”

    *Amen.

    “If we continue to be pessimistic rather than optimistic, unwelcoming and difficult others rather than welcoming and collaborative, and competitive with others in our region rather than competitive with other regions, then our negative economic and social trends will continue. In many cases, we are our own worst enemy. The “rising tide raises all ships” spirit of our community has been diminished.”

    *Are you suggesting that we, collectively as a community, should not be analyzing the effective results of a model that's been in existence for seven years running, is applied to a completely different economic environment, and contingent upon tens of millions of dollars in public funding? 
        
    “In my opinion, one of the reasons it took the Jumpstart team nearly a year to arrive at a consensus-driven REAP document is that much of their time and energy was utilized to establish credibility and plead for collaboration with members of the stakeholder group that (again, in
    my opinion) were extremely critical and difficult to work with in a positive, productive manner. As “outsiders,” they tried very hard to be very inclusive, collaborative, local, and consensus-driven.”

    *Do you think that things would have moved faster and involved less 'pleading for collaboration' if JumpStart's results were clearer and independently measured?

    Going forward, it is my greatest professional and personal hope that people in our community can evolve to be more positive, progressive, and productive. We are clearly our own worst enemy. If we continue to think and act like losers then we will continue to lose. Spend ample time in Austin TX, Raleigh NC, Portland OR, Cupertino CA, or even Omaha NB… and you will experience a very different way of thinking and behavior. 

    *Is JumpStart Community Advisors working in any of those areas?

    Thank you again,

    Jeff Pesek

  • Mburkons

    Someone who cares,

    I am an entrepreneur in Cleveland and am also one of the more vocal critics of Jumpstart.  I invite you, the author of this article or anyone else in the your region to contact me to understand why many people in this region are critical of this group.  My opinion is not one of sour grapes as my company received funding from Jumpstart and my point of view is not 100% critical. 

    It may serve the decision makers, stakeholders and leaders in your area well to hear a differing perspective on this group and effectiveness.  Regardless of whether you end up agreeing with me, if you rely on Jumpstart themselves to tell you if they are an effective organization worthy of modeling your regions efforts upon, you are going to get the answer you want to hear. However, it may not be the wisest path.  My contact info is below.

    Mike Burkons
    Founder & President – Charitee Golf LLC.
    Mburkons@Chariteegolf.net
    216.832.6771

  • http://tech.mn Jeff Pesek

    Hi “someone who cares”, thank you for the thoughtful response.To better understand where you're coming from, I've in-lined some follow-up questions for your consideration:
          
    “…A couple of the most vocal haters are guys who applied for funding from Jumpstart but did not receive it, so their positions should be considered with a grain of salt.”

    *Like who?

    “…The politics in Cleveland and Ohio are very different than in MN. Nonetheless, Jumpstart was highly respected and regarded by most of the business, political, and academic leaders that I encountered in that region.

    *And the entrepreneurial leaders?
    ·       
    “I’m sorry to see that your coverage of Jumpstart and the regional VDO initiative seems a bit biased on the negative side.”

    *What aspect(s) of my coverage of JumpStart above seems a bit biased on the negative side?

    “In my opinion, their model as outlined in the REAP would serve as an innovative, new approach to solving the well-known problem of decreasing venture activity and early-stage investments in our region.”

    *What part of the model do you consider innovative? What are your sources for the 'problematic' funding assertions made?
       
    “The leaders in our entrepreneurial and business communities should become increasingly aware of (and vigilant about reversing) a cultural tendency to be overly conservative, provincial, and passive-aggressive.”

    *Amen.

    “If we continue to be pessimistic rather than optimistic, unwelcoming and difficult others rather than welcoming and collaborative, and competitive with others in our region rather than competitive with other regions, then our negative economic and social trends will continue. In many cases, we are our own worst enemy. The “rising tide raises all ships” spirit of our community has been diminished.”

    *Are you suggesting that we, collectively as a community, should not be analyzing the effective results of a model that's been in existence for seven years running, is applied to a completely different economic environment, and contingent upon tens of millions of dollars in public funding? 
        
    “In my opinion, one of the reasons it took the Jumpstart team nearly a year to arrive at a consensus-driven REAP document is that much of their time and energy was utilized to establish credibility and plead for collaboration with members of the stakeholder group that (again, in
    my opinion) were extremely critical and difficult to work with in a positive, productive manner. As “outsiders,” they tried very hard to be very inclusive, collaborative, local, and consensus-driven.”

