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$2.00/SEPTEMBER 15 - 21, 2014
Hospitals hoping time runs out on midnight rule
SLAM DUNK
For some Medicare patients, sitting in a hospital bed overnight doesn’t necessarily mean they’ve been admitted. Consider it the Medicare version of purgatory, and it’s confusing patients and taking a chunk out of local hospitals’ bottom lines. Last year, the cash-strapped Medicare program instituted a rule that stated that patients needed two nights — make that two midnights — in the hospital to qualify for inpatient-hospital rates. If they don’t cross that two-midnight threshold, hospitals must bill at the lower, outpatient rates. Basically, it injects a time element into a doctor’s decision of whether to admit a patient, and hospitals are clamoring for a change. “It is so convoluted now and under such fire they’ll have to do something to change it,” said Don Paulson, University Hospitals’ vice president of revenue cycle management. The rule, according to Moody’s Investors Service, has the potential to cost hospitals $3,000 to $4,000 per case. That’s big bucks, considering about 40% to 50% of most hospitals’ patients are Medicare beneficiaries. Moreover, Medicare patients are likely on the hook for more of the bill — co-pays and drug expenses, for instance — when the hospitals are reimbursed at the outpatient rates. A boon in high-deductible health plans already has forced hospitals to up their game in collecting unpaid bills, and the two-midnight rule would only intensify those efforts among See MIDNIGHT, page 24
CAVS’ ‘ALL OHIO’ APPROACH GAINS CRUCIAL MOMENTUM
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By TIMOTHY MAGAW tmagaw@crain.com
STORY BY KEVIN KLEPS n 30-second television commercials, the likes of Urban Iproclaim Meyer, Archie Griffin, Thad Matta and Clark Kellogg themselves Cleveland Cavaliers.
DOWNTOWN OFFICE SPACE 37
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See CAVALIERS, page 26
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For the Cavs, captivating the attention of Columbus, Cincinnati and other markets outside Northeast Ohio has been a process that’s more than a decade old. Only now — with the return of LeBron James, the acquisition of Kevin Love and the focus of much of the NBA on Cleveland — the Cavs are playing from a position of strength. Kerry Bubolz, president of business operations for the Cavs, said the team, as the only NBA franchise in the Buckeye State, has “always felt like we should own Ohio.” Following an offseason in which every conceivable
BRIGHT IDEAS Organizations and individuals must be careful and protect their intellectual property ■ Pages 15-21 PLUS: STARTUP STORIES ■ TOP ADVICE ■ & MORE
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Brandt Evans, the owner of Pura Vida on Public Square, wishes more gamblers would walk across Ontario Street from the Horseshoe Casino Cleveland in the Higbee Building to eat at his popular restaurant, especially since he is a casino “partner� — one of 15 nearby restaurants where frequent gamblers can get meals compliments of the casino. But, he said, “I am still a big fan of my neighbor ‘the casino,’� Evans said in an email. “(T)he casino spends a lot of money keeping Public Square very clean and (they) always have security walking around and that makes my customers wanting to come back downtown to eat.� At the same time, the monthly release of revenue totals by the Ohio Casino Commission is watched like the Dow Jones Industrial Average — and this year, the numbers usually are disappointing. The results show monthly revenue ranging from a low of $16.6 million in January to a high of $21.3 million in March — figures that are below 2013 monthly levels and well off the state’s initial projections. The numbers prompt frequent questions to casino officials about the likelihood that a planned “permanent� riverfront casino will ever be built. Much of the gaming industry, though, is of a mind that it’s too early to know what the future holds, especially as racinos, the racetrack-based gambling halls, are still opening in the state. “The industry is still relatively new in the state, something is opening almost every other month,� said Alan Silver, assistant professor of restaurant, hotel and tourism at Ohio University and a former casino executive. “Until everything opens around the state, then we’ll get a good indication. “But even when everything opens up, then the racinos will lobby for, and get, table games and the landscape changes again,� he said. In 2009, Ohio voters approved a constitutional amendment opening the state to four casinos. Pressured by racetrack owners, the Ohio General Assembly in 2011 approved adding slot machines at the tracks. The Cleveland casino opened May 14, 2012, the ThistleDown Racino in North Randall opened April 9, 2013, and the Hard Rock Rocksino opened in Summit County December 18, 2013. The downtown casino and Thistledown are both owned by Rock Ohio Caesars LLC, a joint venture between Dan Gilbert’s Rock Gaming LLC and Caesars Entertainment Corp. of Las Vegas. The Hard Rock is a partnership between the Milstein family that owns Northfield Park race track and Hard Rock International of Orlando, Fla. The downtown Horseshoe has suffered revenue downticks with each of the racino openings. Revenue stayed above $20 million a month until the ThistleDown racino opened and above $18 million monthly until the Hard Rock opened. Those facilities only can offer what are called video lottery terminals, or VLTs — basically, slot machines, and not any game with even a trace of skill, such as video poker. But they are attractive to many, especially to the over-55 demographic that likes easy travel and parking, which is
the heart of the slot machine audience. “Right now the racinos are doing a really good job and they’ve become suburban entertainment centers,� Silver said. “A lot of them have really fantastic amenities.�
Tricks of the trade The Hard Rock racino has what it calls Hard Rock Live, a 2,600-seat concert venue that has booked acts such as country singer Clint Black and comedian Sinbad in the coming weeks. ThistleDown is quadrupling the size of its patio, an outdoor pavilion where gamblers can smoke and watch the horse racing while they gamble. Shannon Mortland, public relations manager for Horseshoe Casino Cleveland and ThistleDown, said the expansion will add 97 VLTs to the current 32 machines. The downtown casino can’t match those amenities, but, said Mike Meczka, a casino marketing consulting in Los Angeles, it can compete. “They have an opportunity to distinguish themselves, but not much of one,� he said. “The point of differentiation is that the downtown casino is a full-service casino with a full complement of games. However, that accounts for only 10%, no more than 15% of the overall gaming revenue and that has higher labor costs (than electronic games).� To combat the downturn, the casino is gearing up efforts to entice gamblers. “The biggest project we have coming up will open in early to mid-October and that’s the TAG Bar,� Mortland said. “That will have electronic table games, which are new to this market.� The 2,000-square-foot lounge on the second floor will have at least 35 electronic table games including blackjack, roulette and craps. Only casinos, not racinos, can offer those games and video poker. Mortland said the casino also now offers live entertainment in its Vintage 51 Bar on Thursdays, Fridays and Saturdays. More subtly, using strategies it doesn’t disclose publicly, the casino tinkers with the amount of free-play
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offers it sends to frequent players to lure them back downtown. “The Horseshoe in July gave out a huge amount of free play, more than $5 million,� Silver said. “In August, they backed it off, probably because they decided the strategy wasn’t working.� Meczka said that since the casino can offer table games the racinos can’t, the trick is to attract quality table game players with more promotional (free) play and return as large a percentage to the player as possible to get them to play longer. “Let the patron play longer at a lower rate; the player will be happier and play longer,� he said. “Time is the enemy of the player and the ally of the casino. The longer you keep them at the table, the better off you are.�
Holding pattern The ever-looming question, though, is whether or not the casino can be successful enough to justify building a new casino building along the riverfront. The initial plan of casino developer Dan Gilbert was to build a casino atop a parking garage overlooking the Cuyahoga River behind the Terminal Tower. The complications and likely slowness of building on a riverbank moved the casino to what came to be called “Phase I� in the Higbee Building. Phase II would come later. That was before racinos were legalized, however, and certainly didn’t take into account a planned, fullservice casino in New Castle, Pa., near the Ohio border. The Pennsylvania Gaming Control Board has a license for a casino there, but has yet to approve a development plan. While Gilbert has continued to say the new casino, which could offer the kind of amenities now available at the racinos, is in the offing, no timetable is being offered. Last week, Mortland would only say that nothing has changed in those plans. But Meczka isn’t so sure. “I don’t think they can generate enough revenue to justify a new facility,� he said. “It’s an unnecessary investment.�
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CRAIN’S CLEVELAND BUSINESS
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5
CampusEAI is continuing to fund, guide ed tech startups By CHUCK SODER csoder@crain.com
A SWEET RESPONSIBILITY Engaged pastry chefs hope to make another future merger — their own restaurant By KATHY AMES CARR clbfreelancer@crain.com
Vincent Griffith and Anistar Meffert surrendered their young professional lives to 18- to 20-hour workdays at some of the world’s most elite pastry kitchens. They embraced the minutiae — such as chopping herbs to perfection — and appreciated the responsibility of apprenticing beside culinary luminaries. They also adopted skills that cannot be taught. At the famed Charlie Trotter’s in Chicago, the “push for excellence” imprinted most upon Griffith. “If there was a standard of quality or a pre-existing ceiling, you needed to have the drive to rise above that status quo and do it better, harder, faster, and above all else, cleaner,” Griffith says. Meffert’s exposure to the service philosophy in France shapes her point of view. “Sure, you learn technique in France, but you also learn about taking pride in working as hard as you can and the importance of treating diners as guests, not customers,” she says. It’s that kind of experience that accelerates talent enough to warrant leading roles at two of Cleveland’s most innovative restaurants. Meffert, 24, is executive pastry chef at Crop Bistro & Bar’s kitchen. “I’ve worked with a lot of pastry chefs over the last 30 years, and Anistar is one of my two best,” says chef/owner Steve Schimoler. “She understands my approach to menu development, and brings a great balance of innovation and creativity, blended with good sensibility, to Crop.” Griffith, 27, is head of the pastry program at Greenhouse Tavern. “Vincent is the most talented pastry chef Cleveland has seen in a long time,” says Jonathon Sawyer, of Greenhouse Tavern and Trentina.
Landing on ‘fertile ground’ But not all of the startups are direct spinoffs of the two CampusEAI entities. Some were created by their employees. And QuickLaunch was started by two employees of an existing spinoff called LookingGlass, which sells software that
Sweet beginnings The pastry chefs met in 2010 at Charlie Trotter’s and worked at Chicago’s Michelin-starred, tasting-menu-only Moto restaurant before moving to Cleveland last September. Griffith took the reins of the Greenhouse Tavern’s pastry program after Eater Young Gun pastry chef Matt Danko moved up to executive chef of Trentina in University Circle. The Euclid native’s first stint at the kitchen was as a See SWEET, page 12
CampusEAI Inc. is pumping out education-focused startup companies — and pumping them full of cash. Seven startups that have emerged from the Cleveland-based technology company have received a total of $18 million from its EduTech Venture Fund since 2012. Now CampusEAI wants to invest in your ideas. The company — which provides information technology services to colleges — recently started accepting applications from outside entrepreneurs working to launch “ed tech” startups. It also aims to help colleges commercialize technologies that they’ve developed. And CampusEAI isn’t just providing cash. Startups that receive money also get hands-on assistance. For instance, most of the seven startups that already have received funding are based at CampusEAI’s downtown headquarters, according to CEO Anjli Jain. “A lot of these ventures are literally sitting in house,” she said. Among them is QuickLaunch SSO, which just received the last installment of a $2 million investment from the EduTech Venture Fund. The “SSO” stands for single sign-on: The company’s software gives schools and companies a way to log into several software programs at once. Though QuickLaunch is technically based in Cleveland, only two of its 15 employees are here. The rest are in India, which is typical of the startups coming out of CampusEAI. Combined, the seven companies employ about 40 people in Northeast Ohio, most of whom work for a computer systems support company called BlackBeltHelp. But they employ another 300 people outside the region — mostly in India. That reflects CampusEAI’s deep ties to the country. The company was created by the nonprofit CampusEAI Consortium, which provides IT consulting services to colleges. Most of the nonprofit’s 50 employees are based in India, which is where Jain was born. She said the startups develop software and conduct other business processes in India, where labor is less expensive. “It has to be cost effective,” she said. The company’s effort to start new businesses began several years ago, while Jain was in a meeting with technology executives from several colleges that buy IT consulting services from the nonprofit CampusEAI Consortium. One of them asked if the group could help its member schools monitor their computer systems and provide tech support from afar. That discussion drove the nonprofit to create CampusEAI Inc., a for-profit company, to provide those services. And it inspired officials who lead the two entities to explore what else they could do for colleges. Those products and services are being spun off into separate companies, such as BlackBeltHelp, the computer support provider.
See STARTUPS, page 24
CORRECTION PHOTOS BY MCKINLEY WILEY
Anistar Meffert and Vincent Griffith, two of Northeast Ohio’s most talented pastry chefs, will wed on Oct. 4 at a 100-acre Wisconsin dairy farm owned by Meffert’s family.
Two Urban Farmer food photos on Page One of the Sept. 8 issue were improperly credited. Barney Taxel is the photographer.
