Crain's Cleveland Business by Crain's Cleveland Business

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Accounting M&A deals adding up Firms hungry for growth gobble up others at fast pace By MICHELLE PARK LAZETTE mpark@crain.com

Each time Allan D. Koltin asked for a show of hands, it reaffirmed what he’d already begun to see. While presenting at a conference of the American Institute of Certified Public Accountants in January, Mr. Koltin asked the room of CEOs,

who represented roughly 75 of the largest accounting firms in the country, three questions. How many of you count mergers and acquisitions as part of your strategic growth plan? Almost every hand went up. How many of you plan to consummate a deal in 2013 or 2014? Again, a near-unanimous show of hands. How many of you are in talks with another Top 200 CPA firm, meaning those with revenues of $13 million or more? Two-thirds of the hands were raised. See MERGERS Page 21

STAN BULLARD

The Worthington Building is located at 621 Johnson Court in the Warehouse District.

Medical device startups WORTHY ADDITION TO facing financial hurdles

WAREHOUSE DISTRICT

Project reliant on tax credit would create apartments, condos and commercial space

By CHUCK SODER csoder@crain.com

If AxioMed Spine Corp. were founded today, there’s a good chance the developer of spinal implants wouldn’t secure venture capital financing, according to CEO Patrick McBrayer. Nationwide, the struggling ven-

By STAN BULLARD sbullard@crain.com

The residential revival of downtown Cleveland is on the cusp of reaching the Worthington Building, a little-known, five-story building at 621 Johnson Court — an address technically in the middle of an alley between West Sixth and West Ninth streets in the Warehouse District. A plan for restoring the hulking, century-old property as 89 residential units and 33,000 square feet of commercial space is among the applications for the intensely competitive round of state Historic Preservation Tax Credits that closed Sept. 30 and will be awarded by year’s end. Neil Viny, a principal of the Dalad Group real estate concern that controls the building through the Old Cleveland Properties and various limited partnerships, sums up succinctly how important the state tax credit is to his group’s plan.

See WORTHY Page 22

Sagging venture capital business often prefers to back early-stage IT companies ture capital business has been shying away from putting money into early-stage medical device companies. That’s especially true of companies facing big regulatory hurdles, such as AxioMed in Garfield Heights, which has raised $65 million in venture capital since 2001. See MEDICAL Page 11

MONEY MATTERS A look at the investments in software and medical device companies in the U.S. since 2007:

Software companies

CONTRIBUTED PHOTO

The Dalad Group’s Worthington Building project would transform the century-old structure into 89 residential units and 33,000 square feet of commercial space. There would be 14 condominiums atop the building.

Medical device companies

Year

Investment

Deals

Investment

Deals

2007

$6.195 billion

1,076

$3.704 billion

396

2008

$6.033 billion

1,113

$3.607 billion

397

2009

$4.109 billion

831

$2.558 billion

341

2010

$5.295 billion

1,058

$2.331 billion

344

2011

$7.761 billion

1,244

$2.882 billion

366

2012

$8.582 billion

1,364

$2.474 billion

318

2013

x-$8.164 billion

1,109

x-$1.609 billion

207

■ Source: MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, using data from Thompson Reuters. ■ x-First three quarters

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INNOVATION Northeast Ohio leaders discuss how they attract and motivate creative minds ■ Pages 15-19 PLUS: HIGHER ED’S ROLE ■ CREATING A NEW CULTURE ■ & MORE

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AMERICAN EXCEPTIONALISM

COMING NEXT WEEK

U.S. companies dominate the Thomson Reuters 2013 Top 100 Global Innovators list, a ranking that includes Ohio giants Eaton Corp., Goodyear Tire & Rubber Co. and Procter & Gamble. Thomson Reuters compiles the list based on four main criteria: overall patent volume, patent grant success rate, global reach of the portfolio and patent influence as evidenced by legal citations. The 100 companies â&#x20AC;&#x153;outperformed the S&P 500 for the third consecutive year, by 2% in annual stock price growth and 2% in market cap weighted revenue growth,â&#x20AC;? according to Thomson Reuters. Hereâ&#x20AC;&#x2122;s the geographic distribution of the 100 companies:

Working ahead Crainâ&#x20AC;&#x2122;s will take a glimpse at efforts in the community, among businesses and in higher education to create the work force of tomorrow.

CORRECTION â&#x2013; An Oct. 14, page 8 story about the move of the Cleveland International Fund to 1240 Huron Road in downtown Cleveland incorrectly identi-

Country

fied the owner of the building. The 1240 Huron Building is owned by a partnership that includes the Slyman Group of Cleveland.

REGULAR FEATURES Classified ....................22 Editorial ......................10 From the Publisher ......10 Going Places ...............14

OCTOBER 21 - 27, 2013

Milestone ....................23 Reportersâ&#x20AC;&#x2122; Notebook....23 Talk on the Web ...........10 The Week ....................23

Representation

Country

Representation

1. United States

45%

T5. South Korea

2. Japan

28%

7. Sweden

3. France

12%

T8. Canada

4. Switzerland

T8. Netherlands

T5. Germany

T8. Taiwan

â&#x2013; Source: Thomson Reuters 2013 Top 100 Global Innovators list â&#x2013; Note: Representation is the percentage of the top 100 companies on the Thomson Reuters list that are based in each country.

Thursday, October 31

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INSIGHT

Roads to mayor’s race have split since close start Jackson, Lanci both grew up on Woodland Ave., but couldn’t be more different today By JAY MILLER jmiller@crain.com

Frank Jackson and Ken Lanci, the two men running on the Nov. 5 ballot to be Cleveland’s mayor, started their lives notso-many blocks apart along Woodland Avenue on Cleveland’s East Side — Mr. Lanci at East 110th Street, and Mayor Jackson at East 83rd Street. They also got into politics because of heart attacks. Their families moved from Woodland early on. Mr. Lanci’s left the city, while Mayor Jackson’s moved to Cleveland’s Central neighborhood. A heart attack and near-death experience in 2007 set Mr. Lanci on a path to give back to his community. Mayor Jackson didn’t consider a run for Cleveland City Council until Lonnie

WHAT THEY’RE SAYING FRANK JACKSON ■ On Ken Lanci’s presence at the Seymour Avenue home where three women were held captive: “I don’t go to a place of tragedy to be disrespectful and condescending to that Jackson tragedy.” ■ On Cleveland: “We’re right there in terms of being able to ensure Cleveland’s future, but we haven’t gotten over the hump yet.” KEN LANCI Lanci ■ On Mr. Jackson: “He has failed miserably on everything. He makes the same statements about schools, safety and jobs. And he’s done nothing.” Burten, his friend and across-the-street neighbor on East 38th Street, died suddenly of a heart attack in 1984. See ROADS Page 8

THE WEEK IN QUOTES

LOU COLAGROSS

Browns president Alec Scheiner poses with fans Chad Donovan, left, and Rick Poe, right, in the Muni Lot on Oct. 13. In the background is Dan Federer, who had Mr. Scheiner sign his RV on the right.

ALWAYS EVALUATING From trips to the Muni Lot to secret shopping, the Browns’ new regime is analyzing everything By KEVIN KLEPS kkleps@crain.com

hen Cleveland Browns seasonticket holder Dan Federer saw Alec Scheiner and a few other men in suits and ties making the rounds in Cleveland’s lakefront Municipal Parking Lot before the Browns’ Oct. 13 game against the Detroit Lions, he said he “knew it

had to be someone in power.” Suits and the Muni Lot usually mix about as well as stout beers and a low-carbohydrate diet. For Mr. Scheiner, an analytical former lawyer and Dallas Cowboys executive who was hired by the Browns last December as team president, it was another chance to learn — and evaluate.

“We have unique conditions today: state and federal tax credits, city and county support, a low interest rate environment and a hot residential market.”