    *Do you think that things would have moved faster and involved less 'pleading for collaboration' if JumpStart's results were clearer and independently measured?

    Going forward, it is my greatest professional and personal hope that people in our community can evolve to be more positive, progressive, and productive. We are clearly our own worst enemy. If we continue to think and act like losers then we will continue to lose. Spend ample time in Austin TX, Raleigh NC, Portland OR, Cupertino CA, or even Omaha NB… and you will experience a very different way of thinking and behavior. 

    *Is JumpStart Community Advisors working in any of those areas?

    Thank you again,

    Jeff Pesek

  • Someone who cares

    I don’t have time for a lengthy online dialogue but here’s my bottom line
    for what it’s worth:

    Since day one, the Jumpstart team has told everyone involved
    that this proposed VDO (based somewhat on their existing model in Cleveland but
    open for enhancements/modifications to specifically meet our needs and
    interests) should be entirely developed, operated, measured, refined, and
    retained by us – not them. They are simply engaged to provide guidance and support, help raise the necessary
    funding, and provide consulting and resources upon request. After seven years, the jury is
    clearly still out on whether or not they have provided measurable ROI in
    Cleveland. It is too early. In MSP, we need to recognize that it is the
    responsibility of our leaders to get engaged and help drive this process instead of watching
    (and critiquing) it from the sidelines.

    In considering and critiquing the VDO model that
    Jumpstart’s team has worked with local stakeholders to propose in the rough/first-draft REAP document (that was prematurely circulated), I simply ask the
    following questions: What do we have to lose? What are we afraid of? What do we think they
    have to gain? Can too many people and too many different ideas be dedicated to
    solving this problem?

    My recommendation is for this VDO initiative to be merged or
    more closely aligned with the Greater MSP initiative led by Langley and his
    team. This partnership with Greater MSP would connect the VDO with Itasca and
    other important groups in our region that share the same mission of economic
    development and cultural enhancement. Yes, the organization that we ultimately create will hopefully have less overhead led by a staff with significant been-there-done-that entrepeneurial experience.

    This dialogue and ongoing debate is great but stay focused on solutions. As all entrepeneurs know, it's easy to identify problems but value is only created when new solutions for these problems are developed and deployed. Keep the dialogue focused on positive, progressive ideas. What would you do to address the problem? What, specifically, do you suggest as changes to the plans outlined in the REAP agreement?

  • Mburkons

    Someone who cares, (this is a response to your 2nd post)

    Jumpstart was paid $500k to help your region (Your region was one of five to split a $2.5m grant). This is a lot of money and if I am an entrepreneur, stakeholder, political leader or just a citizen, I would want to see this money used in the most effective way.
     
    What did this report and Jumpstart’s work tell you that you didn’t already know?  I can’t imagine that you didn’t know that creating an atmosphere, culture and entrepreneurial ecosystem conducive to attracting and supporting startups and entrepreneurs is important.  I imagine you knew that increasing the amount of early stage investment dollars was important to creating that atmosphere. The rest of this report relies on the premise that Jumpstart’s advice is valuable because of their successful track record in Northeast Ohio.  I hope this discussion reveals that before you accept that premise, you should listen to people besides Jumpstart as many people in the Cleveland area disagree.

    You stated that the jury is clearly still out on Jumpstart.  It has been 7 years and they have spent over $70m up to this point with more than half coming from public dollars.  How long should we wait and how much more money should we spend while we are waiting for the jury to get back? 
    If you found out that after 7 years, the jobs created by Jumpstart’s efforts came at a cost of $350-$500k per job, would the leaders of your region rely on this group to help them form a strategy?
     
    A lot has been made of the fact that Jumpstart has a $13m+ budget, with the largest part coming from taxpayers, and only uses $3m to invest in companies.  The remaining $10m is used to support their high overhead, salaries and headcount.  It has been pointed out that the CEO’s total comp is over $400k and in the last 3 years he has received $250k in bonuses tied to the results published in these flawed reports that they refuse to allow an independent party to verify.  Many people have pointed out that despite employing close to 50 people, no one in this organization’s leadership has been the founder of the type of successful high growth potential startup they claim they are experts in cultivating.  To many entrepreneurs, it is frustrating to see that a group like this has an 8 person marketing and PR staff even though they don’t sell anything.  