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CRAIN’S CLEVELAND BUSINESS
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Cost of materials is a chief concern for manufacturers By RACHEL ABBEY McCAFFERTY rmcafferty@crain.com
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Despite signs of strength in the manufacturing sector, concerns loom about work force development and the rising cost of raw materials, health care and energy. Wire-Net, a manufacturing economic development group in Cleveland, released a survey earlier this month in which 50% of 89 respondents predicted improved profitability in the next year. Another 31% expected profits to remain the same. All respondents had fewer than 250 employees. About 12% were in the automotive space, and another 35% were in miscellaneous manufacturing, including metal stampers and fabricators. But the survey also highlighted some constraints to growth, and the consensus on those factors was pretty strong. Material costs were the most commonly cited constraint at close to 63%. About half (47%) pointed to electricity costs and the cost of the Affordable Care Act (55%). And challenges related to talent remained near the top of the list with about 62% of respondents citing it as a concern. John Colm, president and executive director of Wire-Net, said it was significant to see raw materials costs at the top of the list of concerns. Though Wire-Net hasn’t recently conducted this survey, it used to do so at least twice per year. From about 2008 until 2011, sales were the top concern for manufacturers, he said. Talent-related issues started to gain prominence after that. And rising costs aren’t just a worry in Cleveland. The Federal Reserve Beige Book released Sept. 3 boasted relatively widespread growth in manufacturing, including in the Cleveland region, which covers Ohio, western Pennsylvania, eastern Kentucky and part of West Virginia. The report noted that the demand was strongest in the food, motor vehicle and oil and gas industries. But it also said a “growing number of manufacturers reported rising prices for raw materials, especially metals and agricultural products.� And while prices for higher materials were passed through to customers with “little pushback,� some manufacturers said the increases were starting to affect profitability.
“Nobody wants to raise prices, but at some point, you have to think about it.� – Randy Solganik owner and president, City Plating
Raw deals A study released by the National Association of Manufacturers and IndustryWeek Sept. 8 cited rising health care and insurance costs as major business challenges. About 41% expressed concerns about energy or raw material costs. To combat increased spending, local companies have been improving efficiencies and raising prices, Colm said. The Cleveland area has the type of manufacturing sensitive to shifts in raw materials prices, said Randy Solganik, owner and president of City Plating in Cleveland. But coming out of the financial crisis, manufacturers have primarily been able to absorb rising materials costs through lean techniques and other efficiencies. City Plating has turned to methods like automation to avoid price increases. “People have been loath to raise prices,� Solganik said. But he thinks that will soon have to change. In the past year, two of the materials City Plating uses have seen steep increases in prices: about 40% for nickel and about 20% for zinc, Solganik said. And he’s watching for increases in the cost of electricity. Bill Adler, president of metal stamper Stripmatic Products Inc. in Cuyahoga Heights, said materials make up about half of the cost for the company to produce a part, and, in the past year, he’s seen more competition from low-cost imports. A recent trade case puts tariffs on certain tubes and pipes, but the same products that have been minimally processed aren’t included, he said. The tariffs protect the primary suppliers, but not the secondary processors, he said. “That is so much harder for us to compete against,� Adler said. Adler said he expects 2014 sales to be close to those in 2013. He has higher expectations for the future as the company moves into new applications and markets. It’s not just companies working with metal that are feeling the squeeze. Earlier this summer, Omnova Solutions Inc. in Fairlawn announced price increases on vinyl
acetate and vinyl acrylic-based emulsion polymers because of a “global supply shortage of key raw materials.�
Labor pains Jeff Walters, president of Master Products Co. in Cleveland, said raw materials prices have been creeping up, but he hasn’t had to take those cost increases to the customer — yet. While materials are the company’s largest cost, the one that concerns Walters the most is health care. If Master Products, which produces flat washers and metal stampings, is dealing with cost increases of a product like steel, it can be justified to customers. But those customers don’t want to hear about health care increases, he said. That’s for the company to handle. Business is booming at metal stamper Talan Products Inc., but one of the issues that concerns CEO and founder Steve Peplin is labor. He said in the past year or two, the Cleveland company has been doing more training than it used to, hiring someone who is technically minded and helping him or her gain the necessary skills, rather than expecting the skills on day one. Labor isn’t just a concern in terms of finding people with the skills to fit the job openings. Stripmatic, which has fewer than 50 employees, has raised wages in recent years, and Adler said he’s seen increased pressure on wages in recent years. Solganik said starting wages at his shop still were the same, but current employees did receive a pay increase this year. The company needs to stay competitive, he said. Though City Plating doesn’t share overall sales, Solganik said sales were up 7% year to date. And he expects to see steady growth into the next year.
Something’s got to give Solganik said he thinks many of the materials cost increases are related to geopolitical or regulatory issues, like nickel from conflict-ridden Russia or the coal-related mandates facing the electricity industry, rather than just demand. The market is still competitive, but he thinks the rising costs are something manufacturers will have to confront at the end of 2014 and into 2015. “Nobody wants to raise prices, but at some point, you have to think about it,� Solganik said.
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Delayed Kimpton Hotel set to open downtown in 2015 By JAY MILLER jmiller@crain.com The developer of the Schofield Building in the heart of downtown Cleveland has set a mid-2015 opening for the Kimpton Hotel and apartments under construction in the historic building. While that’s not the firmest of opening announcements, it’s a positive sign for a project that has had a rocky history. It has been a victim of a difficult hotel lending environment that remains cautious after the market collapse and decline in hotel occupancy that followed the Great Recession. Brian Intihar, vice president of developer CRM Properties Inc., committed to the opening as CRM is firming up the final bits of financing for the $45 million project, which has been under development since before 2009. Despite financing difficulties, the Kimpton is part of a boom in Cleveland hotel development that has blossomed of late, as the new Cleveland Convention Center was opening and even before the blockbuster announcement that the city would host the Republican presidential nominating convention in summer 2016. Early next month, the Kimpton developer expects approval of a backup collateral agreement with Cuyahoga County. That will provide key lender Wells Fargo the comfort it needs to move ahead with its $29 million in first and second mortgage loans. Last Wednesday, Sept. 10, the Cuyahoga County Community Improvement Corp., a quasi-public body of bankers, business executives and county staff that reviews the county’s economic development lending, unanimously recommended to county council that the county pledge $5 million as backup collateral on the second mortgage loan. The building recently was appraised at $33.5 million, Intihar told the Community Improvement Corp. “It’s the final piece to completing the capital stack,” Intihar told Crain’s about the county’s collateral pledge. “It’s an additional guarantee that Wells can look to.”
spurred several downtown hotel projects. The remaking of downtown is one key reason why one hotel consultant believes Cleveland should be “a city of choice” as a place to live and to visit. “Continued development projects, anticipation of the coming RNC and hype surrounding the return of LeBron James to the Cleveland Cavaliers will cast a bright light on the city and the entire metropolitan area, providing a great opportunity for all to see it’s not a city that developers, national conventions, sports superstars and world-renowned doctors merely settle for,” wrote Laurel Keller, director of appraisal and consulting services for Hotel &
Leisure Advisors, a Lakewood-based consulting firm. “For some, it’s become a city of choice.” Among the hotel projects that Keller highlighted in her Aug. 28 post on HotelNewsNow.com were the recently opened, 484-room Westin Cleveland on St. Clair Avenue; the 150-room Aloft in the Flats; and the 156-room Metropolitan at The 9, a Marriott Autograph Collection hotel that opened earlier this month across East Ninth Street from the Kimpton at the former Ameritrust Tower. She also mentioned the underconstruction, 600-room Hilton Cleveland Downtown and the Le Méridien Cleveland, from the Star-
wood Hotels & Resorts, which is expected to open in January 2016 at 1001-1101 Euclid Ave.
Caution still rules But the struggles of the Kimpton developer and similar setbacks for the Drury Plaza on the Mall reveal the caution that still exists among hotel lenders. The Kimpton financing appears to be in the home stretch, but the Drury project is still some distance from the finish line. Some work has begun on the project, which originally had a fall 2015 opening date. But in June the 180room boutique hotel near the new
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Market heats up CRM and its principals, including Intihar and president Steve Calabrese, have an $11.4 million equity investment in the project. Work began after the developer in 2009 received a $1.25 million loan from the city of Cleveland. That loan enabled CRM to look under the aluminum panels added in the late 1960s to assess the state of the original brick and terra cotta exterior, dating from 1902. The underlying materials needed considerable restoration, but the developer moved ahead with the work as it lined up a financing package. In 2010, the state of Ohio granted the project $5 million state historic preservation tax credits. The final financing fell into place when CRM reworked the project to include more apartments and fewer hotel rooms, which in a hot apartment rental market like downtown Cleveland improves the cash flow outlook for a lender. The resurgence of investment in downtown, led by the new convention center and the adjacent Global Center for Health Innovation, has
Cleveland Convention Center was shut out of a round of state historic tax credits. Herb Wedemeier, general counsel for the St. Louis-based hotel company, told Crain’s last Thursday, Sept. 11, that the firm will be seeking a state tax credit in a round that has a Sept. 30 deadline. “The state historic credit is an essential part of this project,” he said. “We feel confident we will get the award this time.” Wedemeier said the company is targeting a late-2015 or early-2016 opening, though he conceded, “The big deadline, of course, is that you’ve got a big convention coming to town.”
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Paragon regains wings, soars higher By CHUCK SODER csoder@crain.com
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A few executives from Paragon Consulting recently took an aerobatic plane ride — the kind where the pilot does nosedives and then swoops back up into the sky. They know the feeling well. Sales at the web development firm dropped by 40% during the recession, but now the Mayfield Heights company is flying high — much higher that it had ever flown before. Today, Paragon is several times larger than it was before the recession, partly because of a wise move the company made in 2008. That year, Paragon became a partner with a company called Sitecore. And when the recession decimated Paragon’s custom software development business, the company shifted its strategy: Now it focuses most of its efforts on building websites using Sitecore’s technology. It was like Paragon replaced its propellers with Sitecore-brand jet engines. The Danish company’s web content management software, which is designed to help companies automatically reconfigure content on the site, based on who is visiting, has become particularly popular lately. That put Paragon in a good position, given that
Annual
Alumni
awards
Congratulations to Cleveland State University’s 2014 Distinguished Alumni Award Recipients ANTHONY S. BAKALE BBA ’82 Cohen & Company
ELIZABETH PUGH JD ’78 U.S. Library of Congress
ANDREW JACKSON BBA ’82 AJ Automotive Group and Elsons International
RICHARD JANUS MA ’77 Victory Capital Management
MURRAY WINLAND MEd ’93 eBay, Inc.
CYNTHIA STRUK BSN ’83 Summa Health System
KENNETH P. JAYJACK BSIE ’82 American Greetings Corporation
PAUL J. GEMPERLINE BS ’78 and Ph.D. ’82 East Carolina University
BOOMING BUSINESS Paragon Consulting got hit hard by the recession. Paragon recovered much of its lost business in 2010, after it started focusing on building websites using a popular platform called Sitecore. That strategy has paid off handsomely. Estimated sales 2010 $2 million 2011 $5 million 2012 $6 million 2013 $7 million 2014 *$10 million *Projected; Source: Paragon it’s now one of the most prominent Sitecore developers in the Midwest. The company’s revenue surpassed $7 million last year and should exceed $10 million this year — up from $2 million in 2010, according to CEO Mark Atwood. Paragon now has more than 60 employees and 20 full-time contractors, up from 18 employees in late 2010, he said. Granted, the company did win one big contract from Charles Schwab in 2010, which helped jumpstart its expansion, Atwood said. But Paragon’s Sitecore partnership is still driving growth. For instance, two weeks ago Paragon extended offers to three more prospective employees, Atwood said. And the company would hire five or six more people, if it found good ones, he said. “I know I have more work than I have people,” he added. To house its growing staff, Paragon plans to move into a new office at 5900 Landerbrook Drive in December. The 10,000-square-foot office isn’t much bigger than its existing headquarters across the street, but it has been configured so that Paragon
can fit more employees into the same amount of space. Plus, the company has the option to take another 2,500 square feet on the same floor.
Webbed feet Cedric Ervin, manager of the Great Lakes region for Sitecore, said Paragon is “our premier partner in the state of Ohio.” And that says something: Sitecore’s 3,500 clients include some huge organizations, such as the Cleveland Clinic (a Paragon customer), Procter & Gamble and L’Oreal. Plus, Sitecore’s sales have been growing by about 50% each year, Ervin said, though he wouldn’t provide more detail. The web technology company often refers new Sitecore partners to Paragon for training and development assistance, given that Paragon has more than 30 Sitecore-certified developers. Doing work for other web development firms opened up a new source of revenue for Paragon. The company even marketed the service through an “Outsource to Cleveland” campaign, according to Frank McGee, business development principal at Paragon. “We’re kind of like the duck feet under the water,” McGee said. He then pointed to appropriate example: Paragon helped another web firm build the website for Aflac, an insurance company represented by a duck. That kind of work has helped Paragon expand well beyond Northeast Ohio. For instance, Ervin said he has introduced Paragon to two new Sitecore developers since last November. One is in Cincinnati and the other is in Indianapolis. The company also works with firms beyond Ervin’s territory. “It’s not just in the Midwest. It’s literally around the country,” he said.