“My job is to remove roadblocks for people to do the best that they can do, not to tell them what to do.” — Jon Stahl, president, LeanDog. Page 15

— Neil Viny, a principal of the Dalad Group real estate concern. Page One

“Instead of receiving a phone call that says, ‘We’ve got a new invention that “The best thing about ordering Cleveland Browns we would like you to protect,’ (companies) stuff is it’s the most loyal fan base I’ve ever seen. You would call and say, ‘We are putting together a team to know you’re going to sell develop a product for this the stuff.” — Nate Cannell, Northeast Ohio particular market.” regional manager for sporting goods store Cardboard Heroes. Page 5

See EVALUATING Page 12

— Mark Watkins, co-chairman of the intellectual property and technology team at Hahn Loeser & Parks LLP. Page 15

For-profit fund would be new beginning for JumpStart Proposed venture could help nonprofit development group widen its pool of resources By CHUCK SODER csoder@crain.com

JumpStart Inc. wants to start a for-profit fund as a way to funnel more capital to high-tech startup companies in Northeast Ohio, according to several officials in Ohio’s

economic development community. The proposed “JumpStart Next Fund” would represent a big change for the nonprofit venture development group. Over the last nine years, Cleveland-based JumpStart has used its

nonprofit Evergreen Fund to invest $29 million in 76 local startups. Now, that fund is out of capital. JumpStart “will continue to try to raise money for the Evergreen Fund,” which could be replenished through both charitable contributions and money JumpStart would

receive if more of its portfolio companies are sold, according to Samantha Fryberger, director of communications at JumpStart. However, raising a for-profit fund would help JumpStart attract money from a broader number of sources, according to Deborah

INSIDE: A breakdown of how JumpStart has used the $70.6 million in capital it raised from 2005 to 2012. Page 6 Hoover, president and CEO of the Burton D. Morgan Foundation, which has given multiple grants to JumpStart over the years. See JUMPSTART Page 6

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‘Holy grail’ for Port Authority

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Group is expected to annouce deal that would allow liner service to Dutch site By JAY MILLER jmiller@crain.com

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Regular container cargo service from the Port of Cleveland to Northern Europe could begin by spring. The board of the Cleveland-Cuyahoga County Port Authority will hear this week about a plan for the quasipublic agency to sponsor biweekly or monthly runs, called liner service, between Cleveland and a Dutch port. Northeast Ohio importing and exporting companies that currently ship their products in standardsize containers must ship goods by truck to a coastal port and put their products on a ship there. The Port Authority believes it can offer shippers a service that can be faster and competitively priced. Port Authority president and CEO William Friedman said he is close to an agreement with a carrier and expects to be able to announce a carrier and terms of the deal this Wednesday, Oct. 23, when the authority holds its regular committee and board meetings. However, following through on the plan could hinge on renewal of the Port Authority’s 0.13-mill tax levy, a measure that’s on the Nov. 5 ballot. The levy, on the ballot as Issue 82, provides about one-third of the authority’s $7.3 million budget. Failure of the levy would thwart plans for the service. Assuming the service moves forward, a ship could carry a variety of

cargoes, though the focus is on bringing containerized freight onto the Great Lakes for the first time. “We’re aggressively moving to get this liner service started,” Mr. Friedman told a Crain’s editorial board this month. “That’s been the holy grail for us on the Great Lakes.” Failure of the levy, though, would make it hard to fit the liner service’s startup costs — which Mr. Friedman was unwilling to specify — into the Port Authority’s 2013 budget. “We need the levy just to operate and continue the services we have today, and here we’re talking about an expansion (of services),” Port Authority chairman Marc Krantz told Crain’s. “And to even think about an expansion if we’re at the point where we’ve lost 35% of our budget, it’s hard to imagine how we think about expanding.” If the plan goes forward, the Port Authority would charter a ship from a major freight carrier and would collect the cargo fees from shippers to test the concept. The hope is that after a startup phase shipping fees would cover the cost. “This definitely would be of interest to us,” said Dave Vuicich, director of international sales and marketing at CresCor Inc., a maker of mobile food service equipment in Mentor. “Europe is some place we are taking a look at right now.” Mr. Vuicich said CresCor now trucks its outbound merchandise to

ports in either the New York City area or Virginia, where it is put on a ship. “From our standpoint with CresCor, we work with distributors internationally” who make the shipping decisions, Mr. Vuicich said. “But in a couple cases we can start making recommendations because (shipping direct from Cleveland) has not been available as an option.”

Barriers to entry Selling the Port Authority’s service faces obstacles, though. Perhaps first among them is that the St. Lawrence Seaway’s locks are closed for the three winter months. Using a single port — a coastal port — year-round keeps things simple for shippers. Navigating the locks on the Great Lakes adds the cost of tolls and also requires the hiring of a lake pilot, an added expense. “If you look at this market you would conclude there are a lot of barriers to entry,” Mr. Friedman said. But Mr. Friedman believes demand for the service exists despite the hurdles and he has been talking to carriers about partnering with the Port Authority. “The one company we’re talking to in particular is a very excited,” he said. He’s also confident shippers will be interested, based on results of a survey conducted by Martin Associates of Lancaster, Pa., a leading maritime consulting firm. Mr. Friedman said he hopes the service can capture 10% or more of the shipping by Northeast Ohio companies that now goes through East Coast ports, perhaps as much as 20,000 containers a shipping season. ■

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Haas to purchase soccer academy By STAN BULLARD sbullard@crain.com

Add the titles “land developer” and “mixed-use developer” to the others carried by Chris Haas, president and CEO of Avon-based All Pro Freight Systems Inc., as he plans to buy soon the former Premier Soccer Academy in Amherst in a receiver’s sale. Mr. Haas said last Thursday, Oct. 17, that he bested other bidders in a sale conducted by receiver Mark Abood because he was willing and able to purchase the entire 30-acre property, its multiple buildings and soccer fields rather than just taking part of the complex. Mr. Haas expects to receive approval shortly from Lorain County Common Pleas Court to close the purchase. The sale would conclude a foreclosure proceeding filed in October 2009 by RBS Citizens National Association and other creditors for claims totaling more than $9 million. Judge John Miraldi approved Mr. Haas’ bid for the property Oct. 10, according to court records. An affiliate Mr. Haas calls AP Realty Holdings LLC will pay about $2.5 million for the complex that Brad Friedel, a professional soccer player in England and a Bay Village native, built in 2007. The complex closed in 2008. Part of Mr. Haas’ plan for the property calls for selling about six acres that front on state Route 58

for retail or commercial use. But the trucking company owner also plans to put some of the former soccer complex to use himself. During the economic downturn, Mr. Haas leased space at All Pro Freight’s headquarters/warehouse and another warehouse in Avon to volleyball, baseball and athletic training tenants. He said he soon will be able to move those tenants to the Amherst complex, where they will provide Mr. Haas with enough cash flow to cover the purchase. Mr. Haas said he’ll put the vacated space in Avon back to use for storage thanks to improving economy. A 70,000-square-foot field house at the soccer complex will serve as the base of the athletic operations. A soccer operation already leases soccer fields through March at the complex, Mr. Haas said. Some of the four outdoor fields in Amherst eventually may be converted to baseball or other sport uses, he said.

Fortunate fella The most challenging part of the Amherst property is a 30,000-squarefoot building that houses offices, classrooms and a 20-room dormitory for visiting soccer players. That structure served as the soccer academy, where foreign students and prospective pro soccer players could live while training and attending high school, and was the heart of Mr.

Friedel’s plans for the property. Mr. Haas said he is toying with developing an “All Pro Sports and Entrepreneurial Academy” that would allow students to work on sports skills while also learning entrepreneurship. The idea would be to prepare them for the time when they stop pursuing varsity sports or end pro careers. David Wagner, a principal and managing director of the Hanna Chartwell real estate brokerage, represented Mr. Haas in the purchase and will represent him in transactions as he seeks new users for the property. Mr. Wagner said Mr. Haas’ key prospects are about a half-dozen prospective bidders for pieces of the complex. Mr. Haas, who leases and owns about 650,000 square feet of warehouse space for All Pro, said he is excited about the opportunity the Amherst property presents, particularly because he will be going in at a far lower cost than it took to build and equip the complex. “One man’s misfortune can be another man’s fortune,” Mr. Haas said. Mr. Haas appears to have done well with the purchase. There were no bidders for the complex at a May 6, 2011, sheriff sale with a minimum bid of $5 million. An appraisal for that sale valued it at $6.7 million, according to court records. ■

Volume 34, Number 42 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the fourth week of December and fifth week of December at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2013 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373. REPRINT INFORMATION: 800-290-5460 Ext. 136

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Browns and Indians spark run in merchandise sales Giambi’s walk-off home run was welcome No matter what: sight for many Northeast Ohio retailers ‘See you Sunday’ By LAURA STRAUB upcoming trends in the market and clbfreelancer@crain.com

When it comes to professional sports, Clevelanders literally wear their hearts on their sleeves in the form of team apparel. And with the recent success of the Indians and their loyalty to the Browns, retailers are scrambling to keep up. “I think it’s just been a perfect storm so to speak with both teams,” said Nate Cannell, Northeast Ohio regional manager for sporting goods store Cardboard Heroes. Mr. Cannell noticed a distinct spike in sales of Indians gear after Jason Giambi’s walk-off home run in late September during the team’s red-hot run for a wild card spot in the American League playoffs. He said it took people a while to realize there was something special going on inside Progressive Field, but after that game he saw really excited customers. Mr. Giambi’s walk-off also spurred business at GV Art and Design in Lakewood. As a part of a local company, co-owner Greg Vlosich has the freedom to get creative with his designs for sports gear. “We’re tiny compared to Nike and all those things,” he said. “But we have the ability to move faster and be more creative.” Because of this creative license, Mr. Vlosich was able to help when the Indians’ bench players reached out two weeks before the end of the season to create a Goon Squad shirt — which he had trouble keeping stocked after that fateful game. “We couldn’t get those in fast enough at the end,” Mr. Vlosich said. Fortunately for GV Art and Design and other locally based Cleveland retailers such as CLE Clothing Co., the turnaround time for printing additional product is quick. CLE Clothing works with a local printing shop and can get additional bulk orders in the store in about two weeks, said Laura Kubinski, director of operations. “We try to forecast as much as we can,” she said. “Sometimes it doesn’t work out great.” The stakes for forecasting merchandise needs before the season begins are higher at Cardboard Heroes. The 15-store chain is required to pre-book orders in February or March, and opportunities to go back and order more gear are few and far between, Mr. Cannell said. “You have to be able to just roll the dice and say, ‘I hope this will be a good season,’ ” he said. This is standard practice for most chain retailers. JC Penney orders general team merchandise six to eight months prior to the start of the season. The process of deciding on the order is lengthy. “Twice a year, we have in-depth line reviews with all our key vendors — including Nike, VF, G-III and Adidas — and discuss the upcoming season assortment offering, last year’s performance of key items,

overall strategy for the brand,” said David Plummer, a manager for active and seasonal men’s sportswear at Penney. “After this review process, we work together to determine which items will be the most sought-after team gear.” JC Penney also can chase domestically produced merchandise throughout the season, which is critical when a team hits a winning streak, he said. “Most of our vendors have domestic facilities where they own blank inventory and can print merchandise based on demand,” said Mr. Plummer. “For hot markets, we can get goods produced, shipped and in store as quickly as one week during the season.”