    Jumpstart has received criticism over all of the above issues and most importantly, after receiving so many millions of tax dollars, even after the flaws in their claims were pointed out, they refuse to allow an independent audit of their claims. 
    It may serve the decision makers, stakeholders and leaders in your area well to hear a differing perspective on this group and effectiveness.  You may disagree with my point of view but it may give your more rounded knowledge as you form an economic development strategy.
    It may serve the decision makers, stakeholders and leaders in your area well to hear a differing perspective on this group and effectiveness.  You may disagree with my point of view but it may give your more rounded knowledge as you form an economic development strategy.
     
    Mike BurkonsFounder & President – Charitee Golf LLC.Mburkons@Chariteegolf.net216.832.6771

  • Someonewhocaresaswell

    Before MSP thinks we have figured it out in Ohio and our model is one to be followed, you must ask yourself if your state has the stomach to ask voters to approve floating $2.3billion dollars in bonds towards economic development.  If not, Jumpstart and Ohio's experiences are irrelevant.  Here is some quick history people in Minnesota need to understand.
     
    In 2002, Ohio floated $1.6billion in bonds to create the 3rd Frontier Program with the mission to create new technology-based products, companies, industries and jobs. In 2010, they borrowed another $700m to bring the total to $2.3 billion. 
     
    In 2003, the Ohio legislature voted to create the Ohio Capital Fund (OCF).  To create the OCF, the state borrowed another $150m to form a fund of funds that invests in early stage venture funds. The requirements are that at least 50% in Ohio based companies.
     
    Jumpstart was formed in 2004 after these two programs were in place.  Jumpstart's main response to critics is that they are responsible for the increase in the amount of early stage investment $$$ in the region and the amount of follow on funding companies they worked with were able to obtain.  
     
    With these two programs in place, Jumpstart's relationship to this increase in early stage investment $$$ and follow on funding is at best incidental.
     
    Almost 100% of the follow on funding at Jumpstart companies has come either directly from the 3rd Frontier, by a group the 3rd frontier funds or from a Venture firm that received money OCF which must be invested in Ohio.
     
    As for a suggested solution for Minnesota, I don't think the OCF is a bad idea assuming they invest in venture funds that at the very least can come close to returning the money. This hasn't happened in Ohio and the State is going to lose millions of dollars on this program. 
     
    Jumpstart conveniently has taken credit for this increase in early stage $$$ although most of it are a results of the State borrowing over $2.3billion and has nothing to do with Jumpstart.
     
    I work with many early stage companies and the criticism of Jumpstart is not limited to a certain few individuals like one poster suggested.  Very few people will publicly criticize this group (including me) as Jumpstart has tremendous influence on who gets these dollars.  This debate is very healthy as the strategy of Jumpstart is fundamentally flawed.  I hope the people in MSP understand that before you decide to follow this path.

  • http://tech.mn Jeff Pesek

    You left what seemed to be a genuinely thoughtful comment and I asked some clear questions in response.  Questions left unanswered…

  • Mburkons

    The offer is
    still open for anyone in the MSP region to reach out to me to understand why
    many people in Northeast Ohio are critical of the Jumpstart model. Despite my
    criticism, I will also share some of the positive things about this econ dev
    model.  I am an entrepreneur who was
    funded by Jumpstart so my opinions come from direct experience.

    One of the
    posters commented along the lines of “what do we have to lose?”.  In every region, only so many
    dollars and resources set aside for economic dev in the early stage/ startup
    space.  There is a large and tragic
    opportunity cost when these dollars aren’t used effectively.  My contact info is below.

    Mike
    Burkons

    Founder & President – Charitee Golf LLC.

    Mburkons@Chariteegolf.net

    216.832.6771

  • http://techbytes.biz techbytes

    I'm an experience entrepreneur from NEO/CLE and I would encourage the folks in MN to compare and contrast. The Jumpstart VDO model has way too much overhead and evidence as to why their reported results should be questioned are already mentioned here.

    VDO's don't create ecosystems, people do. Getting startups off and running is not as complicated as the power brokers want you to believe. If MN is looking for one of many models other than VDOs that actually work look no further than Jim Cossler and the Youngstown Business Incubator (@ybiTweets:disqus).