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Sivon enters next generation, adds products By MIKE SCOTT Rubber & Plastics News
Sivon Manufacturing Co. of Perry, a manufacturer of a full range of equipment for the rubber industry, is turning to its third generation for leadership. Charles Sivon started the Lake County company in the late-1930s, before his daughter, Charlotte Kieffer, and her husband, Ron, took over management in the 1970s. Now on their way to “semi-retirement,” the Kieffers are transitioning management to the third generation, their daughter, Kathleen Ritts, and her husband, Shawn. Among the various industries that Sivon Manufacturing sells to regularly is the architectural field, where the company supplies a number of O-rings and other automotive molds. Its rubber gaskets and seals also sell to a wide variety of machining and automotive suppliers. The company’s full range of products include rubber cutters, vulcanizers, splicers, injection transfer presses, molds, accessories and adhesives.
Key growth markets “One of the growth areas for us is the oil and gas industry,” Charlotte Kieffer said. “That is an industry where a lot of rubber is used and where there is more demand for products. It is an area where more of our business will come from in the future.” The aerospace industry is another area of growth for Sivon Manufacturing, she said. Airplane manufacturers, both commercial and military, want to ensure that their aircraft achieve reduced noise and compression levels. Sivon Manufacturing has a global presence in each of these industries. Even as an employer with fewer than 10 professionals involved in the day-to-day operations, Sivon Manufacturing has the ability to sell globally to manufacturers to ensure that growth continues outside of the U.S. market. “That has been an important part of our strategy,” Charlotte said. “Today, you have to be a global player no matter how big or small you are. So we have set up foreign
Chicago firm buys Mongoose Metrics By CHUCK SODER csoder@crain.com
The company that bought Mongoose Metrics has the resources to take the local call tracking technology company “to the next level and the level after that,” according to Mongoose CEO Brad Reynolds. Mongoose was acquired by Ifbyphone, another company that helps sales and marketing departments make the most out of inbound calls. They wouldn’t say how much Ifbyphone paid, but the Chicagobased company just raised $30 million in venture capital. Some of the money is being used to buy Mongoose from its founders — Reynolds, Jeff Tirey and Stephen Abbey. Reynolds called it “a significant exit.” The rest of the money will be used to accelerate the growth of the combined company, which aims to hire 30 to 50 people over the next year or so, according to Ifbyphone CEO Irv Shapiro. “You will not see announcements about layoffs. … Just the opposite,” Shapiro said. When Reynolds was talking about Ifbyphone’s resources, he wasn’t just talking about money. For one, Ifbyphone has about 115 employees, while Mongoose has about 35. The Chicago company also has a broader lineup of software products and an experienced management team, including Shapiro, who previously built and sold two computer technology companies. Reynolds, who also has sold multiple tech companies, said he was looking for a way to take Mongoose “to the next level,” which led him to consider merging Mongoose with another company, raising capital or
expanding its management team. Ifbyphone was easily the best potential acquirer, Reynolds said. “Frankly, you want to attach your wagon to the thoroughbred,” he said. Both companies’ sales have been growing in the 25% to 50% range annually, and sales should keep rising, Shapiro said. That’s partly because the number of calls coming into sales departments is expected to skyrocket over the next four years: 30 billion inbound sales calls were made in the United States last year, and that number is expected to reach 73 billion by 2018, according to BIA/Kelsey, a research and consulting firm that focuses on local media. Why the big increase? Shapiro noted that it’s easier to touch a phone number on a smart phone than it is to type an email with your thumbs. “Voice is important again,” he said. Mongoose’s founders have a habit of starting and selling tech companies. In the 1990s, Abbey started an Internet service provider in Cleveland and hired Reynolds as his chief technology officer when he was just 19. Abbey sold that company, Internet Access Group, for $15 million in 1998, and Reynolds made money on the deal. Three years later, the two men founded Expedient, which is now a data center company. A Pittsburgh firm bought Expedient — which still has a data center in Garfield Heights — for about $30 million in 2005. In 2007, they founded Mongoose with Jeff Tirey, who previously was CEO of a local web development company called Pre23.
distributors and an infrastructure and partners that allow us to sell everywhere. In fact we just shipped some product this morning to the United Kingdom.” Sivon Manufacturing has supplied the rubber industry with the SMACO bench model vulcanizers in multiple sizes, from portable to large injection or transfer presses. The most popular size is used in all industries splicing O-rings, to corner gaskets for complicated profiles. “We are a full-service manufacturer for our customers from the splicing units, and with molds for splicing the extrusions, rubber cutters and the adhesive to splice,” Charlotte Kieffer said. Adhesives made by Sivon Manufacturing are composed of neoprene and silicones. Many are food grade-acceptable, she added. Sivon also produces a contact adhesive that crosslinks at room temperature along with a splicing two-component neoprene-based adhesive that cures at room temperature. There will be an estimated sixmonth transition period before the Kieffers turn the full operation over to their daughter and son-in-law.
Shawn Ritts said additional training will be needed for him and Kathleen, adding that the transition to the new management team will be very transparent. “All of our customers know about this plan, but nothing will really change for them,” he said. “The same level of service and products will be available to them. But we will also be looking at adding to our product line.”
Future offerings One of those expanded product lines will include new adhesives to meet the needs of various industries, Ritts said. Future products that Sivon Manufacturing hopes to add include a cold bonding sponge rubber and a two-component adhesive that works efficiently at ambient temperatures, according to Ron Kieffer. “It’s perfect for construction or other industries that issue big or heavy equipment,” he said. “You apply the cement and let it set over night. Bonding applications are something we are continuing to
look at.” Sivon Manufacturing will make other operational investments over the next two years, Ritts said. That will include a newly redone website at www.sivonmfg.com, along with other technological upgrades. Ron Kieffer has been responsible for much of the technical knowledge at Sivon Manufacturing for a few decades, and while he laughs at the notion of his “semi-retirement plan,” he and Charlotte will continue to serve as technical consultants to the family business for at least several months. The company is proud of its family heritage, Charlotte Kieffer said. “Some of our customers have been with us for 40 or more years,” she said. “You don’t have many small family businesses like us doing this anymore, so we must have been doing something right. “We’re really proud of the fact that we are keeping it in the family,” Charlotte said. “It’s what Ron and I always wanted.” Scott is a correspondent for Rubber & Plastics News, a sister publication of Crain’s Cleveland Business.
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PUBLISHER:
John Campanelli (jcampanelli@crain.com) EDITOR:
Elizabeth McIntyre (emcintyre@crain.com) MANAGING EDITOR:
Scott Suttell (ssuttell@crain.com)
OPINION
Shielding blame Let’s not kid ourselves: The NFL’s decision to indefinitely suspended Baltimore Ravens running back Ray Rice has little to do with domestic violence and everything to do with protecting the NFL brand. The league has endured an onslaught of outrage brought on by the release of a video last Monday showing Rice delivering a knockout punch to the head of his future wife Janay Palmer in an Atlantic City elevator. Before the video’s release, the NFL had decided the offense warranted a two-game suspension for Rice. That decision was based on another video from February that showed Rice dragging an unconscious Janay Palmer off the elevator. Only when criticism began to intensify this summer that the punishment was too lenient — testing positive for marijuana draws a harsher sanction in the NFL, just ask Cleveland wide receiver Josh Gordon — did the NFL announce stiffer penalties for players who commit domestic violence. The league only decided to dump Rice once he tainted the NFL brand, not because he beat his significant other. The NFL could embrace the ambiguity of the first video and hope it would go away, a hope aided by the league neglecting to conduct a thorough investigation, because Rice still benefited the NFL. Last week’s video changed that. Rice was now toxic, and he had to go. NFL commissioner Roger Goodell spoke back in 2010 about his top priority in “protecting the shield” for the 32 team owners for whom he works. “My job is to protect the integrity of the NFL.” We all know that words like “shield” and “integrity” are just coded language for the NFL’s brand, which is where the real money lies. The NFL, a nonprofit trade association, posted almost $10 billion in revenue in 2012, according to its 990 tax form. Problems arise for organizations, though, when protecting the brand gets in the way of doing what’s right. And that’s where the NFL fumbled. Instead of taking a firm stance on domestic violence after the legal case against Rice had been resolved back in the spring, the NFL copped out by issuing a slap on the wrist. For an organization so concerned about its brand, it doesn’t make a lot of sense. Consider this: The biggest domestic growth area for the NFL is with women, who now make up 46% of the league’s fan base. What message is the NFL sending to female fans with its initial decision? That the league only sees value in women as consumers, not as human beings? But don’t worry, ladies, the NFL respects you — they wear pink every October to remind you about breast cancer! They make jerseys just for you! And maxi dresses and halter tops! Ray Rice was cut by the Baltimore Ravens and is now serving an indefinite suspension. You can’t blame women for wanting to instate the same punishment on the NFL itself. If the league doesn’t get beyond protecting its brand and genuinely commit to true integrity, it may have to come to that.
FROM THE PUBLISHER
Cable companies need to adapt I’ve never put too much thought into Before I joined Crain’s Cleveland Busipaper towels, except maybe when I enness last year, I was editor at another countered a surprisingly soft and abCrain’s publication called Waste & Recysorbent sheet — or one that rubbed my cling News. delicate hands the wrong way, The giant in that industry, like sandpaper. Waste Management Inc., was But now almost every time I doing something equally unrip a towel off the roll in my conventional. It had set up a kitchen, I think — for a split sustainability arm that worked second — about something I with businesses to reduce think is remarkable. their garbage, with the ultiSometime over the past few mate goal being “zero waste.” years, a paper towel maker In other words, the nation’s (and I’m not sure which one) largest garbage hauler was decided to think about custeaching businesses to elimitomer needs and cut the size JOHN nate garbage. of the traditional sheet in half. CAMPANELLI Actively and eagerly reducSome spills are small, right? ing demand for your core Go to the grocery today, and you’ll noproduct? Think about that as a business tice that half-sheets are practically inmodel and it seems like the Looney dustry standard. Tunes theme music should be playing in But before we consumers got to expethe background. rience the convenience and flexibility of It does seem kind of nutty until you the half-sheet, the idea had to go think about the motive: serving custhrough levels of decision-makers who tomers whose needs and desires are were evaluated and likely compensated evolving. It starts to seem downright on profitability. smart when you think about the busiThey no doubt asked this question: nesses that haven’t caught on. Why should we voluntarily do something For decades, cable television compathat will result in people using and buynies have forced customers to pay for ing less of our product? products — in this case, channels — they
didn’t need, want or use. The model was OK when there were 30 cable channels and the monthly bill was $21. Now a “basic” cable and Internet package can easily cost more than a $100 a month and include literally hundreds of channels you’ll never watch. The high prices, lack of à la carte choices and, frankly, some lousy customer service, have pushed many customers, especially young adults, to simply cut the cable and view content online with services such as Netflix. Last week, HBO and Showtime floated the idea of offering their channels over the Internet to users who don’t subscribe to cable. (HBO already does it, with apparent success, in Scandinavian countries). The end game is fairly clear here: We will be getting all of our viewing entertainment on the web … soon. Part of the reason is the natural evolution of the Internet. But what is accelerating this move is the simple fact that cable companies — unlike forward-thinking towel makers and trash haulers — have put customers down the list of their priorities. They have made a mess that no amount of paper towels can clean.