Burned on Trent With less opportunity for midseason orders, Cardboard Heroes chooses to focus on merchandise touting fan favorites, impact players or players with years remaining in their contracts, though that strategy doesn’t always work. “We thought the Browns were building around Trent Richardson for the future,” Mr. Cannell said. “We got burned pretty bad on that move.” Mr. Cannell’s stores also discount merchandise of players with injuries or in slumps on a case-bycase basis. After Brandon Weeden appeared to lose his starting quarterback position to Brain Hoyer, jerseys donning his name headed to the sale rack. However, the Oct. 3 game against the Buffalo Bills in which Mr. Weeden guided the Browns to victory after filling in for an injured Mr. Hoyer was enough to bring the youth sizes of Mr. Weeden jerseys back to regular price — due in part to the lack of youth merchandise. The adult sizes are still half off, Mr. Cannell said. Mr. Plummer said on-field performance and marketability are the two main factors JC Penney takes into consideration when deciding whether to carry merchandise branded with a particular player. Mr. Cannell thinks a Jordan Cameron jersey should be well on its way after his recent performances. “It takes special games like he’s had,” said Mr. Cannell, who thought Brian Hoyer was on his way to a retail jersey before the knee injury against the Bills derailed his strong start.

Good or bad, the stuff sells Other stores that don’t rely on national brand-name jerseys have the freedom to make player-centric apparel at will, meeting the demand for apparel supporting new stars but also legends of the past. “We team up with a lot of former players,” said Mr. Vlosich of GV Art and Design. Making shirts for former players such as Bernie Kosar, Kevin Mack, Webster Slaughter and Eric Metcalf bring back great memories, he said.

Greg Vlosich said he makes it a point for all his sports apparel to be pro-Cleveland, even the pieces that poke fun at the city’s reputation for sports futility. “When the Browns stink it up, we’ve got that covered, too,” said Mr. Vlosich, co-owner of GV Art and Design in Lakewood. With GV Art’s Factory of Sadness and There’s Always Next Year shirts, Mr. Vlosich said he hopes to capture the persistence of fans. “It’s like no matter what, see you Sunday,” he said. — Laura Straub He is also open to making special designs when players approach him. He currently is working on a design with Mr. Cameron, a second-year tight end for the Browns. “We like teaming up with good

JASON MILLER

Jason Giambi’s walk-off home run against the Chicago White Sox on Sept. 24 at Progressive Field sparked business at a number of Northeast Ohio retailers. people,” he said. Even with the fluid nature of the Browns’ roster, Mr. Cannell thinks any losses incurred to trades or poor performance are fairly consistent with other markets. “There may be a little more so in Cleveland because of the ineptitude of the team in the last few years,” he said.

Even with that ineptitude, retailers agreed — Cleveland is a Browns town, and football merchandise will move regardless of the team’s success. “The best thing about ordering Cleveland Browns stuff is it’s the most loyal fan base I’ve ever seen,” Mr. Cannell said. “You know you’re going to sell the stuff.” ■

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Cash fuels E-Z Electric growth Motor repair shop aims to triple size of staff, add equipment By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com

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A family-owned industrial motor repair business is gearing up to increase its capabilities and its work force with the help of a local investor. Demetrius Ledgyard, president of E-Z Electric Motor Service Inc. in Bedford Heights, has been in the business since he was 11, when he helped out at what was then his fatherâ&#x20AC;&#x2122;s shop. The company got its start in the basement of his familyâ&#x20AC;&#x2122;s home in 1965, turning his fatherâ&#x20AC;&#x2122;s electrical hobby from the Army into a business with more than a dozen employees. Now, the company is poised to grow with the support of Ken Roller, former owner of Cleveland-based Monarch Electric Service Co., now known as Integrated Power Services. Mr. Roller is investing $750,000 in the company and, as of mid-September, began serving as its vice president. Today, E-Z Electric mainly repairs medium-voltage motors, but planned equipment upgrades that will be made possible in part by Mr. Rollerâ&#x20AC;&#x2122;s investment would allow the company to repair high-voltage motors and megawatt generators, Mr. Ledgyard said. That capability would open up the markets E-Z Electric can serve, from municipalities to electric utilities to operators of wind turbines.

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The company plans to reconfigure its 15,000-square foot plant at 23400 Miles Road, re-equip it and hire 20 to 25 new employees by the end of 2014. E-Z Electric as of early October had 13 employees, up from a low of four employees in 2008 and 2009. Last month, Ohioâ&#x20AC;&#x2122;s Minority Development Financing Advisory Board voted to approve a $1 million loan for the company. The loan still needs to be finalized by the state, but if it is, E-Z Electric would use it to buy two large cranes, new 14-foot ovens to dry motors and bake varnish, a vacuum pressure system to varnish motors and other equipment. The company plans to expand with or without the loan, Mr. Roller said, but it would help expansion plans. Mr. Ledgyardâ&#x20AC;&#x2122;s father, George Ledgyard, is excited about the growth plans. He always planned for

his son to take over, and he said he thinks his son has done an excellent job over the years. Demetrius Ledgyard, 59, bought the company from his father and became president in 1995. â&#x20AC;&#x153;I always had a passion for this business. And I had big ideas,â&#x20AC;? Demetrius Ledgyard said. Bernie White, a materials manager for ITW Bedford Wire in Bedford Heights, said the company has been sending its motors to E-Z Electric Motor Service for nearly a decade. The motor repair shop offers fast turnaround, Mr. White said. Bedford Wire processes coiled rod into wire for the automotive, construction and industrial markets, and its machines usually run 24/7. A broken motor means that equipment is down, so the turnaround time is important. â&#x20AC;&#x153;They do a very good job of meeting our requirements,â&#x20AC;? Mr. White said. â&#x2013;

JumpStart: Fund wouldnâ&#x20AC;&#x2122;t be alone continued from PAGE 3

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RACHEL ABBEY MCCAFFERTY

Demetrius Ledgyard, left, president of E-Z Electric Motor Service Inc., stands with his father, George Ledgyard, who started the company in the 1960s.

Pooling more capital for startups is particularly important at a time when early-stage companies here and nationwide are finding it harder to raise money from investors, said Ms. Hoover, who also is chair of the Fund for Our Economic Future, another group that has given grants to JumpStart. Many local industry watchers have told Crainâ&#x20AC;&#x2122;s they are worried about that trend. â&#x20AC;&#x153;The intent is to help fill a perceived gapâ&#x20AC;? in early-stage venture capital, Ms. Hoover said. Ms. Hoover said she supports the idea of the for-profit fund, adding that the Morgan Foundation has been thinking about financing programs that could provide a return to the foundation. The concept also sounds good to Robert Eckardt, executive vice president at the Cleveland Foundation, which also has provided financing to JumpStart. â&#x20AC;&#x153;On the surface, it seems to be something they should be considering,â&#x20AC;? Mr. Eckardt said. The foundation hasnâ&#x20AC;&#x2122;t considered putting money into the proposed fund, but would think about it if JumpStart provided a prospectus describing the opportunity. Few details are available regarding how the JumpStart Next Fund would be structured. JumpStartâ&#x20AC;&#x2122;s Ms. Fryberger would not comment on the effort. JumpStart has made progress in raising more money for startups: The group since December has been awarded a total of $5 million in loans from the Ohio Third Frontier

HOW ITâ&#x20AC;&#x2122;S SPENT A look at how JumpStart has used the $70.6 million in capital it raised from 2005 to 2012, according to its report at the close of last year: â&#x2013; $36.7 million: Assisting startups and providing them with access to resources. â&#x2013; $23.8 million: Fund invested directly into early state companies. â&#x2013; $5.7 million: Operations. â&#x2013; $4.4 million: Working with entrepreneurial ecosystems across the country. View the report at: tinyurl.com/mfcnggs Commissionâ&#x20AC;&#x2122;s Pre-Seed Fund Capitalization Program. The program provides money for both nonprofit and for-profit funds that invest in startups. However, JumpStart will need to raise matching funds to get that money.