    The name is misleading as it is much more than an Incubator and it's international success proves the model works, dollar for dollar, better than any other model I've seen in the Midwest. Their model is about experienced entrepreneurs helping new entrepreneurs and repeating the cycle. Minus all the overhead.

    Unfortunately the VDO model here in CLE/NEO benefits itself more than it benefits entrepreneurs. I wish everyone in MN great success with a common sense approach to nurturing startups.

  • http://techbytes.biz techbytes

    P.S. I also encourage the MN group to read “The Lean Startup” by Eric Ries, currently a best seller. It offers a common sense approach to startups, in addition to a Methodology, I've seen and used that works. This same model should be applied to any quasi public/private attempt at nurturing and funding successful startups. Technology is moving so fast on a global scale the VDO model being considered is already out of date. Any VDO with large overhead can't possibly move as fast as needed.

  • Piedmonttechgeek

    Why are we
    listening to a bunch of consultants from Cleveland, none of which have any startup
    experience tell us how to create companies? If you look at all the “stakeholders”
    Jumpstart put in place maybe two of them have actual startup experience.  Looking at the disaster of an organization
    Jumpstart created in Cleveland, why is the Knight, Surda and EDA funding them to
    spread this strategy? 

    Here is a
    suggestion…Why don’t we form a committee of local MSP entrepreneurs who have
    successfully founded high growth startups in the last 20 years and task them with putting together a strategic plan.   The
    goal of this plan should be how to increase the early stage investment dollars
    in the region and how to create a very small organization whose purpose is help
    match entrepreneurs with mentors, advisors and possible funders.  A group like this can operate with three
    people and less than a $300k annual budget. 

    To fund this
    group, we should contact the EDA, Knight and Surdna Foundation
    and request that they discontinue funding Jumpstart and release whatever amount
    remains from this grant that was purposed for MSP.  Instead of using that money to pay out of town
    consultants with a terrible track record, we will use the remaining funds to
    put together a committee of entrepreneurs

    who have actual high growth startup
    experience. 

  • Chuck Birchall, Jr.

    First, a quick “who
    is this guy?”  Name: Chuck Birchall, Jr.

    MBA; 20+ years in medical
    device industry; co-founded disc prosthesis company; raised VC $; CFO for
    blueprint co – sold; 3 years at TechLift/JumpStart as an EIR. Presently, I am
    the CEO of a very early stage, start-up software company (full disclosure –
    JumpStart rejected funding it, but I agree with its decision.  It is still too early for JumpStart Ventures) 

     

    Second, a bit of humor…

    A spine surgeon once told
    me that the definition of an expert is someone who lives more than 100 miles
    away, so I guess that makes qualifies me as one.  Same goes for JumpStart.
    :)

     

    Opinion of JumpStart:  The questions and comments that arise from JumpStart’s
    critics are not about the concept of having a VDO, but how it has operated, as
    well as how it has reported its results. 
    Having been on both sides of the fence as both an entrepreneur and an
    employee of JumpStart, I believe JumpStart has added value to Northeast Ohio by
    helping entrepreneurs via its services and funding, but I also believe there is
    some validity to what its critics are saying. 
    In my opinion, JumpStart can improve by doing the following:

     

    *Allocate more of its
    resources to the entrepreneurs – Provide as much funding or services to a
    start-up company that reduces it’s burn (i.e. legal, accounting, financing).  In other words, it should spend substantially
    less on promoting itself.  JumpStart has
    to do some self-promoting to justify its support to its funders, but there has
    to be some limitation to this activity. 
    Youngstown Business Incubator has done an outstanding job of doing this
    on a shoestring budget.  Also, outsource
    some of the internal operations.  For
    example, its marketing/communications department is larger than the one I
    worked with at a $100MM company.

     

    * Board of Directors and
    Management Team – Increase its expertise in key technology sectors of medical, energy,
    & materials; Increase entrepreneurial expertise with people who have raised
    outside funding for a start-up company, as well as led or been a part of small
    start-up companies.  Term limits should be
    put in place for top positions, as well as board members to keep it “fresh” and
    prevent the buildup of power and self-serving agendas that is occurring (there
    is a reason why there are term limits in some government positions).    I believe JumpStart is trying to reduce the #
    of employees, as well as the amount it is paying by replacing more experienced
    employees with younger ones.  Still,
    JumpStart has a large executive management team with a lot of overlap and
    layers.