TALK ON THE WEB Re: Baseball thrives in Akron I’ve worked on the Canal Park renovations and know that Akron RubberDucks owner Ken Babby is a guy who really cares. Nice guy doing wonderful things. GO DUCKS! — Dave Dobransky
Re: The true unemployment rate Read any econ 101 college-level textbook and you will find that full employment is between 4% and 6%. A national average of 6.1% is a total joke. The real unemployment rate nationally is 23%. Those looking for a job
while unemployed feel it as such. — Thomas McFreeman
Re: One man’s trash … Thank you to Crain’s publisher John Campanelli for sharing the story about new University of Akron president Scott Scarborough’s attention to detail, including a “not-to-do” list that mentions “failing to pick up trash.” I work at the University of Akron and found this tidbit interesting. I have found myself picking up trash as well. — UofA employee Can’t agree more. After walking in our Tremont neighborhood for the past 14 years, we finally
got fed up and began picking up trash on our morning walks. Maybe people will think twice about tossing out their empty lunch containers if the street is clean and looks taken care of. — Margy Judd
Re: Port authority’s busy year According to the Cleveland-Cuyahoga County Port Authority’s website, Spliethoff will offer two sailings in the month of September. (The port authority is chartering the Fortunagracht, a ship owned by the Amsterdam-based Spliethoff Group, for $850,000 a month,) If business is that good, maybe the
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PERSONAL VIEW
By WILL FRIEDMAN
Friedman is president and CEO of the Port of Cleveland. While the full potential of the fourth coast has yet to be fully realized, this all-water connection to the world does provide significant competitive benefits to Ohio businesses, and we have data and realworld results to prove it. A recent study conducted under the auspices of the U.S. and Canadian Seaway management agencies and shipping groups reports that shipping goods from the Great Lakes through the St. Lawrence Seaway is 24% more fuel-efficient than shipping by rail and 531% more efficient than by truck. These are material savings that can go straight to the bottom line. The Economist recently released an analysis of what makes cities economically competitive on a global scale. “Easy maritime access” was a key factor, with nine out of 10 of the fastest risers in competitiveness being a seaport or having easy maritime access, while those losing competitiveness are lacking in this area. For exactly this reason, we began the Cleveland-Europe Express (CEE) ocean cargo service this year
— a scheduled liner service for international freight. For the first time in decades, Ohio firms have a direct, scheduled option from the Port of Cleveland to the cargo hub of Antwerp, Belgium, which has onward connections to destinations worldwide. Early adopters of our new service are saving time and money while reaching markets in Europe, Russia, Asia and the Middle East. Users are reporting door-to-door transit times between Cleveland and Europe up to 10 days faster than shipping through an East Coast port. Ohio is already a powerhouse in global commerce. The U.S. Department of Commerce recently released figures indicating that firms in Northeast Ohio alone exported goods worth $18 billion in 2012, a figure that has grown significantly over the past five years. It’s our job to convince regional firms and others throughout the Midwest that ocean services based at the Port of Cleveland, including our new CEE service, add value to their global supply chain operations. We know old habits die hard. It will take at least two shipping seasons for our CEE service to fully penetrate the market and stabilize financially. We knew going in we had to play the long game. Ports invest “patient capital” that can take years or even decades to result in job growth and new investments. That’s the essence of our mission. I hear some say shipping on the Great Lakes is obsolete or doesn’t matter anymore. The Goodyear decision tells us just the opposite is true — our Lake Erie and Ohio River ports matter now more than ever. With adequate support and the opportunity to pitch our capabilities, our ports will help Ohio win the future competitions for investments and jobs. That’s job one every day at the Port of Cleveland.
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TALK ON THE WEB (CONTINUED)
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port authority should try underwriting Cleveland international air service, too. — Robert Salmon
Re: Little Mountain Country Club renovations (Northeast Ohio golf pro) Jimmy Hanlin is on the right track. I’ve played Little Mountain once and was not impressed. As an “average” golfer, I want the opportunity to post a halfway decent scorecard, but Little Mountain with its bunkers everywhere did not afford that possibility. I will play again on the redesigned course, providing, of course, I’ll still be able to afford it. Good luck to all the golf courses in the area. Times are, indeed, tough. — df1898
11
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Port is full of opportunity Goodyear Tire & Rubber Co. announced recently that it’s no longer considering Ohio as an option for a major, new manufacturing plant that will supply markets in North and Latin America. Although this decision stings now, what’s good for Goodyear, which recently doubled down on its headquarters in Akron and employs over 3,000 Ohioans, is good for the Buckeye State. Rather than cry in our cereal, we should take heed of the considerations that drove Goodyear’s decision so we are in the best possible position to compete for investments going forward. To that end, Goodyear’s news release cited “logistics (. . .) and access to a deep-sea port” in particular as “key factors” in the decision. With growing markets in South and Latin America, it’s understandable that a Midwestern location was not ideal for this plant. The added costs of shipping from Ohio were likely a factor in Goodyear’s statement that “locating in Ohio would add more than $50 million a year in costs over other locations.” The good news is that Ohio’s global traders can, in fact, save money shipping directly from the Port of Cleveland. Many businesses in Ohio and the Midwest serve markets that are cost-effectively reached by a direct sea route from the Great Lakes. Since arriving here four years ago, I’ve steered our port on a course to exploit this advantage for businesses with high sensitivity to port accessibility and other logistics factors. Our primary challenge is increasing awareness because many companies have, regrettably, forgotten that Ohio does have access to global markets through the St. Lawrence Seaway. When the Seaway was completed in 1959, the Great Lakes were hailed as America’s “fourth seacoast.”
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16-year-old dishwasher at the nowdefunct Johnny Mango’s in Willoughby. At home, he made desserts as a hobby. “I made the same chocolate pudding cake everyday for two years starting when I was 15,” he says. He briefly studied chemistry at John Carroll University — a subject directly tied to pastry-making — before enrolling at the Culinary Institute of America, from which he graduated with an associate’s degree in baking and pastry arts. He studied beside the late famed chef Charlie Trotter before deep
diving into modern gastronomy with Homaro Cantu at Moto, an Asian-influenced eatery. He then moved to executive pastry chef of ING Restaurant before he and Meffert relocated to Cleveland. Serendipitously, Griffith lived in Chicago’s Ukrainian Village, on the same block as Greenhouse Tavern sous chef Brett Sawyer, and didn’t even know it. “It was meant to be,” Griffith says. “Anistar and I decided to choose Cleveland over her hometown of Madison, Wis., and were blown away by what’s happening here.” The Greenhouse Tavern, a local
hub for adventurous eaters, is fertile ground for Griffith to experiment and reveal his personal style. Approachable items like strawberry mousse share the menu with unexpected concoctions — think medieval bone marrow custard in a bone. Griffith characterizes his technique as “modernist American with French undertones.” All his desserts are built upon a French-inspired foundation like mousse or soufflé, and embellished with mod-American accents such as fluid gel, foam, or tapioca maltodexterin powder.
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Meffert spent her early teen years as the only girl crafting the pastries, stocks and sauces for a fine dining French eatery in her native Madison. After high school, she was the sole female graduate of a class of 11 from École Supérieure de Cuisine Française, Grégoire-Ferrandi, a premier culinary school in Paris. She secured an elusive year-long position as garde manger — French for “keeper of the food” — at Alain Ducasse au Plaza Athenee, a threeMichelin Star restaurant, and understudied with world-renown French master pastry chef Christophe Michalak. Meffert traveled extensively throughout Europe and in Asia, training at the world’s best restaurants. She was brought on as Charlie Trotter’s executive pastry chef, and along with Griffith and a handful of other pastry cooks, helped the restaurant earn two Michelin stars. A three-month working vacation in Asia ensued. She joined Griffith at Moto, where a confection such as fried rice paper and seasoned with freeze-dried fruits, honey, soy milk and liquid nitrogen poured tableside further exposed her to the showy side of pastry making. Meffert transitioned some of those influences into her creations early on at Crop, but then tempered their complexity so as to not totally confound diners. “I try to stay true to the Charlie Trotter approach of innovative American food using high-quality ingredients,” she says, and references Crop’s berries and cream as an
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Anistar Meffert attempts to “stay true to the Charlie Trotter approach” with such desserts as berries and cream. Vincent Griffith, below, says relocating to Cleveland was “meant to be.”
example. That dessert, composed of scratch crème fraiche, local berries, dried milk powder and whipped vanilla cremeux, incorporates multiple flavors and textures. “I don’t like everything to be all one note or too heavy,” Meffert says. The Lakewood residents will wed
on Oct. 4 at the Meffert family’s 100acre dairy farm in Wisconsin, at which the bride and groom will forage, prepare and serve a multicourse menu for 100 guests. Ultimately, the couple envision marrying their talents, too. “We want to eventually open our own restaurant,” Meffert says.
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Nowacki Asset Management (NAM) is a registered investment advisory firm specializing in value-oriented investment management. All client assets are included in one composite and invested using a value-oriented strategy. NAM claims compliance with the Global Investment Performance Standards (GIPS®). Results as of 7/31/2014 are still subject to final verification by an independent third-party. NAM only uses short-term margin or leverage to buy securities after a client commits to deposit funds and the funds are in the process of being transferred, but the money has not yet completed the transfer process. To receive a list of composite descriptions of NAM and/or a presentation that complies with the GIPS standards, contact Michael T. Nowacki at (440) 488-6936 or write Nowacki Asset Management, 29525 Chagrin Blvd. Suite 301, Pepper Pike, Ohio 44122, or michael@nowackiassetmgmt.com. www.nowackiassetmgmt.com
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Boundless Globalization A CFO’s guide to realizing international ambitions By James Ritchie s firms throughout the U.S. undertake growth initiatives such as introducing new products, entering new markets, and acquiring other companies, they’re looking to their CFOs for much more than financial leadership. They’re depending on them to oversee a wide range of new areas John Masters Managing Director and play a key role in setting corporate Cleveland direction and identity. Bank of America Merrill Lynch “The CFO has evolved from this accounting function — the most senior accountant in a company — to being this strategic leader who, by the way, is also involved in finance,” says John Masters, Bank of America Merrill Lynch managing director for Cleveland.
The finer points can take a lifetime to master. Few CFOs have the time to understand every nuance of a new business environment, especially when their growth strategy might involve multiple countries. Bank of America Merrill Lynch relies on their experience with clients from nearly every industry, that have been through the growing pains of international expansion, to aid other clients. Their from-the-trenches advice can complement that of lawyers, accountants and consultants. Firms can also measure their performance against vast amounts of benchmarking data through a Bank of America Merrill Lynch tool called PeerProfiler.®
“Bankers don’t just provide access to capital or products or services,” Masters says. “We provide access to people — peer-to-peer insight and experience.” Ultimately, the CFO’s role in globalization is the same as in other areas: Support the organization’s strategy while managing risk. “People in hyper-growth mode are quickly wearing many different hats,” Masters says. “I call globalization a team sport. You not only need support and data, but to hear about different experiences.” For more on how your Cleveland business can expand internationally and adapt to the demands of rapid growth, contact john.masters@baml.com
One area in particular associated with an aggressive growth enterprise is globalization. More than half of U.S.headquartered, mid-size companies are now conducting business outside the country’s borders, and many smaller firms are finding opportunities overseas, too. In a Bank of America Merrill Lynch survey, a large majority — 76 percent — of CFOs predicting above-average sales growth for 2014 expected to see increases from international sales. But global strategies bring new challenges. And in fastgrowing organizations, it’s typically up to the CFO to find a way to overcome them. Key issues include foreign exchange, repatriation of revenue and unfamiliar laws and customs. “It falls on the CFO to set up relationships with facilitators and find the right intermediaries to do business there,” says Masters. HIGH-STAKES TERRITORY It’s not hard to see why globalization has taken hold: The growth possibilities in developing markets can be hard to match elsewhere. For example, China’s economy is likely to expand by 7.6 percent in 2014, according to BofA Merrill Lynch Global Research. That’s compared with projected growth of three percent for the U.S. economy. International acquisitions can be a quick way to ramp up a company’s presence and sales in new markets. In tough-to-crack regions, they may be the only viable way in. In this high-stakes game, CFOs must see the firm through funding the expansion, operating profitably, complying with local laws and, ultimately, accessing the money it makes. It’s easy to overlook a tax issue or other matter that can sink a company’s plans. To smooth a firm’s entry into global markets, an experienced global bank can connect the CFO with experts and other managers who have been where they are. For a given country or region, a banker can work with the CFO to create a suitable treasury management structure. “It’s a strength of ours,” says Masters. “We have people on the ground in the countries where they want to do business, and we’re doing business there ourselves.” Factors to consider include the company’s objectives and need for liquidity as well as local regulations and tax implications. “Our CashPro ® Online treasury management system is a tool that can help rapidly expanding companies manage their cash and information flows,” Masters says. The bank also helps firms understand issues such as currency, fraud and regulatory risk. LESSONS FROM THE TRENCHES Language and culture differences can also be major stumbling blocks. For example, handling business cards the wrong way can signal a lack of respect in China and Japan. It’s crucial in both countries to give and receive cards with both hands and to review cards carefully before putting them away — preferably in a nice case or portfolio, not your pocket.
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“Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and members of SIPC, and, in other jurisdictions, by locally registered entities. Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed. THE POWER OF GLOBAL CONNECTIONS is a trademark of Bank of America Corporation. CASHPRO and PEERPROFILER are registered trademarks of Bank of America Corporation.” © 2014 Bank of America Corporation 08-14-0949
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THERE CAN ONLY BE ONE FLO Firms need to take steps to protect their brands PAGE 16
CHANGING THE RULES IP attorneys say new law hasn’t been a complete game-changer PAGE 18
WHAT YOU NEED TO KNOW
PAGE 19
SECURING STARTUP IDEAS New firms must not overlook the fuel behind their business PAGE 20
ILLUS TRATIO N, FOT OLIA (2 )
Experts share top pieces of advice
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Keeping your brand one of a kind — just like Flo By KATHY AMES CARR clbfreelancer@crain.com
We first were introduced to Flo in a Progressive Insurance television ad in 2008. Not surprisingly, the lovable, quirky brunette with bright red lipstick quickly captured our hearts, helping her become one of the most recognizable characters in recent advertising history. Soon, people were dressing as Flo for Halloween and imitating her one-of-a-kind look and personality. A high school fan even launched a Flo Facebook page, which today has more than 5 million fans. (That page is now overseen by the Mayfield Village-based company after the creator contacted Progressive because it was too time intensive.) As a result of Flo’s widespread popularity and viral nature, the company in January took action to pro-
tect both the character and the company’s brand. “Flo” is now pending trademark registration, said Peter Albert, the firm’s deputy general counsel. “We’ve been kicking it around for some time. We’ve seen people tweeting as Flo, costumes with Flo and imitators in the marketplace copying her character,” Albert said. “We feel her character should be protected the way our name and logo is.” A trademark is a brand’s armor for its logo, name, design or symbol. And, with the proliferation of social media, companies, organizations and even individuals are finding it increasingly difficult to protect their brands from misrepresentation and misuse. In the sports world, for example, “MACtion” — a catchword used by the Mid-American Conference — this year became a trademarked term after gaining widespread popularity on Twitter. Even though it’s a term not easily defined, the word became so recognizable that commissioner Jon Steinbrecher said in a Feb. 9 Crain’s story that it had “taken on a life of its own.” Even Cleveland Browns quarterback Johnny Manziel is trying to protect his brand, making the move recently to trademark “Johnny Cleveland.” It’s the 10th trademark that he and his company have applied for, with others including “Johnny Football” and “JFF.”