First profit, then jobs The idea of a nonprofit economic development group running a forprofit fund isnâ&#x20AC;&#x2122;t unusual. For one, JumpStart already has the for-profit Emerging Market Fund, a smaller investment vehicle designed to finance minority-led startups and young companies in economically depressed parts of the region. Similar organizations in other parts of Ohio also have for-profit funds. Among them is CincyTech, which assists and invests in young tech startups in the Cincinnati area. CincyTech provided JumpStart information on how the organization runs its for-profit funds, according to the groupâ&#x20AC;&#x2122;s president, Bob Coy.

He said he wasnâ&#x20AC;&#x2122;t sure whether JumpStart planned to imitate anything about CincyTech, which raises money from institutional investors and individuals. Though CincyTech has never run a nonprofit fund, Mr. Coy said he believes the pressure to make profitable investments for his investors has an impact on the way his organization operates. For instance, CincyTech always invests alongside other investors, providing more money for startups at the outset. The goal is for startups to have a better hand to play when they start negotiating with a second round of investors, which is intended to protect CincyTech and other early investors from dilution, Mr. Coy said. â&#x20AC;&#x153;Iâ&#x20AC;&#x2122;m not sure if nonprofit funds think about that the same way,â&#x20AC;? he said. Nonprofits can run for-profit funds well, as long as they have the right people, structure and incentives in place, said Jonathan Murray, managing partner at Early Stage Partners, a venture capital firm in Cleveland. Mr. Murray is a fan of the idea. For one, he thinks â&#x20AC;&#x153;the profit motive is always a good thing.â&#x20AC;? Plus, he likes that for-profit funds tend to be judged on how much money they make, as opposed to how many jobs they create. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve been measuring the wrong thing for the past 10 years,â&#x20AC;? Mr. Murray said. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve been measuring jobs. You donâ&#x20AC;&#x2122;t really create long-lasting, sustainable jobs without creating profit.â&#x20AC;? â&#x2013;

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CRAINâ&#x20AC;&#x2122;S CLEVELAND BUSINESS

WWW.CRAINSCLEVELAND.COM

OCTOBER 21 - 27, 2013

Roads: Candidates have very different views on cityâ&#x20AC;&#x2122;s safety forces continued from PAGE 3

As they come together now, both appear sincere in their desire to improve the city. But they couldnâ&#x20AC;&#x2122;t be more different in how they present themselves, who they are listening to, and, not unexpectedly, how they regard the incumbent mayorâ&#x20AC;&#x2122;s record. Mr. Lanci, CEO of Cleveland printing company Consolidated Graphics Group and the challenger, is a salesman with more than a little flash. He drives a Bentley, wears bright jewelry and maintains a deep tan. Heâ&#x20AC;&#x2122;s selling his candidacy as a remedy for eight years of failure, and he holds the business community in part responsible. He cites promises Mayor Jackson made in his early inaugural and State of the City speeches and says he achieved none of them. â&#x20AC;&#x153;He has failed miserably on everything,â&#x20AC;? Mr. Lanci told Crainâ&#x20AC;&#x2122;s editorial board Sept. 24. â&#x20AC;&#x153;He makes the same statements about schools, safety and jobs. And heâ&#x20AC;&#x2122;s done nothing.â&#x20AC;? Mr. Lanci blames Mayor Jackson, at least in part, for a rise in poverty in the city and for a litany of problems in the police, fire and water departments that he says he has learned of anecdotally from city

employees. Mayor Jackson, by contrast, has none of Mr. Lanciâ&#x20AC;&#x2122;s flash and never had any aspirations to business success. Above his old-fashioned lace-up ankle boots, heâ&#x20AC;&#x2122;s strictly off the rack. If Mayor Jackson knocked on your door to sell you something, even his record as a two-term mayor, he likely would end his pitch with his oft-repeated line â&#x20AC;&#x201D; â&#x20AC;&#x153;It is what it is.â&#x20AC;? In those early speeches by Mr. Jackson that Mr. Lanci mentioned in their debate at the City Club of Cleveland, the mayor pledged to improve public safety and education, and he believes heâ&#x20AC;&#x2122;s following through on those promises. Mayor Jackson looked past those early speeches in a meeting with Crainâ&#x20AC;&#x2122;s editorial board Oct. 7. He said his candidacy â&#x20AC;&#x153;is about the positioning of Cleveland and insuring that that positioning will last, whoever is mayor.â&#x20AC;? â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re right there in terms of being able to ensure Clevelandâ&#x20AC;&#x2122;s future, but we havenâ&#x20AC;&#x2122;t gotten over the hump yet,â&#x20AC;? he said.

Safety first Perhaps the most striking con-

trast is in how they approach the fissures in Clevelandâ&#x20AC;&#x2122;s safety forces. The police division has a long history of dissension between line officers and those at the top of the chain of command; the problem has been exacerbated by the death of two people after a high-speed car chase last Nov. 29 involving dozens of police officers, some of whom wound up riddling the vehicle with 137 bullets. The mayor and his chief disciplined 11 supervising officers â&#x20AC;&#x201D; actions that included one firing and two demotions. Hearings on disciplinary actions for 104 patrol officers are underway. Mr. Lanciâ&#x20AC;&#x2122;s embrace of the troubles heâ&#x20AC;&#x2122;s heard from patrol officers has led him to call for the firing of safety director Martin Flask and police chief Martin McGrath. That stance, and his plan on how to replace the chief, earned him the support of the Cleveland Police Patrolmanâ&#x20AC;&#x2122;s Association, the union of street cops. â&#x20AC;&#x153;I want the union to put up three candidates, men that they respect and are qualified to be their chief,â&#x20AC;? Mr. Lanci said. â&#x20AC;&#x153;I would choose from there; I know that would work. â&#x20AC;&#x153;The people in the community

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will be the ones to judge,â&#x20AC;? he said. Mayor Jackson, by contrast, supports the safety departmentâ&#x20AC;&#x2122;s leadership. â&#x20AC;&#x153;Without this police chief there would be no semblance of fairness and justice in the whole thing,â&#x20AC;? Mayor Jackson said of Chief McGrathâ&#x20AC;&#x2122;s response to the events of Nov. 29. â&#x20AC;&#x153;He stood up against a culture that said there was nothing wrongâ&#x20AC;? with the chase and the shootings, he said.

On the right path? More broadly, Mayor Jackson believes he successfully has led the city through the worst economy since the Great Depression and that city government now provides more and better services for less money. He also maintains he has encouraged significant private investment in the city, and has laid the foundation for improvement of Clevelandâ&#x20AC;&#x2122;s schools through a transformation plan he championed that was passed last year by the Ohio Legislature. Among Mayor Jacksonâ&#x20AC;&#x2122;s key goals for the next four years are to continue to emphasize sound budgeting and financial planning and to make sure the citizens of Cleveland share in whatever economic growth comes from recent investments in the city. Those investments include the Cleveland Convention Center and the Global Center for Health Innovation and, in the next few years, redevelopment along the lakefront. But his top priority is education. After working with Gov. John Kasich last year to win legislative approval for his school transformation plan and then leading a successful campaign for a hefty 15-mill levy to pay for its implementation, Mayor Jackson wants to see the plan through. â&#x20AC;&#x153;I want all kids to have good schools,â&#x20AC;? he said. The way Mayor Jackson has worked on the schools issue reflects the way he has run his public life. â&#x20AC;&#x153;I firmly believe that if youâ&#x20AC;&#x2122;re put in a position of making a decision and your focus of what is right for where you are and who youâ&#x20AC;&#x2122;re serving, then nine out of 10 times that public official will make the right decision,â&#x20AC;? he said. As the challenger and a newcomer to city politics, Mr. Lanciâ&#x20AC;&#x2122;s goals

are more aspirational, and he exudes confidence in himself and his ability to bring the same success to the city as he has done in the business world. His Consolidated Graphics, based on East 40th Street in Clevelandâ&#x20AC;&#x2122;s Midtown neighborhood, employs 150 people and has annual revenue of $25 million. In conversation, itâ&#x20AC;&#x2122;s clear that Mr. Lanci, like many small business owners who started by scrapping for a toehold in a competitive sector, sees himself as the little guy against the big guys, fighting against established competition. In bringing that attitude to the mayorâ&#x20AC;&#x2122;s race, he lumps the broad business community in with those politicians whom he believes are bringing the city down. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re going to be Detroit, thereâ&#x20AC;&#x2122;s no doubt in my mind,â&#x20AC;? he said. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s going to happen because nobody cares in this business community. Iâ&#x20AC;&#x2122;m convinced. â&#x20AC;&#x153;Theyâ&#x20AC;&#x2122;ve all given (Mayor Jackson) hundreds of thousands of dollars and (people in the business community) have no idea whatâ&#x20AC;&#x2122;s going on,â&#x20AC;? Mr. Lanci said, citing statistics that show a rise in poverty in the city. â&#x20AC;&#x153;â&#x20AC;&#x2DC;Oh, itâ&#x20AC;&#x2122;s not really all his faultâ&#x20AC;&#x2122; (the business people say). It may not be all his fault, but what has he been doing to try and change that?â&#x20AC;?