     

    * Funding decision
    process: Funding a company should be based on its own merits and the decision
    to fund should be based solely on the internal and external experts who have
    experience in the tech sector that the company is operating in.  The amount of funding should also be based on
    what is needed for the company to reach a significant milestone that will lead
    to follow-on funding.  Presently,
    decisions are made following a 30 minute meeting/presentation with some of the
    people voting having never met the entrepreneur; may or may have not read its
    executive summary; and have no knowledge of the business or market that it is
    operating in.  Also, JumpStart usually
    invites up to three companies to present and usually selects only one for funding.  The funding amount is normally set at $250K.  Therefore, the funding decision as it
    presently stands creates a delayed decision (have to wait for the once per
    month presentation); with artificial competition (three companies); a set
    amount ($250K); and voted on by some people who should not be voting.

     

    *When companies are funded:  This is a tough one to correct because if
    JumpStart funds companies at the earlier stages in the Valley of Death, then
    results will take longer to be realized. 
    With JumpStart being measured by the state of Ohio and its other funds
    by how many jobs it has created; amount of outside funding raised; and revenue
    generated, better outcomes are demonstrated when it funds companies that are
    further along.  These companies may not
    need the funds as much as earlier ones that are rejected.  JumpStart may want to present its results by
    stratifying them based on where a company is in the commercialization
    phase.  Otherwise, it will continue to be
    viewed as a later stage funder, which is not where it was intended to invest to
    support the entrepreneurial environment. 

     

    *Measuring results:  This is another tough one to correct since it
    is difficult to determine the exact impact JumpStart has had by providing
    services or funding for a company.  Were the
    services or funding provided significant enough to accept credit for the jobs
    created, the outside funding received, or the revenue generated?  Presently, JumpStart has to record what it
    did to justify any results produced by one of its portfolio or client companies.  As long as JumpStart can show it made a
    significant contribution to a company, it receives 100% credit for anything a
    company accomplishes.  This, of course,
    probably overstates its impact.  One way
    to rectify this is to put the results on a scale.  The earlier the company is in the commercial
    phase, the more credit JumpStart receives (100% – Idea Phase; 50% in Incubating
    Phase; 25% in Demonstrating Phase).

     

    Additional comments:

    Criticism of JumpStart – As
    mentioned in one of the comments, a critic may jeopardize his ability to
    receive funding, so most will remain anonymous. JumpStart already knows my
    opinion, so no reason to hide my identity, but this is the first time that I
    have gone public with my opinion.

     

    Advice to MSP in creating
    a VDO:  Do your due diligence as you are doing now.  Talk to Scott
    Shane, (http://weatherhead.case.edu/fa…, who is a professor at Case
    Western Reserve, an expert on entrepreneurship, & a former
    JumpStart Board Member.  Check out Innovation Works (http://www.innovationworks.org…, which is where the idea of
    creating JumpStart came from.  You may want to consider running it like a
    for-profit (i.e. control overhead; spend $ that have the greatest impact on
    customers/entrepreneurs) with some non-profit qualities (i.e. term & salary
    limits; full disclosure).              
        

     

    Entrepreneurs/early stage
    companies crawl through the “Valley of Death” (5-phase
    commercialization diagram) searching for funding.  In some parts of our
    country (i.e. West Coast), the Valley is supported by a plethora of angel
    investors who have the ability & willingness to invest (even in really bad
    ideas).  Therefore, they don't need a VDO, like JumpStart.  In
    Cleveland/Northeast Ohio (NEO), we did and still do need a JumpStart.  MSP is probably in a similar situation that
    we are in.    

     

    Start-up companies will
    start & thrive in MSP if it offers non-dilutive funds (grants) or
    convertible debt in a wide range of amounts ($5K – $500K?) to companies in the
    earliest commercialization phases.  The funds should come with no red tape
    (simple process) and take < 30 days to process.  Also, keep all
    expenses to a minimum and consider the suggestions that I made earlier in my
    comments.  

     

    Mantra “Every dollar spent
    on us is one less dollar to give an entrepreneur.”   

      

    I hope you find my
    comments to be helpful. If you would like to contact me, send an email to cfbirch44@gmail.com

  • http://tech.mn Jeff Pesek

    Thanks for the thoughtful and educated comment, Chuck.

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