Silencing the megaphone “Everyone has a megaphone nowadays,” said Sam Khoury, a partner with Willoughby-based Rankin, Hill & Clark. “There are a million little threats.” So at what point do organizations intervene — or even take legal action? “The use of social media doesn’t make the rules of the game any different in terms of protecting your name,” said Michael Stovsky, partner of Cleveland-based Benesch. Sure, some uses may be perceived as free advertising, but the real danger is in the trademarked item’s misuse. Plucking a company logo and using it for the sale of someone else’s goods or services is hallmark trademark infringement, legal experts say. Even distorting a logo, name or symbol qualifies as misuse. If a threat is spotted, Khoury suggests the company first contact the social media site — like Facebook or Twitter — to remove disparaging material before contacting the individual. “If you immediately start going after individuals, you can get this Streisand effect,” said Khoury, referring to the phenomenon, named after Barbra Streisand, of generating increased publicity after attempts to suppress information. “People get touchy, and everyone feels the need to jump in on the conversation. You get this community retribution.” Contacting the host first, there-
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SAFEGUARDING YOUR BRAND Having an online presence is valuable for companies and organizations, but monitoring a brand isn’t easy. Here are some ways that help you protect your firm’s reputation: 1 REGISTER YOUR BRAND — This action can prevent a loss of time and expense in trying to reclaim your mark once someone else has registered it. fore, can save a company a PR headache. “There’s not a ton of case law on this, but the situations between the user, company and Twitter usually settle” by Twitter removing the contested material or Twitter handle, he said. A company also should educate its employees on social media use, and make sure they know when to spot potential minefields. “Employees on social media can be your most effective police force,” said Richard Sharpe, partner at Cleveland-based Pearne & Gordon, an intellectual property law firm.
What’s in a name? Sometimes an offensive move is warranted if an institution or organization wants to be proactive, rather than reactive, in protecting its brand. Kent State University sought to educate its students about the pitfalls of improper logo and name usage by issuing in 2013 a cease-anddesist order, requesting students refrain from using the university’s logos and marks on social media. “It was more about increasing awareness about the importance of protecting our brand,” rather than a specific situation that prompted the action, said Rebecca Murphy, associate vice president for the university’s communications and marketing. “It’s a tough balance, because we don’t want to discourage students and promoters who want to share their love for KSU. Entities that find themselves in the market for a trademark should first make sure the item is eligible for protection; otherwise, they run the risk of brand dilution The popularity of the international Cash Mobs movement prompted Andrew Samtoy, a local attorney and Cash Mobs co-founder, to apply in 2012 for a trademark to protect that brand, said Khoury of Rankin, Hill & Clark. But the application was abandoned because the U.S. Patent and Trade Office determined “cash mobs” as a weak, descriptive term and not subject to broad protection. “The less descriptive the mark is, the better the chance of registering it, like Apple for the computer company or Yahoo or Nike,” he said. Flash Cashers, for example, a separate entity based in Shaker Heights that has a similar goal of staging spontaneous group-spend events, applied for and received its trademark this year. Sharpe of Pearne & Gordon said it can take a couple of years to trademark a name or logo, and the cost ranges from $800 to a couple thousand dollars. The investment is meaningful, as is the time allocated to monitoring and protecting the trademarked item from public misuse. Otherwise, an easily recognizable logo or symbol runs the risk of losing protection rights, as was the case with “aspirin,” “cellophane” and “elevator,” he said. “The worst case would be losing your ability to enforce your rights because the mark becomes generic from overuse,” Sharpe said.
2 HAVE A MONITORING SYSTEM IN PLACE — Websites such as KnowEM.com (which checks trademark availability on social networking sites); TweetBeep.com (which receives alerts when people are tweeting about your company); and Adgooroo.com (which provides reports about who is bidding on keywords related to your trademarks) are effective internal tools. 3 TAKE AN ACTIVE ROLE IN SOCIAL NETWORKING SITES — Generate your own positive press and benefit from the viral effects. “There may be a big passion for your brand, and social media allows the community to own representation of the brand to a certain extent,” said Nader Ali-Hassan, Progressive’s marketing manager of social and digital. “They’re your storytellers, too.” 4 DETERMINE YOUR PAIN TOLERANCE — What type of infringement are you willing to tolerate? Will you send out cease-and-desist letters or take a less-stern approach? 5 IMPLEMENT AN EMPLOYEE POLICY THAT ADDRESSES SOCIAL NETWORKING CONDUCT Source: American Bar Association, Crain’s research
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Want a patent? Make sure you’re first to file By KIMBERLY BONVISSUTO clbfreelancer@crain.com
Three years after the America Invents Act (AIA) started phasing in significant changes to the U.S. patent system, Northeast Ohio law firms say even though the legislation was billed as a game changer, it hasn’t really impacted their intellectual property law work. The AIA was the most sweeping alteration of the U.S. patent system since the U.S. Patent Act of 1952. By moving from a first-to-invent to a first-to-file system, the U.S. patent system aligned itself with the European Patent Office and placed pressure on inventors to file patent applications earlier. While area law firms report slow and steady growth in the area of intellectual property law, they say it has little to do with the AIA and more to do with the incremental growth in the economy. The true impact of AIA, they say, still may not be felt for several years. “The IP legal market was battered in the 2008 time frame, like everyone else. But we’ve seen healthy recovery of growth since then,” said Tom Eschweiler, a shareholder at Eschweiler & Associates LLC in Cleveland. Amanda Miller, partner and patent prosecution lead for the 3iP (Innovations, Information Technology & Intellectual Property) practice group at Benesch in Cleveland, said there are a lot of things about patent prosecution the AIA changed, but it didn’t fundamentally change the way law firms function in the IP arena. “The change in the law gave us
WHAT IS THE AMERICA INVENTS ACT? On Sept. 16, 2011, President Barack Obama signed into law the Leahy-Smith America Invents Act. The final provisions of the law went into effect in March 2013. According to the United States Patent and Trademark office, here are some of the key provisions of the AIA: Transitioning the U.S. to a first-to-file system. Providing an enhanced grace period for inventors to safeguard patent rights against disclosures made one year or less before the effective filing date, allowing inventors to engage in negotiations with potential buyers or investors without fear of losing their right to a patent. Creating consistency with international norms. Eliminating the requirement for inventors to set forth the best mode to carry out the invention as a defense in infringement actions or in post grant review. Providing 75% discount for patent fees to all applicants that qualify as microentities. Source: United States Patent and Trademark office
the ability to reach out to clients who hadn’t considered their IP needs before,” said Miller, adding that IP attorneys work across all practices to bring in corporate clients and educate them on the new patent law. John Cipolla, partner and chair of Calfee, Halter & Griswold LLP’s IP practice, said his firm experienced an increase in patent filings as pieces of the AIA were implemented over the past three years. He added that there is more awareness within the business community about intellectual property and an increasing empha-
sis over the last two to three years to protect that intellectual property. In some cases, there also was a rush to get in before the new standards went into effect. D. Peter Hochberg, president and founder of D. Peter Hochberg Co. LPA in Cleveland, said he initially saw more work because of the AIA in the form of provisional application filings prior to March 16, 2013 — the date the AIA was officially implemented — because clients wanted everything to be covered under the old first-to-invent law. “We file applications sooner than
we used to because of the race to the patent office,” Hochberg said.
Under review While changes in the practice of IP law haven’t been dramatic, that doesn’t mean more additional work won’t be coming down the road. Two new review proceedings introduced by the AIA — “inter partes review” (IPR) and “post-grant review” (PGR) — didn’t exist prior to the AIA, and both processes bring new rules and procedures that may end up being a growing area for firms. Both are used to challenge the validity of patents with proceedings held before the Patent Trial and Appeal Board and heard by a panel of administrative law judges. The first-ever PGR petition was filed in August. Salvatore A. Sidoti, founding shareholder of Curatolo Sidoti Co. LPA, a boutique IP firm in Cleveland, said the new proceedings are a possible way to avoid expensive and lengthy litigation. “Everyone is looking for best practices in review proceedings,” he said. “Everybody is learning about these processes. It’s an evolution. Best practices will develop over time.” Miller said she anticipates the biggest change to her firm’s practice will involve post-grant proceedings. “Those really put us more in line with the European patent office and give the challenger the ability to vet the patent in the patent office vs. litigating,” she said. “It’s a
much faster result through the patent office than through the court system.” Prior to AIA, the mechanism for challenging a patent’s validity after issuance was cumbersome and ineffective, Eschweiler said. The new challenges are handled within the patent office by seasoned, senior examiners and are meant to reduce the amount of litigation brought to district courts. “It’s been a venue for people to challenge validity where they are meeting a certain level of success,” said Eschweiler, adding that the research shows people who challenge patents through this process are successful
Clock’s ticking Eschweiler said the change to first-to-file also might have more of an impact on in-house legal departments, in terms of reducing cycle time between when an inventor at a company provides an invention disclosure and when in-house counsel moves the process along to outside counsel to file a patent application. “They want the number of days between the two events to be as short as possible,” he said. “Consequently, there is a little bit more focus on us guys in private practice to move that work expeditiously.” And, Eschweiler said while the AIA has not yet been a seed of change, there still could be some movement in the IP field. “The post grant validity challenges will continue to grow, and I think the IP legal community will see an area of growth,” he said.