No respect Beyond the policy differences, the animosity between the two men has led to each calling the other â&#x20AC;&#x153;condescending.â&#x20AC;? Mr. Lanci used the word to describe the mayorâ&#x20AC;&#x2122;s relationship with neighborhood leaders, especially the cityâ&#x20AC;&#x2122;s ministers. He said he believes Mayor Jackson sees Mr. Lanciâ&#x20AC;&#x2122;s candidacy the same way. Mr. Lanci had not lived in the city for years before he decided to run for mayor earlier this year, though he has spent most of his business life in Cleveland. Mayor Jackson use the â&#x20AC;&#x153;condescendingâ&#x20AC;? term to describe Mr. Lanciâ&#x20AC;&#x2122;s presence at the Seymour Avenue home where three young women were held captive for a decade by the now-deceased Ariel Castro. â&#x20AC;&#x153;I donâ&#x20AC;&#x2122;t go to a place of tragedy to be disrespectful and condescending to that tragedy,â&#x20AC;? he said. â&#x2013;

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CRAIN’S CLEVELAND BUSINESS

WWW.CRAINSCLEVELAND.COM

OCTOBER 21 - 27, 2013

PUBLISHER/EDITORIAL DIRECTOR:

Brian D. Tucker (btucker@crain.com) ASSOCIATE PUBLISHER/EDITORIAL:

John Campanelli (jcampanelli@crain.com) EDITOR:

Mark Dodosh (mdodosh@crain.com) MANAGING EDITOR:

Scott Suttell (ssuttell@crain.com)

OPINION

Do it again

e’re glad to see a good 2012 idea get another go-around in 2014, as the presidents of Ohio’s public colleges and universities begin to hash out plans for how best to spend the money the state will allocate for construction projects on their campuses. Gov. John Kasich deserves credit for putting the process of deciding how to carve up higher education’s portion of the state’s capital budget in the hands of the schools. He first tried this collaborative approach two years ago, when he charged a committee led by the then-president of Ohio State University, E. Gordon Gee, with creating a wish list of construction projects to take before the Legislature. By February 2012, the state’s three dozen public colleges and universities had settled on a single, $350 million list, which the committee shipped to the governor in a report signed by the presidents of all the schools. In that report, the committee wrote: “College and university leadership took the challenge seriously, and worked in tandem to recommend the capital projects that best reflect an effective and responsible use of the state’s investment. Moreover, we believe that the approach adapted in this report can serve the State of Ohio in the future.” The governor apparently agreed, because a group of college presidents met with him late last month to talk about the approach he’d like to see them take in developing a new wish for the next capital budget. Gov. Kasich wants to see the schools direct their state money toward expenditures that are tied to economic development and are linked to K-12 education. “There are many areas that can be connected, from technical training, vocational education, preparation for the two-year and four-year school,” the governor said after meeting with the presidents. Local colleges did well in securing construction money in the inaugural edition of this exercise in higher education collaboration. Kent State University and the University of Akron each were allotted $16 million, Cleveland State University, $12.7 million, and Cuyahoga Community College, $8.9 million. We’re convinced the collaboration again will work well for our region’s higher education leaders and, as a result, for their students.

Well done

ongratulations to Amanda Rabinowitz, assistant news director of WKSU-FM, 89.7, for winning a national Edward R. Murrow Award from the Radio-Television-Digital News Association. Ms. Rabinowitz was honored with the prestigious award for Best Sports Reporting for an in-depth report on the misuse of prescription painkillers by college athletes. Her story followed the overdose deaths of two former University of Akron football players who died within six months of each other in 2011. We applaud her work.

FROM THE PUBLISHER

Two lanes is plenty for truckers makes an exception when there is a hazarely do I bother to comment on ard in one of those lanes, or in the rare a new bill that has been sponinstance when an exit ramp is on the left sored in our state Legislature, for side of the roadway. a number of reasons. Now, the lawmaker readily First, these bills often are BRIAN admits she was prompted in nothing more than a publicity TUCKER part by her commuting experigrab by the author. ence between Copley and Second, they often have no Columbus. During those trips, chance of passage, let alone seshe has watched as trucks — rious discussion. three abreast — hold up traffic. Third, they sometimes are so The representative says 44 ideological that commenting U.S. states, including all that would do little more than give border Ohio, already have siman already overly partisan ilar laws in place. That means bunch of Ohioans yet another truckers wouldn’t find the change unreason to bicker. usual, and we all know that this industriBut then along comes House Bill 278, al state of ours sees an immense amount and I simply must comment, while also applauding its author, Marilyn Slaby, a of truck traffic. Republican from Copley. If it becomes So, Rep. Slaby’s law makes sense. law, HB 287 would ban trucks and other Now, if only we could knock some sense heavy vehicles from the left lanes of our into our state’s car drivers, who insist on state’s major highways. using that far-left lane not as a passing Rep. Slaby says with the advent of 70 lane, but as a cruising lane. I never realmph highway speed limits in some lessized how bad Ohio drivers are about populated areas of the state, it makes hogging that lane than when my bride sense to limit vehicles weighing more moved here a couple decades ago from than 10,000 pounds to the inner two Michigan. lanes of any three-lane highways. It “Don’t drivers here know that the left

lane is for passing?” she asked me. “Why don’t they get over?” I didn’t have a good answer then, and I still don’t. I do know that a lot of us make that same error, clogging our highways and irritating other drivers. ***** WITH THE SHUTDOWN OVER, and the government running along again, it’s amusing to look back at the politicking by both sides of the aisle and the White House that went on during that mess. One of the most transparent — and clumsy — attempts to gain from the debacle came in the form of a press release from an organization called the Democratic Congressional Campaign Committee, with this headline: “Congressman Joyce’s New Budget Demand: Throw Seniors Under the Bus.” In the first line, the organization called the recent impasse “Congressman David Joyce’s reckless shutdown.” It never specified how exactly a first-term congressman owned the shutdown or what he exactly was doing to throw Ohio seniors under the bus. Where, or where, do these so-called strategists cook up such nonsense? ■

TALK ON THE WEB

POLL POSITIONS

Re: Craft beers ■ Remember Schaefer’s — “The beer to have when you’re having more than one?” What a slogan! I rarely have more than one, so I want something exceptional when I do have one. Love trying the craft beers. — Robert Salmon

Re: PPG moving jobs ■ Cleveland needs to quit worrying about the Steelers and start worrying about Pittsburgh taking our precious jobs. First Oglebay Norton, then PNC and now this. What’s next? — Chris Mobily

Re: Planned building near Cleveland Clinic ■ Another example of the importance of the Clinic as a leader in both redevel-

Reader responses to stories and blogs that appeared on: www.crainscleveland.com

Should the Cleveland Indians do away with Chief Wahoo as their mascot? Yes. It’s an offensive image.

opment and development. We all need to support their effort. The Opportunity Corridor will really benefit everyone. — Neil Dick

25.7%

No. It represents the team’s tradition.

Re: Shale in Ukraine ■ This is where the shale gale may generate its first momentous geopolitical upheaval. But Ukrainians will have to understand the stakes Dr. Iryna Lendel sets forth in her Oct. 11 blog, because there are no private mineral rights to drive development like there is in the U.S. and Canada. — Andrew Thomas

74.3%

Based on 102 online responses. Vote in the poll each week at CrainsCleveland.com.

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OCTOBER 21 - 27, 2013

Medical: Itâ&#x20AC;&#x2122;s a â&#x20AC;&#x2DC;dangerousâ&#x20AC;&#x2122; time continued from PAGE 1

Instead, investors have been turning their attention to later-stage medical device businesses and information technology companies, which often need less time and money to become profitable. Mr. McBrayer, who has helped launch several startups, says he never has seen a more â&#x20AC;&#x153;dangerous timeâ&#x20AC;? for emerging medical device companies that need capital to get their products to market. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s a difficult climate for brandnew medical technologies,â&#x20AC;? he said. The trend is good for local IT companies, which have been raising more money lately, but it could pose a problem for Clevelandâ&#x20AC;&#x2122;s medical innovation engine. The shift hasnâ&#x20AC;&#x2122;t had a big impact on local medical device companies â&#x20AC;&#x201D; at least not yet. Local health care startups attracted $79 million in venture capital during the first half of 2013, and $47 million of that went to 14 medical device companies. Those figures compare well to totals from previous years. But Karen Spilizewski said she â&#x20AC;&#x153;wouldnâ&#x20AC;&#x2122;t be surprised to see a dip in those numbers.â&#x20AC;? Ms. Spilizewski has an interesting perspective on the situation: Sheâ&#x20AC;&#x2122;s a vice president at both nonprofit BioEnterprise Corp. in Cleveland â&#x20AC;&#x201D; where she leads a team that helps local medical device companies commercialize their products â&#x20AC;&#x201D; and at RiverVest, a St. Louis-based venture capital firm that focuses exclusively on the life sciences sector. Through RiverVest, Ms. Spilizewski still is focused on looking for medical device companies that might make for good investments. But a lot of other medical investors are putting more money into software companies focused on the health care sector, she said. Investments in the white-hot health IT sector often are seen as faster, easier ways to capitalize on the growing demand for products that can lower the cost of delivering health care. The shift could mean less competition for RiverVest, but it isnâ&#x20AC;&#x2122;t good for medical device companies. Ms. Spilizewski suggests they hunt for more grant money and plan on spending more time raising capital. â&#x20AC;&#x153;You will see good companies not get funded,â&#x20AC;? she said.

