This product was the outcome of a$2.5m grant that JumpStart received based on “impact” as measured over five years of existence within Ohio, at which point it had seen an estimated $50m in funding. The grants purpose was to explore how “certain core elements of the successful JumpStart approach” could be potentially replicated within other upper midwest Knight Foundation Communities such as: Ft. Wayne and Gary, IN; Detroit, MI; Duluth and Minneapolis-St.Paul, MN; and Akron, OH.
To date, JumpStart has received $70m over the past seven years, the majority of which — approximately $39 million — has come from Ohio taxpayers and is essentially borrowed to begin with. The organization provides financial and operational assistance to startup companies, although in Ohio, the majority of funds disbursed have not gone directly into funding emerging companies, rather “services and overhead”.
Many have since read the v1 report to gain a better understanding of how JumpStart diagnosed the MSP region and what their proposed remedy would look like. One local stakeholder, who declined to publicly comment on the original article, was quick to point out that ‘this report is suggestive and no where near final’.
Obviously, considering the lack of substance; the report is riddled with questionable claims and unsupported presumptions. The org seeks to raise $10m to fund 28 months of operation, largely from “government and philanthropic sources.” There is no hard earned, privately held smart money to be found for this plan and its easy to see why.
For example, a blatant “secondary market research” miscalculation used to justify the need for JumpStart’s services in MSP appears on page 16 where it’s reported that first round/seed investments made in 2010 was two.
This early stage “first round/seed” research is nothing short of ignorant (how much was spent on this report?). We know there were at least 42 early stage companies funded in 2010 with 60 already capitalized this year. It is safe to conclude that half of those companies were in “first round/seed” stage, considering the average investment amount ranges between $200k – $250k. That’s 20 for 2010, a number that will be double to 40+ in 2011, not even considering the other tech verticals.
“Although these numbers are unlikely to include investments by angels, and may not even include all venture capital investments, they nevertheless present strong evidence that the thriving, high-‐tech MSP region is not generating new, market-‐ready opportunities at or near its potential,” says the report. Now why would an analysis of early stage dealflow in Minnesota not include angel investments?
Overall, the report is biased to align with JumpStart’s goal of expansion, regardless of our actual circumstances. “Did you expect that they would come back and just say everything is ok, we’re not necessary here?,” quipped one observer.
Since publishing that original piece, a lot of people have come forward to weigh in. Some aired their opinions out in the open while most preferred to keep their sentiments off the record. As one credible and articulate Ohioan said:
“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.”
And there must be validity, considering that many of the dissenting voices around JumpStart’s MSP hopes are now coming directly from inside the group of local REAP Stakeholders itself. Understandably so, considering that JumpStart has still yet to transparently report outcomes in Ohio, while at the same time, attempting to sell Minnesota on the basis of its merit.
Here’s to the notion that those same stakeholders have the courage to ask the right questions in pursuit of truth. This has clearly become an initiative disconnected from the same values our entrepreneurial community stands for.