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“What’s the most important thing a person needs to know about protecting their ideas, innovations and brand?” “Protecting ideas, innovations and brands requires early and close coordination with your patent and trademark lawyers — delay can be lethal. If you fail to invest sufficient time, effort and money into protecting your innovations and brands, they will deteriorate just like any other part of your business that is neglected. Patents and trademarks should not be treated as commodities to be provided by the lowest bidder. While controlling costs is important, short-term cost cutting on patent and trademark matters will do harm that becomes apparent only years later. A deep, consistent and long-term relationship with your IP counsel will pay dividends for many years to come.” — Steven M. Haas, partner, Fay Sharpe
Success Depends on Unique Ideas
“You should protect against the possibility of ‘friendly fire.’ Now that the U.S. Patent Office uses a first to file system, it is at least possible that your company’s supposed ally (vendor, customer, technology collaborator) can take your technology/improvement (in whole or in part) and include the same in its own confidential patent application without your knowledge. Also, if your company’s innovation is not protected by IP, it is possible that your customer could seek other sourcing for a product you created. Don’t inadvertently design solutions for others, allowing them to reap benefits or cut you out of future profits.” — Mark A. Watkins, patent law partner, Vorys, Sater, Seymour and Pease Akron office “The most important thing that a person needs to know is how to select the correct vehicle for appropriately protecting a firm’s intellectual property. It is a ‘fit-for-purpose’ problem. It is crucial to realistically evaluate and balance the scope, effectiveness and cost of the various options. The relevant geographic, jurisdictional and durational limits need to be determined. The practical limits on validity and enforceability also need to be considered. Lastly, the costs and related benefits of the different options need to be weighed. Quite often, securing the full benefit of some intellectual property rights also includes potentially significant costs.” — Patrick H. Gaughan, associate professor of law, executive director, Innovation Practice Center, University of Akron “Small inventors need to know that if they want to continue to invent, they need to contact their congressman and senators. The House passed HR 3309 ‘Innovation Act,’ 325-91. Although stopped in the Senate, Congress is pushing laws that will make it impossible for non-millionaires to participate in the invention ecosystem: requiring inventors to post a bond when enforcing their patent, disclosing all angel investors who require anonymity, making all investors personally liable for your litigation costs, and other provisions discouraging invention and making patents a ‘toxic asset.’ You can see the details on my five part series posted on IPWatchDog.com.” — Robert N. Schmidt, chairman and CEO, Cleveland Medical Devices Inc., Orbital Research Inc., Great Lakes NeuroTechnologies Inc., NeuroWave Systems Inc. and Flocel Inc.; national co-chair, Small Business Technology Council; board member, National Small Business Association
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Startups need to safeguard their ‘secret sauce’ By DANIEL J. MCGRAW clbfreelancer@crain.com
When starting a business, there are many costs but few assets, at least beyond the “secret sauce� — the original spark of an idea that probably ignited the company in the first place. Oftentimes, however, it’s the intellectual property that will gain outside investments and seal distribution deals. “You can have great talent working for you, but anyone can do that, and just about everything else in business can be replicated too, from your manufacturing facility and your distribution system and your marketing plans,� said Shawn Mastrian, the CEO for Darkside Scientific LLC, a Medina company that a few years ago developed electroluminescent paint, which glows when an electric current passes through it. “But in the end, in many startups, the only thing you really have that has value is your intellectual property, and you have to do all you can to protect that,� Mastrian said. For startups and others, there are many options for protecting intellectual property, and the key is timing. “Provisional� patents, which basi-
cally hold the idea in flux in the applicant’s name for a year while full details are worked out, are a good place to start, most patent attorneys say. A “utility� patent is the full-scale version, for which drawings and technical details are needed to gain approval for a 20-year period. With legal fees and government fees, the provisional patent can cost a few thousand dollars, while the utility patent can cost $10,000 to $20,000 and higher depending on the technical documentation and legal work needed — often an unrealistic amount for a startup. “Most new companies should explore doing the provisional patent as early on as possible, because it establishes a start date when the idea was first floated, and the company can tell investors that their idea has patent pending status,� said Cleveland patent attorney Daniel Cohn of Howard M. Cohn & Associates. The relationship between having legal ownership and intellectual property is key in attracting investment. “There are some investment firms and individuals who want to see some form of patent protection before they will even talk to a new com-
INTELLECTUAL PROPERTY SPEAK PATENT — A limited duration property right relating to an invention. TRADEMARK — A word, phrase, symbol or design that identifies and distinguishes the source of the goods of one party from those of others. COPYRIGHT — Protects works of authorship, such as writings, music and works of art that have been tangibly expressed. TRADE SECRET — Trade secrets consist of information and can include a formula, pattern, compilation, program, device, method, technique or process. The U.S. offers trade secret protection under state laws, and they only protect against unauthorized disclosure. If a trade secret holder fails to maintain secrecy or if the information is independently discovered, becomes released or otherwise generally known, protection is lost. Trade secrets, which do not expire, are an alternative to patents, which require the inventor to provide a detailed disclosure about the invention in exchange for the right to exclude others from practicing the invention for a limited period of time. Source: United States Patent and Trademark Office
pany based upon a new idea,� said Byron Clayton, vice president of cluster acceleration for NorTech, a technology-based economic development organization. But not all new businesses should be ramping up into 20-year full patent mode right away, Clayton said: “New companies have to factor the cost, and also the fact that a patent does make your idea public. Some ideas are better protected
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with patents, and some are best to be left as trade secrets, and a new company has to figure out which is the best track to go on.� The recipes for Coca-Cola and Kentucky Fried Chicken are the most famous trade secret examples. The reasoning behind not patenting those recipes is that once they are made public through the issue of the patent, others might take the original recipe and tweak it and change a few ingredients so that it might be construed as its own new recipe. Software developers often decide to protect some of their specific codes with the trade secret model. “The software industry as a whole relies on the patent system less than say, the pharmaceuticals and biotech industry,� said Craig Nard, director of the Case Western Reserve University School of Law’s IP Venture Clinic. The center recently received a $3 million grant from the Spangenberg Family Foundation to fund intellectual property research and to help startups seeking help in developing patent applications. “The problem with software is that there are many applications where different groups have done different parts of the software together,� Nard said. “So one company might own the patent for the physical design of the cell phone or tablet, but 100 might co-own different parts of the software applications needed to run them. So it is best sometimes for
everyone to protect the property by the trade secret method, and negotiate rather than litigate if there are differences.� “It’s sort of a cold war mentality with software and trade secrets,� Nard said. “Both sides have missiles aimed at each other, but they know it is not in their best interest to use them. So they figure out how to keep things out of the courtroom, and therefore out of the public eye.�
Finding the best route Atossa Alavi, in-house counsel for AlphaMicron in Kent, an innovator in liquid crystal tinting technology used in many types of eyewear, said the key things for startup companies is to study the market and the science carefully before making a decision on trademarks and patents. AlphaMicron began with military contracts in 1996 for shielded visors for soldiers for better eyesight and sun protection, and it has since expanded into products like ski goggles and motorcycles visors. “Generally, if you think someone can reverse engineer what you’re making, meaning they can take it apart and figure out how it works, literally and figuratively, then it is best to get a patent,� Alavi said. “But one has to figure out what is the best blend of patents and trade secrets, and, more importantly, how the cost of patents fits into the initial budget.� Ted Theofrastous, an intellectual property attorney who works with Venture Clinic, said the protection of intellectual property also goes beyond the mere filing of patent applications. New businesses have so many challenges, he said, but they really need to keep on top of things and keep their eyes on the protection of their ideas both in this country and around the world. “Intellectual property is an asset of the business, and for startup companies, which typically don’t have a lot of assets, its protection can be critically important,� he said. “But companies also need to watch out who they talk to, who they bring in for investment discussions, and to know when is the right time to make those ideas public with a patent application.�
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KEEPING IDEAS BRIGHT Darkside Scientific, Medina Invention: Paints that conduct electricity and glow Paints that are bright and glow in the dark are not a new idea. But paints that conduct electricity and give off a bright glow without a need for exposure to exterior light are new. In essence, with the development of the LumiLor water-based paint, Darkside Scientific of Medina created a paint that generates light from within and allows it to be turned on and off like a light bulb. It does so by conducting electricity. It began as a custom-painting idea for motorcycles. But now, the company is fielding ideas for a whole host of products — everything from household appliances to car accessories to building materials. And that is where the intellectual property issues come into play. The company has patented and trademarked LumiLor, but some companies wishing to partner with Darkside Scientific on new applications want to share the patent ownership in some cases. “We have broken new ground, and it would be very dangerous for us as a company to compromise our (intellectual property) in any transaction,” said Darkside Scientific’s CEO Shawn Mastrian. “We have told everyone we deal with that we will walk away from any deal that includes sharing our IP. That’s where our value is.” Darkside Scientific developed the electro-luminescent paint in 2011 and now employ 13 in its Medina plant. — Daniel J. McGraw
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In the days when just about everything has data — and when everyone seems to want data at their fingertips in seconds — Case Western Reserve University student Craig Lewis had a rather simple idea a few years ago. People are always wondering how long they have spent in the shower, he reasoned, so why not have a device that measures how long a person is in there, how much hot water they are using and energy costs. In the four years since, that simple idea has morphed into Sprav, a device that fastens to the pipes behind the showerhead that measures water flow, heat and the amount of time spent under the spray, sending that data to a smart phone app that can be analyzed by the user. The device then can be programmed to notify the user with warning lights when certain water use threshholds are hit. But moving the idea from classroom to the marketplace took more than just hard work and some investors writing checks. Lewis and his partners first filed for patents on the way the device measures water flow and how it fastens to the shower head. “Those provisional patents cost us about $800, but we were able to use those to show investors and distributors that we were serious about this as a viable product,” Lewis said. The company is in the process of applying a 20-year utility patent. Lewis hopes Sprav will be rolled out in retail stores next year for $39.99. — Daniel J. McGraw
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Intwine Connect, Chagrin Falls Invention: Solutions for controlling household items over the Internet Dave Martin has been working in the information technology world for many years. He started in sales in the late 1980s with Texas Instruments when the big tech device was pocket calculators. But as he has seen the changes in IT over the years, he has always been focused on how technology becomes applicable in everyday life. To that end, he helped found Intwine Connect in 2009. The Chagrin Falls software company is betting that the next big Internet change in many households will be the ability to control basic household items such as dishwashers, furnaces and air conditioners over the Internet. The challenge for Intwine Connect, Martin said, is to combine the interests of so many different and somewhat staid industries — appliance manufacturers, electric utilities, builders — in an effort to change how consumers use their products. To that end, Intwine Connect has taken on a hybrid approach to its intellectual property: The hardware has been largely patented, while the software developed to operate those devices is kept as a trade secret. “There has not been much consensus in the industry on the value of software patents,” Martin said. “It a difficult decision, because in some respects, all having a patent does is give you the right to prosecute someone who uses your invention.” “But in software, you are collaborating and partnering and sharing information, and the new technology is so disruptive, you really don’t know where it is going to go sometimes,” he said. “So you may be collaborating and sharing with a company that might develop into a competitor. You don’t want to be risk averse, but you also don’t want to give up your intellectual property. It’s a huge balancing act right now.” — Daniel J. McGraw
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Medicare beneficiaries. The feds haven’t gone full-press with enforcement of the rule, but Medicare’s administrative contractors have begun auditing a handful of claims at hospitals around the country to educate providers on the rule — “probing and educating,” as the feds call it. Still, that hasn’t slowed local hospitals from adjusting the way they admit Medicare patients, and it’s already tightening their profit margins. Take the Cleveland Clinic, the region’s largest health care system, which posted a 4.8% operating mar-
STARTUPS continued from page 5
gin in the second quarter compared with a 5.5% margin during the like period in 2013. The Clinic’s inpatient admissions fell 4.7% while observation stays ballooned by 17.9%. The combination of the two, however, was flat year-over-year, which Clinic officials chalk up to the twomidnight rule. “The burden is on the medical staff,” said Dr. Robert Wyllie, the Clinic’s chief medical operations officer. “It’s something else to think about besides the medical care or the patient’s problem,” he said. “You want the doctors and nursing staff to focus on patients’ med-
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ical problems instead of administrative considerations. The less administrative burden we can put on the docs and more focus on medical problem, the better of patients can be.” The two-midnight rule has forced local hospitals to retool their admitting process by tweaking their electronic medical systems and educating doctors on how to properly admit the patient so they’re not dinged by Medicare’s auditors. “Educating physicians was a tremendous challenge,” said Mary Ann Freas, Southwest General Health Center’s senior vice president and chief financial officer. “Getting our computer systems up to date for proper documentation, then understanding what the financial implication were going to be — all of that had implications for the hospital.” Plus, regulators require hospitals to provide patients with letters explaining the difference between observation and inpatient status — a case not easily explained. “When they’re in the bed, they don’t know the difference between the two,” said Craig Richmond, MetroHealth’s chief financial officer. “It’s about ongoing communication with our patients to make sure they’re informed along the way.” Health care observers agree the impact would be hardest felt at community hospitals like Southwest in Middleburg Heights, as they’re typically the facilities with the shortest hospital stays. Freas declined to disclose how much revenue Southwest lost because of the new rule, but she said its outpatient observation cases spiked by 30% year-over-year. She added, “This is all about less money, not more money.” The Centers for Medicare & Medicaid Services claimed the rule would increase Medicare spending by about $220 million nationwide, though Moody’s forecast and the revenue crunches at local hospitals seem to contradict that claim. “I’ve yet to meet any of my peers who haven’t lost money on this,” UH’s Paulson said. “If more than nothing else, the change announced by CMS has
changed behaviors across the country.”
It’s not a hotel Hospital advocates haven’t sat idly while the rule has taken hold. They’ve taken their complaints to the feds, and a coalition of hospitals and the American Hospital Association filed lawsuits claiming the rule arbitrarily ignores doctors’ best judgments. Hospitals stress the rule hasn’t caused them to keep patients longer for the sake of getting paid and the rule hasn’t fundamentally changed the way they care for patients — just the way they’re reimbursed. Medicare auditors also comb through medical data to ensure the inpatient stays are medically necessary. Bill Ryan, president of the Center for Health Affairs, a local hospital advocacy group, said the rule seems to contradict Medicare’s other efforts to reduce the length of stay at hospitals. The feds and commercial payers, for example, are experimenting with bundled-payment programs that reward providers for keeping patients healthy and out of the hospital. “In many instances, you’ve got the pressure of the patient who says “I’m fine, I want to go home.’ And quite frankly, if the physician agrees, what are you supposed to do? Keep them an additional 15 minutes and tell them to just hold tight so you can get paid? It’s not like it’s a hotel and you just checkin.” While the two-midnight rule is relatively new, hospitals squabbling with Medicare over payments for short hospital stays isn’t. The feds have such an extensive backlog of hospital appeals that they recently offered a settlement that would pay hospitals 68 cents for every dollar billed involving inpatient stays under appeal. “That doesn’t really address the issue,” Ryan said. “It allows CMS to eliminate its backlog. It doesn’t address the issue from a policy perspective of who is responsible for determining whether an admission is appropriate or not.”