The trend accelerates Nationwide, fewer medical device companies are raising fewer dollars. Those companies raised just $1.6 billion in venture capital during the first three quarters of this year, according to the MoneyTree Report, which is compiled by PricewaterhouseCoopers and the National Venture Capital Association. Thatâ&#x20AC;&#x2122;s down 33% from the $2.4 billion U.S. medical device companies attracted during the same period in 2011, according to the report, which is based on data from Thomson Reuters. Meanwhile, software companies attracted $8.2 billion in venture capital during the first three quarters of 2013. Those three quarters alone nearly match the 2012 total and easily beat annual figures from the past 10 years. Local statistics arenâ&#x20AC;&#x2122;t quite as dramatic, but IT companies here have been receiving a bigger piece of the venture capital pie over the past few years, according to figures compiled by JumpStart, a Cleveland nonprofit that supports high-tech startups. Health care startups in Northeast Ohio typically raise more investment dollars than local IT companies, partly because of the technologies that have been coming out of

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HE SAID IT â&#x20AC;&#x153;In many ways it feels like the late 1990s, with information technology driving venture investment and significantly outpacing other sectors when it comes to level of activity and momentum. The difference, however, is where we go from here. There will be no tech bubble. IT investing will continue to be the bedrock of the venture industry â&#x20AC;&#x201D; but at sustainable levels. â&#x20AC;Ś Life sciences investments (are) poised for a slow and steady recovery, provided we can continue to see progress on the regulatory front.â&#x20AC;? â&#x20AC;&#x201D; Mark Heesen, president of the National Venture Capital Association, on results from its second-quarter MoneyTree Report the Cleveland Clinic and Case Western Reserve University since the turn of the century. Last year, however, marked the first time in at least six years that local IT startups did more venture capitaldeals than their health care counterparts. One big factor that makes it easier for local IT companies to raise small amounts of capital are the three startup business accelerator programs that have opened in Northeast Ohio since the start of 2012. All of them heavily favor companies based on software or services provided via the Internet. Among them is FlashStarts, a Cleveland-based accelerator led by longtime software entrepreneur Charles Stack. Despite the dot-com bubble that burst 12 years ago and the more recent recession, there continues to be an â&#x20AC;&#x153;immense untapped opportunityâ&#x20AC;? in the IT sector, Mr. Stack said via email. Medical device companies can be good investments, but â&#x20AC;&#x153;for regular individuals with lifetimes measured in mere decades, the time frames are positively glacial,â&#x20AC;? he wrote.

Preparing for â&#x20AC;&#x2DC;second adulthoodâ&#x20AC;&#x2122; Reaching retirement requires new mindset â&#x20AC;&#x201D; one with much more financial discipline By JOE FORAN and TOM FUHR

ADVISER

ow would you react if you were told that you could relive the majority of your adult life, taking full advantage of all that you know and every lesson youâ&#x20AC;&#x2122;ve ever learned? What would it be like to have 30 or more years to do it all over again, just the way you want? The reality is that most of us are being given exactly that chance because of the truly astonishing advances medical science has made over the last two decades. These realities are radically altering how we must think about the notion of retirement. This can either be viewed as a burden, or it can be viewed as a gift. That gift is quite simply the opportunity to do and be almost anything we want and to live our lives in almost any way we wish. But this extension of life is only a gift if we recognize it and act on that recognition by intentionally planning our future lives. Unfortunately, only a small frac-

tion of Americans actually plan in any way for retirement. Even then, plans are typically short-term reactions to the past, not a creativelooking forward. The result is that most people outlive their plans and donâ&#x20AC;&#x2122;t have any Plan B. We urge our coaching clients to stop using the word â&#x20AC;&#x153;retirementâ&#x20AC;? and to instead think about the transition from full-time work to their second adulthood. Simply changing your terminology will help you change your paradigm, putting you in the right frame of mind to create an exciting future life for yourself. Here are some things to think about and some steps to take to move beyond the limits of retirement to the promise of â&#x20AC;&#x153;second adulthoodâ&#x20AC;?: First, change your mindset; embrace the likelihood of a much longer life ahead of you. This one is simple â&#x20AC;&#x201D; and hard. It is simple because it is quite

straightforward. But adding visualization and emotion to thinking expands the lenses through which we view the issue. Second, quality financial planning and financial discipline is essential â&#x20AC;&#x201D; but itâ&#x20AC;&#x2122;s not sufficient. Competent financial advice is an essential part of planning your transition. By all means find a great and reputable financial advisor. But frankly, you have to give them something to work with by doing life planning as well. Third, recognize that very few of us ever succeed in doing quality life planning on our own. Donâ&#x20AC;&#x2122;t do it alone. We suggest you recruit your spouse, a close friend, or retain a certified coach to help you walk this journey. A long second adulthood is inevitable for the majority of baby boomers and anyone younger than that. If we allow the notion of retirement to cloud our thinking and limit our options, the future will be grim indeed for the large majority of us. But if we fundamentally re-imagine what happens going forward â&#x20AC;&#x201D; and if we plan intentionally for it â&#x20AC;&#x201D; our futures can be bright indeed. (Joe Foran and Tom Fuhr of Chagrin Falls are life coaches.)

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â&#x20AC;&#x2DC;Game changersâ&#x20AC;&#x2122; only, please The Cleveland Clinic has gotten into IT in a big way, too. About 20% of the inventions that come out of the Clinic are based on information technology. Three years ago, that figure was 6%, and three years from now it should be in the 30% range, according to Gary Fingerhut, interim executive director at Cleveland Clinic Innovations, the hospital systemâ&#x20AC;&#x2122;s business development arm. Mr. Fingerhut said he expects the number of medical devices developed at the Clinic to keep growing, but at a slower pace. He noted that the bar has been raised in the medical device industry. â&#x20AC;&#x153;Another glucose monitor isnâ&#x20AC;&#x2122;t going to make a difference,â&#x20AC;? Mr. Fingerhut said. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re looking for the game changers.â&#x20AC;? Besides going after grants, medical device startups also should pursue capital from strategic investors, which are picking up where some venture capital firms have left off, according to Jerry Frantz, managing venture partner at JumpStart. Like Ms. Spilizewski, Mr. Frantz suggested medical device startups be conservative when estimating their ability to raise money. Despite the current softness in medical device investment, â&#x20AC;&#x153;the sector will weather the storm,â&#x20AC;? Mr. Frantz said. After all, lots of innovation will be needed to treat the aging population, control the obesity epidemic and hold down the cost of health care, he said. â&#x20AC;&#x153;The trends at large, some of the drivers of health care, are not going away,â&#x20AC;? Mr. Frantz said. â&#x2013;

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OCTOBER 21 - 27, 2013

Evaluating: Browns’ attendance has bounced back after four down years continued from PAGE 3

JOHN REID

Cleveland Browns president Alec Scheiner, center, is shown on the field prior to the team’s game against the Detroit Lions on Oct. 13 at FirstEnergy Stadium.

“I think any time you’re in a suit in the Muni Lot, you stand out,” he said. “I think they either figure you’re with the team or you’re out of your mind.” It turns out Mr. Scheiner, Browns chief revenue officer Brent Stehlik and the other team executives who trolled the lot fit right in with the pregame crowd. Mr. Scheiner said Mr. Stehlik was the group’s designated connoisseur of tailgating cuisine.“He ate everything that everyone had to offer,” Mr. Scheiner said of his friend. Mr. Scheiner didn’t eat — “I already had breakfast,” he said — but he did, as usual, study everything. “Part of the reason I do this is just to understand our fan base better,” said Mr. Scheiner, who spent the last five of his eight years in Dallas as the Cowboys’ senior vice president and general counsel. “When you go to the Muni Lot, that’s exceptional. There’s nothing like that in the NFL. I’ve been to almost every stadium in the NFL, and there’s nothing like the Muni Lot. “And I would argue,” he continued, “that there is nothing like our fans in terms of loyalty and passion because

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DRAWING A CROWD A look at the Cleveland Browns’ average attendance per game, along with where they rank in the 32-team NFL, the last five seasons: SEASON Average Rank x-2013 71,436 11 2012

66,632

2011

65,859

2010

66,116

2009

68,888

2008

72,778

■ x-Through four home games ■ Source: ESPN.com we have not been the most successful franchise over the last 15 years. Yet they keep coming; they care about us. They care as much as we do.”