HOW BAD IS THAT LEAK?
universities use to build and manage their websites. The CampusEAI organizations provide a “fertile ground” for growing education-focused businesses, given their knowledge of the sector and access to colleges, Jain said. QuickLaunch CEO Katie Winings — who splits her time between Cleveland and Chicago — said she also gets a lot of help from Jain and Michael DeJohn, director of corporate development at CampusEAI. “I get their continued advice every day. Almost every single hour,” Winings said. Now the EduTech Venture Fund is regularly receiving applications from entrepreneurs outside of the CampusEAI family of companies, Jain said. CampusEAI officials also are talking to colleges that might want help commercializing their own technologies. Among them is Lorain County Community College, said DeJohn, who also is general counsel for CampusEAI. CampusEAI Inc. is separate from the nonprofit, but it’s governed by Jain and school executives who belong to the nonprofit’s executive advisory committee. The company has provided all of the EduTech Venture Fund’s funding, but it aims to raise money from other investors, DeJohn said. The fund in some ways resembles the startup business accelerators that have become popular lately, given that it provides young companies with venture capital, office space and mentoring, Jain said. But the EduTech Venture Fund typically makes bigger investments. The first seven companies received between $2 million to $5 million each. It makes sense for the fund to make larger investments because CampusEAI officials can quickly get a good sense of whether an idea will succeed in the education sector. They also get input from outside advisers, such as Prashant “Peesh” Chopra, who previously was CampusEAI’s lead technologist, and technology executives at member colleges. For instance, Winings and her cofounder, Ranjith Madhavan, decided to develop single sign-on software because their clients at LookingGlass wanted the technology. Now QuickLaunch’s software is used by 200 schools and companies, including many LookingGlass clients, Jain said. “We knew that would be a home run,” she added.
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OFFERED WITH A RESERVE PRICE OF ONLY:
$25,000
Corner commercial lot located at the busy intersection of Pleasant Valley Rd. and Ridge Rd. (SR 3) in Parma. Zoned Retail Commercial, the parcel is directly adjacent to Legacy Place apartment complex and Pleasantview Care Center.
RETAIL / MULTI-FAMILY DEV. OPPORTUNITY 9.47 AC
SHEFFIELD TOWNSHIP, LORAIN COUNTY, OH 44055
PRIME COMMERCIAL DEV. OPPORTUNITY 46051 US RT. 20, OBERLIN, OH 44074
PRO-LAWN, INC. COMPLETE LANDSCAPE BUSINESS Tuesday, September 16th – 10 AM Open for preview September 15th 10 AM-3 PM Day of Sale 8 AM-10 AM 7250 Northfield Rd., Walton Hills, Ohio
INVESTORS!! BUILDERS!! DEVELOPERS!! 4.25 ACRES IN WESTLAKE 30412 Center Ridge Rd. Thurs., Sept. 18th, 6 PM
LARGE TUDOR with 5 acres – Moreland Hills 33095 Chagrin Boulevard Friday, Sept. 19th - Selling: Chattels -10 AM Real Estate - 12 Noon Across from Orange Schools
$200,000
4 bdrms, 3-car garage with vehicles Wood shop with wood-working equip.
216-990-1831
1-877-BID-ROSEN
www.BIDROSEN.com
MAGNIFICENT HUDSON ESTATE HOME
$150,000
5700 RESERVE LANE, HUDSON, OH 44236
$325,000
This spacious,1-owner, custom home 4,768 SF on 13.66 wooded acres. Features include 4 bed, 3 full baths, 1 half bath, oversized Gourmet Kitchen, open front porch that spans the front elevation, screened back porch, huge master-suite, attached 3-car garage, brick enclosed courtyard (the “secret garden”), all-brick elegant barn and more. Built in 1991. Open Houses: Sundays, 1:00 P.M. to 3:00 P.M. September 21 & 28 and Saturday 1:00 P.M. to 3:00 P.M. September 20.
TRADITIONAL COLONIAL GATES MILLS HOME 1030 WEST HILL DR., GATES MILLS, OH 44040
OFFERED WITH A RESERVE PRICE OF ONLY:
$395,000
Perched on the hillside with panoramic vistas, this home is 5,900 SF on 3.107 wooded acres. 5 bed, 5 full baths, 1 half bath, large updated Kitchen, 1st floor living suite for in-laws or nanny’s quarters, game room, walk-out lower level multi-level deck across rear of property, 3 fireplaces, 3-car attached garage. Open Houses: Sundays, 10:00 A.M. to 12:00 Noon, Sept. 21 & 28 and Saturday 10:00 A.M. to 12:00 Noon, September 20.
59 ACRE EQUESTRIAN ESTATE 7139 MULBERRY RD., CHESTERLAND, OH 44026
OFFERED WITH A RESERVE PRICE OF ONLY:
$600,000
Spectacular 58.78 AC with 2 ponds. 4,351 SF updated century home with separate guest quarters. Updated throughout including mechanicals, kitchen & bathrooms. 2 car attached garage. Gas well on property generating $12K/Yr. Open Houses: Sundays, 1:00 P.M. to 3:00 P.M. September 21 & 28.
Real Estate Auction
Real Estate Opportunity 624 Market Ave. N., Canton OH Recently Listed At : $1,900,000 Suggested Opening Bid: $850,000
3% Broker Participation! Bambeck Auctioneers Inc. www.bambeck.com Owner Directs Immediate Sale
Real Estate Auction Oct.22 • 11:00 AM On-Site
8818-8828 Tyler Blvd., Mentor OH
Bambeck Auctioneers Inc. www.bambeck.com
Designed by Ernst Payer (Renowned Student of Frank Lloyd Wright), this 7,500+ SF home sits on 7+ Acres and features 4 bedrooms, 3 baths, 20’ x 40’ indoor swimming pool, 4 car attached garage, beautiful grounds and meadow. OFFERED WITH A RESERVE PRICE OF ONLY:
By Order of Court-Appointed Receiver
7,800 & 3,900 Sq.Ft.
OFFERED WITH A RESERVE PRICE OF ONLY:
Open Houses: Sundays, 10:00 A.M. to 12:00 Noon. September 21 & 28.
Bambeck Auctioneers Inc. www.bambeck.com
2 Business Condominiums
RESIDENTIAL PROPERTIES
9621 HOBART RD., WAITE HILL, OH 44094
3385 & 3391 Miller Park Rd AKRON (GREEN) OH Near Major Highways
Attn.: Users/Developers/Investors
Off-Site Due Diligence Seminar for ALL Land Parcels: Thursday, September 18 at 2:00 P.M. at Hanna Chartwell Offices
MID-CENTURY MODERN HOME
With 10 & 20-Ton Bridge Cranes
(See Website for terms.)
10 Acres zoned commercial at the S/W corner of US RT 20 and RT 58. Strategically positioned across the street from a Walmart Super Center, Oberlin Plaza Shopping Center, Pizza Hut, Advance Auto Parts, Lorain County JVC and less than 2 miles from Oberlin College. Terrific opportunity for user or investor. Free & Clear title.
10 AC
2 Industrial Bldgs on 2.75 Acres
Oct. 8 • 11:00 AM On-Site 45,000 Sq.Ft. Office Building on 2 Acre Site
Zoned Multi-family OUTSTANDING LOT!
$25,000 OFFERED WITH A RESERVE PRICE OF ONLY:
ABSOLU TE
Trucks, vans, trailers, Commercial lawn-care equipment, shop tools, snow removal
OFFERED WITH A RESERVE PRICE OF ONLY:
9.47-Acre commercial land site with 500’of frontage on Oneil Blvd. and directly across the street from Centre of Sheffield Shopping Center, Apple’s Grocery Store. Zoned Shopping Center. Free & Clear title. CORPORATE SELLER ORDERS IMMEDIATE SALE
UPCOMING AUCTIONS
AUCTION Century Home Built 1860 95 S. Franklin St, Chagrin Falls,OH 1.47 Acres, 3,626 sf home, 2nd building 3020 sf With an apartment on 2nd floor Auction will be held at 1215 W. 3rd St. Cleveland, October 6th at 9am
DON’T FORGET: Crain’s Cleveland Business on-line @ CrainsCleveland.com
For more information Contact 216-407-2622
COMMERCIAL SPACE
LAND
Location, Location, Location 1681 sq.ft. House converted to office
Commercial/ Multifamily Land
First floor, basement and 3 upper floor offices. High traffic area, 10 min. to airport, I-480. Redevelopment or move-in ready. Asking $155,000.00. Fairview Park.
For Sale in Westlake 7.5 ac. Former mobile home park. Frontage on two roads.
Call 440 667 6102
(440) 871-6400
TO FILL YOUR SPACE, LIST YOUR INDUSTRIAL, COMMERCIAL, RETAIL, OFFICE OR WAREHOUSE SPACE HERE. Contact Denise Donaldson at (216) 522-1383
CHARTWELLAUCTIONS.COM
216.360.0009 HANNA CHARTWELL BROKERAGE CHARTWELL AUCTIONS •
MICHAEL BERLAND & MAC BIGGAR, OH AUCTIONEERS
Classified continued on next page >>
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CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
SEPTEMBER 15 - 21, 2014
CAVALIERS offer their opinions, ask questions and occasionally complain. Stein said the Cavs “are rarely a topic — a world away from Ohio State sports, of course, but also less than other pro teams” such as the Columbus Blue Jackets and Crew, along with the Browns, Indians and Cincinnati Bengals. “In those terms,” Stein said, “the Cavs long have been dead last among professional sports in Columbus.” The sports editor said it’s difficult to say how large of a following the Cavs have in the state capital, aside from knowing “the base will be larger this year because LeBron is there and they’re a legit contender.” Mo Egger, a Cincinnati native and ESPN 1530 host, is “a huge NBA fan.” That doesn’t help him during his Cincinnati afternoon radio program. “I can’t get any kind of NBA conversation going,” Egger said. Egger said sports radio in Cincinnati is almost entirely comprised of talk about the Bengals, Reds and college basketball. “The (Indiana) Pacers are two hours away, and some of us have wondered why the Pacers don’t market to Cincinnati,” the host said. “I think they know it’s a lost cause. It’s a good basketball city, a good sports city, but when it comes to the NBA, nothing. It’s crickets.”
continued from page 1
chip, both strategically (the re-signing of Kyrie Irving, the recruitment of James, who helped lure others, and the trade for Love) and via the luck of the draw (another win in the NBA lottery), has seemed to fall the Cavs’ way, the franchise shouldn’t have many road blocks in its quest to carve a much greater footprint. Late last month, the Cavs filmed TV spots that will air in Columbus and Cincinnati. The two commercial include big-name personalities from Ohio State and Xavier universities, along with Columbus Mayor Michael B. Coleman and Northeast Ohio native and ESPN NFL analyst Tom Jackson (a Cincinnati resident). The personalities introduce themselves and say they are “a Cavalier.” The commercials end with a new spin on a longstanding Cavs motto: “All for one. One for all. All for Ohio.”
Anything but ‘like old times’ The Cavs will hold a preseason game at Xavier’s Cintas Center on Oct. 15. Five days later, they’ll play at Ohio State’s Schottenstein Center, continuing a tradition of preseason contests in Columbus. The preseason date in Cincinnati is the Cavs’ fifth in as many years, but it will be the first at Xavier since 2001 and the first in the Queen City with James in the wine and gold. The Cavs expect both games to sell out, a theme that will continue for all 82 regular-season games in 2014-15. “We’ve always had this platform,” Bubolz said. “It’s one we’ve worked at, but now we really have a unique opportunity to take it to the next level.” In many respects, the Cavs already have. The franchise reached its self-imposed cap on season tickets hours after James announced his return July 11, and Bubolz said the 92 suites at Quicken Loans Arena are already “at capacity” on a “multiyear basis.” The secondary-ticket market, in which Cavs owner Dan Gilbert has a considerable stake (via paperless ticketing company Flash Seats), for the team’s games will be among the NBA’s most active, and the Cavs’ digital properties are thriving. The Cavs had more than 2 million visitors to their website in August, a year-over-year increase of 505%. The site’s page views jumped 405% year-over-year (to more than 5.7 million), its unique visitors increased 365% and its video streams were up more than 10-fold. The Cavs had more than 2.2 million mobile views.
‘Stay tuned’
All numbers likely are near the top of the 30-team league. (The Cavs aren’t permitted to disclose their website and mobile rankings.) Cavs vice president of communications Tad Carper, who has been with the franchise for almost 15 years, said “there’s really no comparison” between the interest level in the current star-studded edition of the Cavs and the group formerly led by James from 2003-10. “That’s one of the questions I get asked repeatedly. ‘Hey, it’s just like old times,’ ” Carper said. “No, it’s not. It’s much different. There’s a much higher level of engagement. There’s an energy level in general in the marketplace, an interest level, that is much greater than it ever was.” With James back and saying he’s in for the long haul, the odds of extending that reach throughout the state, and to parts of New York and Pennsylvania, are vastly improved — much like the team’s title chances.