Leaving ‘no stone unturned’ Trips to the Muni Lot are a walk in the park compared to the front office’s other efforts to gauge the experience of their fans before, during and after a Browns game. The Browns have secret shoppers at every home game who roam FirstEnergy Stadium, talk to fans and workers, take pictures — and take in everything. If there is a portable concession stand that is too far into the concourse, it’s noted. If there is an issue at a parking lot, the “shopper” will take a picture and include it in his or her report. Fattar Thomas, general manager at Delaware North Cos., has a firsthand view of the increased focus on customers of the Browns’ new regime. Mr. Thomas’ company is one of two main food service providers for the Browns, and Mr. Thomas is in charge of DNC Sportservice’s massive game-day operation at the stadium. “(CEO) Joe (Banner), Alec and Brent, they leave no stone unturned,” Mr. Thomas said. “There are people all over making sure that things are done the right way.” Mr. Scheiner said the team also has fans fill out surveys on portable devices provided by stadium personnel during every game. To be consistent, the same questions are asked about such topics as friendliness of the staff, stadium entry, exiting the game and general fan experiences. Since the mood of the fans tends to change as the game progresses, the surveys indicate when each question was asked. “After those games, we get feedback and we know how we’re trending,” Mr. Scheiner said. “We know what areas are areas for concern, what are areas for optimism.” The executive team then gathers each week and shares their observations. “I have a running spreadsheet of all of the things we’re trying to address,” Mr. Scheiner said.

Shopping for information Like the Browns, many professional sports teams use secret shoppers to analyze the performance of their staffs and concessionaires. The Cleveland Cavaliers occasionally use third-party shoppers to improve fan experience and operations, a team spokesman said. Much of the team’s analysis, however, is done in-house, with self-critiques and the monitoring of fan responses on social media.

Delaware North, the concessions provider at Progressive Field, has done secret shopping for the Cleveland Indians on the food and beverage side (the company does so for the Browns, too). To analyze fan experience, the Tribe does “multiple, comprehensive e-surveys per season,” said team spokesman Joel Hammond. “The Indians are always looking to seek feedback from our fans, which can come from various forms — continuous surveying, secret shopping and focus group research,” Mr. Hammond said. “While not all of those are conducted for every home game, we strive to keep a balance between collecting sufficient data and not disrupting our fans’ experience.” A copious amount of data is a must for Mr. Scheiner, whose shoppers include an outside company contracted by the team (the Browns’ president declined to identify the company because he believes anonymity will help it perform its job better), uniformed personnel who roam the stadium and take notes, and Delaware North’s secret buyers. “We’ve done a lot of things because what we don’t want to do is just take it for granted or have anecdotal evidence of how we’re doing,” Mr. Scheiner said.

Winning over the people So, how are the Browns’ faring? Halfway through the home schedule, pretty well. Mr. Scheiner said the team’s many fan experience initiatives — new gates and screening lines to improve stadium entry, a disc jockey, enhanced cell phone service, banner unveilings, even weiner dog races at the halftimes of one preseason and one regular-season game — have been very well-received. The Browns’ attendance — after ranking 20th, 18th and 18th in the 32team NFL in 2010, ’11 and ’12, respectively — is up, too. The Browns have drawn an average of 71,436 fans in their first four home games, which ranks 11th in the league. The team has had more than 71,000 fans at each of the four contests. In 2012, the team failed to reach 70,000 in any of its eight home games. “I look at it like a virtuous cycle,” Mr. Scheiner said. “The more your fans are engaged, the better your team will do. There’s kind of a point for each NFL franchise where the fans get so good that it becomes much harder to win at their home venue.” A team president cruising a parking lot packed with orange-andbrown-clad partiers isn’t going to affect the win total. But Mr. Scheiner said he believes it’s all part of the team’s approach to being more engaged with its fans. While in the Muni Lot prior to the Browns’ loss to the Lions, Mr. Scheiner posed for pictures with Mr. Federer — a Euclid resident who bought season tickets three years ago upon his return to Northeast Ohio after eight years in the Marine Corps — and his friends. Mr. Federer had the sharply dressed team president sign his Brownsdecorated RV with a black Sharpie. “He asked us how we were doing, how long we had been fans, what we were looking for,” Mr. Federer said. “This regime is a lot better when it comes to relating to the fans.” ■

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20131021-NEWS--15-NAT-CCI-CL_--

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CRAIN’S CLEVELAND BUSINESS

OCTOBER 21 - 27, 2013

INSIDE

17 CLINIC SUMMIT SHOWS OFF INNOVATIONS, GLOBAL CENTER.

INNOVATION Inventions are being protected from start

BRIGHT IDEAS Northeast Ohio leaders detail how they attract creative minds

Intellectual property practices on rise as demand for patent services increases

By CHRISSY KADLECK clbfreelancer@crain.com

lowing bubbles is a required skill. Grumpy people need not apply. Write a poem that describes your past work history. Can you write software on a 120-year-old renovated boat with bulldogs, beer kegs and a rock climbing wall? These are just a few examples of how the region’s employers find creative people and attract innovative minds. “You can’t buy innovation,” says Jon Stahl, president of LeanDog, which helps companies improve their culture and products through training and development of software. “You have to create a culture that supports innovation.” That culture is fostered from the first interaction with a potential candidate and cultivated throughout the organization on a daily basis in very tangible ways, say thought leaders and local innovators.

By CHRISSY KADLECK clbfreelancer@crain.com

ven before generating the next big idea or innovation, companies increasingly are turning to legal experts early in the process for counsel on how to best protect, develop and acquire intellectual property for a competitive edge. “Our patent attorneys can be found on the factory floor of a client all the way up to the boardroom, talking to the CEO and CFO about important acquisitions and what’s the value of the intellectual property of a company that they are going to acquire,” said Ned Pejic, who is co-chairman of the health care and life sciences practice group and second in command of the intellectual property practice at Calfee. Mark Watkins, co-chairman of the intellectual property and technology team at Hahn Loeser & Parks LLP, said the IP professionals at his firm are becoming more likely to be involved with the strategic planning process of how to protect intellectual property before a product or service has been developed. “Instead of receiving a phone call that says, ‘We’ve got a new invention that we would like you to protect,’ (companies) would call and say, ‘We are putting together a team to develop a product for this particular market,’” said Mr. Watkins, whose firm boasts a sizeable Northeast Ohio practice with 28 full-time IP professionals. “We would do some advance research to see what prior technology exists and then help them with the development process in general and be up to speed with the technology as it comes into existence,” he said.

■ Cathy Hakala-Ausperk, executive director, Northeast Ohio Regional Library System, Warren Cultivating a culture of innovation is a passion for Cathy Hakala-Ausperk, who in August presented a webinar on the topic. “First of all, you have to hire for creativity and innovation,” she said. “That means dusting off the old interview and coming up with questions that will tell you whether or not people have the skills you need today on your staff. You have to be creative in your job ad and be creative in your interview questions so people see that that’s your culture and that’s what you’re all about and that will allow you to attract like people.” Once that creative staff is in place, leaders have to model the kind of behavior and thinking you desire. “From the director through the managers to the direct line staff, you need to demonstrate creativity and openness to innovation. You celebrate it and you talk about it and you keep it in the forefront so it is something that people know is really critical to you,” she said. See IDEAS Page 19

Necessity is the mother

GETTY IMAGES

As Northeast Ohio companies and entrepreneurs continue to generate innovations and inventions, the demand for intellectual property protections has increased and prompted area law firms to respond by expanding their practices. Take Squire Sanders LLP. In the last year, this global firm has gone from zero patent attorneys to four in its Cleveland office, said Steve Auvil, who leads the U.S. litigation practice in the firm’s intellectual property and technology practice group. See INVENTIONS Page 19

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INNOVATION

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OCTOBER 21 - 27, 2013

Innovation officers helping to create a new culture Position is becoming more common and important at a variety of organizations

and Cathy Justice — through a $10 million gift — created in 2011 his current Justice Family Chair in Medical Innovation. “The idea of sponsored innovation through philanthropy was a real breakthrough,” he said. “People understand the importance of fueling the capabilities of answering today’s medical problems with tomorrow’s solutions. Innovation is a worthy target of generosity.”

Pat Perry, president of Mayfield Village-based ERC, said the human resources organization began noticing within the last five to eight years more of these formal positions on its NorthCoast 99 workplace award applications, mostly from companies in health care, IT, manufacturing, engineering or creative. “I think we saw more of an emphasis on innovation through the recession,” Mr. Perry said.