In 2008-09, James’ second-tolast season in his initial tenure with the Cavs, 76% of the team’s individual ticket sales came from outside the Cleveland direct marketing area. Last season, when the Cavs won 33 games, that number dropped to 60%. It figures to rise substantially in 2014-15. “The sense of anticipation for the Cavs goes well beyond Northeast Ohio,” team president Len Komoroski said. “And that’s all good for Cleveland and Northeast Ohio, because that spotlight is going to be on Cleveland and Northeast Ohio — regionally, nationally and internationally.”
Challenges in two cities Komoroski said the Cavs’ regional efforts are boosted by the organization’s TV contract with Fox Sports Ohio, which has “one of the largest” footprints in the NBA. Fox Sports Ohio spokeswoman Kate Zelasko said the regional net-
work has a “full distribution” of more than 5 million homes — the maximum number of homes, if every cable and satellite customer in its reach subscribed to the tiers on which Fox Sports Ohio is offered. Cavs games currently are distributed to more than 3 million homes in Ohio, Pennsylvania, New York, Kentucky, Indiana and West Virginia, and the network is “always working to expand within NBA parameters,” Zelasko said. “As Ohio’s team, people see us everywhere,” Komoroski said. “We’ve been fortunate to get great support in markets like Columbus and Cincinnati. What you’re seeing right now is that payload just starts to spread and get more intense as we go.” Even with the world’s greatest player, gaining steady footholds in Columbus, and especially Cincinnati, isn’t a slam dunk. Ray Stein, sports editor of The Columbus Dispatch, writes a weekly mailbag column in which readers
The Cavs hope their marketing campaign, with its “We Are All Cavaliers” slogan and #AllForOhio hashtag, can help to change some of that. But it’s the presence of James, who is every bit as valuable off the court as he is on it, that makes almost anything possible. Stein said since James left Cleveland in the summer of 2010, the Dispatch generally covers only a couple of Cavs games per season — when LeBron returned to The Q with the Heat and when former Ohio State standout Jared Sullinger and the Celtics are in town. “In other words, we have not covered a Cavs game because it’s a Cavs game in quite some time,” Stein said. “That changes this year, I’m certain.” Komoroski, the Cavs’ president, said the increased attention “motivates us because we know the spotlight will be more intense and the scrutiny will be more intense, but that’s what we live for. We’re fortunate to be in that type of situation. So I would just say stay tuned.” Even in Cincinnati.
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(855) 707-1944
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(800) 690-9409
FOR SALE Expanding? Come to our warehouse; by appointment new & used. Pallet racking-Flo RackShelving-Conveyor-Mezzanines. We install; we buy and tear down. Looking for scissor & fork lifts? Stys Inc. 216 641 7897- Sales@stysinc.com
CABINETS KITCHEN & BATH Locally Made ProMark Cabinets
(216) 453-3654
BUSINESS OPPRTUNITY ESTABLISHED DISTRIBUTOR Looking to expand to Cleve area. Seeking 100-500k. 1-3 yr term. 12-18% return
440-759-7711
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SEPTEMBER 15 - 21, 2014
THE WEEK SEPTEMBER 8 - 14 The big story: A proposal surfaced to remake the 925 Building, better known as the former Huntington Building at East Ninth Street and Euclid Avenue, in a $231 million project. Besides continuing to offer some office and retail space, the largely empty office building would go through an adaptive reuse that would incorporate apartments, condominiums and a boutique hotel. Plans were described in a resolution approved by Cleveland City Council. The resolution signals council’s support for an application by Vintage Development Group, an affiliate of Marous Brothers Construction, to receive a $25 million state historic preservation tax credit to assist the project.
Change is coming: DDR Corp. of Beachwood said CEO Daniel B. Hurwitz and the company’s board of directors agreed not to renew his employment agreement, which expires Dec. 31, 2015. DDR, a shopping center-foHurwitz cused real estate investment trust, said “it is anticipated” that Hurwitz, 50, will remain CEO through 2015 “to facilitate a smooth leadership transition as the company continues to execute its strategic plan.” Terrance R. Ahern, DDR’s board chairman, said the company will engage an executive search firm and consider internal and external candidates to succeed Hurwitz. Roots entwined: Boards of the Holden Arboretum and the Cleveland Botanical Garden voted to begin the process of joining together. The arboretum and the garden announced in June they were pursuing a merger. The new entity will become the 13th-largest public garden in the country. Clement W. Hamilton, who has led the arboretum since 2008, will become president and CEO of the integrated organizations. Natalie Ronayne, who has led the botanical garden since 2007, will become executive vice president.
Buying up the block: Morgan Management, the Rochester, N.Y.-based owner of the Bingham Apartments in Cleveland’s Warehouse District, bought the next-door National Terminal Warehouse Apartments for $15.5 million. With 250 units in an apartment building installed in 1996 in an old warehouse building, National Terminal was the largest single conversion of its time and “the grandfather of what’s going on today,” said Dan Burkons, a Marcus & Millichap vice president who represented Housing Horizons, an affiliate of Irving, Texas-based Kimberly-Clark Co., in the deal. Up in the air: Timken Co. of Canton is taking actions to improve the performance of its aerospace business that will result in non-cash, pretax charges of $110 million to $120 million in the third quarter. Among the planned actions, Timken said it will “eliminate its aerospace segment leadership positions and integrate aerospace activities” under the direction of executive vice president Chris Coughlin. The company also plans to close its aerospace engine overhaul business, based in Mesa, Ariz., by the end of the year; “evaluate strategic alternatives” for its aerospace parts business, also in Mesa; and close its aerospace bearing facility in Wolverhampton, United Kingdom.
Fair share: A pay-as-you-go community bikesharing pilot launched Sept. 10, with a handful of participating businesses in and around Ohio City spearheading the initiative and hoping more urban organizations come along for the ride. The Cleveland Bike Share program allows riders to rent bikes for $3 per hour at designated stations, and return them to other participating businesses once their ride is complete. Zagster, a Massachusetts-based private bike share provider for companies, hotels and universities, designs, builds, operates and maintains the bike-share system.
CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
27
REPORTER’S NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS
Bradley Building, a Warehouse District landmark, is on block
The fruit of his labor is starting to pay off
Two histories define downtown Cleveland’s Warehouse District. One is from the 19th century when it became home to a garment industry that served the nation; the other is when it became a site for artist’s studios and loft living that helped spark downtown’s revival. The Bradley Building, 1220 W. Sixth St., spans both, and it has just been listed for sale for $10.77 million with Colliers International. The building, which dates from 1886 and was the work of famed Cleveland architects Cudell & Richardson, now consists of offices and apartments within its red-clay exterior and behind its huge arched windows. With the listing shared by Colliers brokers Gary Cooper and Tom Gustafson, the marketing reflects its mixed-use nature as Cooper specializes in apartments and Gustafson in offices. The building has 32 apartments, 40,000 square feet of offices and 23,000 square feet of first-floor retail space. Gustafson said the building should attract a variety of investors because it offers immediate cash flow and has been well-maintained by its current owners. “It doesn’t require renovation like the National Terminal Building,” Gustafson said of the building on West Ninth Street just sold to a new owner. “It also does not entail the kind of risk entailed by K&D Group’s recent purchase of the Leader Building, which will later be converted to apartments from offices. It won’t require substantial renovation and is not a raw conversion from office to lofts.” Cooper said Colliers plans to market the
About six years of work is starting to pay off for entrepreneur Ethan Holmes. The 21-year-old Hiram College junior first asked his grandfather to show him how to make applesauce when he was just 15. He’s been working to get his all-natural business off the ground ever since. This summer, that hard work started to bear fruit. Holmes entered a couple of competitions earlier this year, including the Charter One Foundation Student Business Idea Competition, in which he won second place. Holmes used the money he won to invest in labeling, product testing and some time at the Cleveland Culinary Launch & Kitchen. He turned to crowdfunding platform Indiegogo to raise the money to make his first batch, raising $2,274 in a month. Early last month, Holmes said he made 400 jars of “Holmes Mouthwatering Applesauce” in two days with the help of family and friends. He said he had about 100 preorders, and he’s started reaching out to local retailers to carry his product. Holmes said a storefront for students at Hiram has agreed to carry his products — he added that he dropped off the jars in early September — as well as a store in Wooster. Holmes said that he wants to work to expand the flavors and product offerings at his company, Holmes Made Foods LLC. Though he’s young, he wants other teens and young adults who want to start a business to know they don’t have to wait to follow their dreams. It’s important to “have that confidence to move forward,” he said. — Rachel Abbey McCafferty
CONTRIBUTED PHOTO
The Bradley Building in the Warehouse District has been listed for sale for $10.77 million with Colliers International.
MILESTONE
eight-story building to Northeast Ohio apartment owners and to a list of owners nationally who own properties with federal landmark designations. “This building was a model for how to adapt warehouse buildings as mixed-use property” Cooper said of the Bradley, often described in local histories as the first such rehab between Chicago and New York City’s SoHo area. Cooper said the building’s long-term owners, Bradley Associates, have decided it is a good time to market the property. However, this deal will require more than simply finding someone to cough up cash. Cooper said the current owners seek a buyer as dedicated as themselves to serving as a “steward” for the landmark property. — Stan Bullard
BEST OF BLOGS Excerpts from recent blog entries on CrainsCleveland.com.
The state of enterprise
COMPANY: Richardson Design, Cleveland OCCASION: Its 20th anniversary “I’m still my own boss and am still doing what I love to do.” So says Scott Richardson, a Cleveland Institute of Art graduate who launched Richardson Design in January 1994, just a couple years out of art school. In a note to clients, he wrote, “I initially had dreams of just being my own boss and doing what I love to do. So I set up my drafting board in the spare bedroom of my house and began drawing and rendering with the markers I had left from my college days. My initial marketing was done through printed post cards which were mass mailed to targeted prospects.” Marketing today is done through e-newsletters and social media, and the firm’s design process “has evolved to include the latest computer modeling and rendering technologies,” he wrote. Richardson Design now has an eight-person team, and it occupies a 3,000-square-foot studio at 2570 Superior Ave. The firm’s work includes retail, corporate interiors, exhibitions and showrooms, and restaurants. In the last category, it has done the design work for Michael Symon’s B Spot chain, Great Lakes Brewing Co. and the renovated food area at Cleveland Browns Stadium. You can view images of the firm’s work at richardsondesign.com/portfolio.
There are 12 Ohio companies on Black Enterprise magazine’s list of the nation’s 100 largest black-owned businesses. The top-ranked Ohio company was Dublin-based manufacturer Modular Assembly Innovations, at No. 4 nationwide, with $1.2 billion in revenue in 2013. The next three Ohio companies on the list hail from Northeast Ohio: Lordstownbased restaurant supplier The AndersonDuBose Co. at No. 6 with $546 million in revenue last year; Norwalk-based New Horizons Baking Co. at No. 35 with $95 million in revenue; and Cleveland-based Ozanne Construction Co. at No. 43 with $87 million in revenue. Remaining Ohio companies on the list are from the Cincinnati, Columbus and Dayton areas. Black Enterprise says the country’s largest black-owned business is St. Louisbased IT products and services company World Wide Technology Inc., with $6.4 billion in annual revenue.
Tough month BusinessInsider.com ranked the current state of state economies, and Ohio is not exactly a stellar performer. The website ranked each state on seven economic measures: the July unemployment rate; the change in non-farm payroll jobs from June to July 2014; the 2013 GDP per capita; the 2012 per capita consumption; the 2013 average annual wage; the 2013 exports per capita; and the 2012 government expenditures. Ohio was a mediocre No. 35 by these measures, Here’s how BusinessInsider.com described the Buckeye State’s economy:
“Ohio may be poised for better economic times in the near future, with shale energy discoveries and a return of manufacturing to the U.S. … (But in this ranking) Ohio had mostly middle of the road rankings. The July unemployment rate was 5.7%, a little below the national rate of 6.2%. Similarly, average annual wages were in the middle of the pack at $44,667, not too far below the national average of $49,804. However, what held Ohio back was the July jobs report: Ohio lost 12,400 jobs in July, the worst performance in the country.” Ohio trailed most of its Great Lakes neighbors, including Indiana (No. 33), Pennsylvania (No. 31), Michigan (No. 17) and Illinois (No. 12)
A grande experiment A Starbucks test in Cleveland might be going national. Miami New Times noted that the coffee giant for a few months has been using 400 stores in Cleveland and Portland, Ore., to test coconut milk as an alternative to regular milk for non-dairy drinkers. The story’s writer, Hannah Sentenac, said a Miami barista told her that coconut milk “is officially on its way” to Starbucks in other markets. An email to Starbucks’ media relations team about a national rollout got this non-denial: “Starbucks is aware that many of our customers prefer their favorite beverages to be prepared with nondairy milk and soy alternatives. Starbucks is currently testing coconut milk at approximately 400 stores in Cleveland and Oregon for a limited time. We’re looking forward to learning more, but do not have additional information to share on future availability of non-dairy milk and soy alternatives within our stores nationally.”
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NORTHEAST OHIO’S TOP FINANCIAL R E CO G N I T I O N AWA R D
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