By KATHY AMES CARR clbfreelancer@crain.com

Frank Natoli Jr. became the first Diebold Inc. employee two years ago to brandish a business card with the title of chief innovation officer. While senior leadership positions at the Green-based ATM manufacturer always have been tied in some way to emerging technologies, the newly created position underscored innovation’s core role in Diebold’s transformation from a cash-dispensing machine into an interactive banking hub. “Innovation is everything; it’s a culture,” said Mr. Natoli, who was promoted from chief technology officer. “We have employees all over the world working on new technology and solutions development. I’m interacting with those employees at every level and our customers to execute those innovations.” Throughout Northeast Ohio, the chief innovation officer increasingly is becoming part of today’s C-suite among larger, well-established companies and institutions — from Sherwin-Williams and Parker Hannifin to Case Western Reserve University — as their contributions to the global marketplace accelerate. Chief innovation officers lead efforts to develop ideas for new products and services. And while the formal title was unfamiliar to the executive world 10 to 15 years ago, it now is becoming more commonplace both here and nationwide.

All systems go

CONTRIBUTED PHOTO

Allowing customers to use their smart phones instead of credit or debit cards to withdraw money from ATMs is one of Diebold’s recent innovations.

Brain gain Case Western Reserve University chief innovation officer Joseph Jankowski, for one, is actively in search of opportunities for product commercialization. In the innovation officer role since January, Dr. Jankowski also seeks out potential partnerships with research, for-profit and economic development entities. “We’re seeing a new generation of university where students and faculty are collaborating with companies and other community economic development partners on new technologies. Universities are developing administrative leadership to steer that level of innovation,” Dr. Jankowski said. Among his priorities, Dr. Jankowski is working to deploy a $6 million investment fund — a joint initiative established this year with University Hospitals Case Medical Center and Ohio Third Frontier — into the commercialization of medical and technological discoveries as well as emerging studentled companies. “Our main goal is to increase

activity with companies developing products … and help students be more productive and impactful throughout private sector enterprises,” he said. He also is spearheading efforts to create an innovation network map, or a virtual front door to the university, to outsiders who are looking to collaborate with a particular department or individual. The navigation tool will link interested companies more efficiently to university resources. In his previous nine-year role as associate vice president for technology management, Dr. Jankowski led the university’s commercialization efforts around more than $300 million in annual research activity at the institution.

A leader in innovation Dr. Thomas Graham, a renowned hand surgeon and prolific inventor, played a key part in the 1990s of mobilizing the concept for Cleveland Clinic Innovations, which formally took shape

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in 2000. The commercialization arm of the health care giant since then has produced 66 spinoffs, with about 75% of those receiving more than $750 million in equity investment from private equity firms and institutional investors. “I’m able to bring my experience as an individual inventor and entrepreneur who’s experienced the good and the bad of bringing ideas from the head to the marketplace,” said Dr. Graham, chief innovations officer. He referenced as one of the more visible accomplishments during his tenure as chief innovation officer the establishment of the Healthcare Innovation Alliance, a coalition of some of the world’s most influential health care and research organizations. That partnership aims to combine research, technology, clinical investigation and commercialization on a much grander scale. Another, he said, was when West Virginia entrepreneurs James

Innovation also is surrounding the Cleveland Metropolitan School District under a transformation plan that aims to increase the number of high-performing district and charter schools and replace those that are failing. Christine Fowler-Mack is leading efforts to connect the dots among those schools with innovative practices in teaching and learning that she helped spearhead during her former role as the district’s chief of new and innovative schools and programs. Now that the groundwork has been laid for instituting new technology and project-based schools — such as Campus International, which collaborates with Cleveland State University — she is taking her current duties as chief portfolio officer to the next level. A broader strategy of incorporating those types of schools and additional strategic community partnerships will create a portfolio of high-quality schools systemwide, she said. In fact, the district is ramping up staffing in its innovation office to facilitate this next phase. “We don’t want to just have islands of excellence,” Ms. FowlerMack said. “It takes a community to meet needs of children.” ■

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Innovation is star of summit Cleveland Clinicâ&#x20AC;&#x2122;s annual event helps to put spotlight on new Global Center By TIMOTHY MAGAW tmagaw@crain.com

he Global Center for Health Innovation â&#x20AC;&#x201D; the hulking downtown complex formerly known as the medical mart â&#x20AC;&#x201D; had its very public unveiling last week, having hosted for the first time the Cleveland Clinicâ&#x20AC;&#x2122;s annual Medical Innovation Summit. The Global Center, a four-story facility linked to the cityâ&#x20AC;&#x2122;s new convention center, is designed to be a showcase for all that is possible in health care. The same can be said for the Clinicâ&#x20AC;&#x2122;s Medical Innovation Summit and the reason why the health system decided to move the event from its main campus off Euclid Avenue to the recently opened center in the heart of the city. It was also the perfect opportunity for the Clinic and Northeast Ohio to show off the newly minted Global Center to the very people it was meant to serve â&#x20AC;&#x201D; health care providers, investors and inventors. This yearâ&#x20AC;&#x2122;s summit, which was focused on obesity, diabetes and the metabolic crisis, drew a record crowd of more than 1,600 professionals. â&#x20AC;&#x153;To see it ready for business, delivered on time and under budget and see the enthusiasm for the city is really great for us,â&#x20AC;? Dr. Thomas Graham, the Clinicâ&#x20AC;&#x2122;s chief innovation officer, said about the new center. â&#x20AC;&#x153;We are Clevelandâ&#x20AC;&#x2122;s Clinic, and this has allowed us another way to celebrate that.â&#x20AC;? While only a handful of the spaces in the Global Center are open for business, convention center officials stressed that the Clinicâ&#x20AC;&#x2122;s summit was the right event at the right time to set the stage for the burgeoning center. â&#x20AC;&#x153;This is a terrific group that comes from around the world,â&#x20AC;? said Dave Johnson, the centerâ&#x20AC;&#x2122;s director of public relations and marketing. â&#x20AC;&#x153;It was the right audience for the space holders in the Global Center.â&#x20AC;?

MATTHEW KOHLMANN

Dr. Thomas Graham, the Cleveland Clinicâ&#x20AC;&#x2122;s chief innovation officer, speaks at the Clinicâ&#x20AC;&#x2122;s annual Medical Innovation Summit last week.

MORE ONLINE View a photo gallery of the Clinicâ&#x20AC;&#x2122;s summit at: tinyurl.com/mahwr4k Meanwhile, the wide-ranging, three-day event highlighted medical breakthroughs in treating obesity and the impact health care reform will have on the state of innovation. The general consensus was that while the Affordable Care Act, or Obamacare, might present some challenges, its launch will not cripple the health care system or hamper innovation. â&#x20AC;&#x153;The Affordable Care Act, at least, is pushing people to think differently,â&#x20AC;? said Greg Hubbell, senior vice president for Aon Hewitt, during a panel discussing the online health care exchanges. A resounding theme early in the conference wasnâ&#x20AC;&#x2122;t so much focused on the clinical aspects of fighting obesity â&#x20AC;&#x201D; weight loss surgeries or novel drugs, for example â&#x20AC;&#x201D; but rather the role employers should play reducing the collective heft of the American work force. For instance, Cleveland Clinic CEO Dr. Toby Cosgrove and the health systemâ&#x20AC;&#x2122;s wellness czar, Dr. Michael Roizen, touted the Clinicâ&#x20AC;&#x2122;s own wellness programs â&#x20AC;&#x201D; programs that include free gym and Weight Watchers memberships for its employees. The Clinic also hosted a handful of well-known health care leaders for one-on-one talks, including Aetna CEO Mark Bertolini and former U.S. Sen. Tom Daschle, a lead-

ing policymaker in the health care arena, who pleaded for a compromise in Washington shortly before the partial shutdown of the federal government ended. Mr. Bertoliniâ&#x20AC;&#x2122;s heartfelt speech, which was a highlight for many in the audience, recounted his experiences caring for his son who was diagnosed with T-cell lymphoma at age 16 â&#x20AC;&#x201D; an experience that involved donating one of his own kidneys to aid in his sonâ&#x20AC;&#x2122;s survival. Throughout the ordeal, Mr. Bertolini coordinated all aspects of his sonâ&#x20AC;&#x2122;s care. He extolled the fragmented nature of the United Statesâ&#x20AC;&#x2122; health care system, suggesting it would be broken until providers begin talking to each other and put the patient at the core of what they do. â&#x20AC;&#x153;You have to have an economic model thatâ&#x20AC;&#x2122;s fundamentally different from the one you have with the goal of making people healthier, economically productive and viable and happy,â&#x20AC;? Mr. Bertolini said during his talk. â&#x2013;

CRAINâ&#x20AC;&#x2122;S CLEVELAND BUSINESS 17

CLINIC UNVEILS TOP 10 MEDICAL INNOVATIONS The Cleveland Clinic on Oct. 16 unveiled its list of the top 10 medical innovations expected to impact patient care over the next year. â&#x2013; No. 1, Retinal prosthesis system: After two decades of development and testing, the U.S. Food and Drug Administration approved a new technology to treat severe cases of retinitis pigmentosa, a degenerative eye disease. The new technology combines a surgically implanted retinal prosthesis, videocamera-enabled glasses and a video-processing unit worn at the waist or carried. â&#x2013; No. 2, Genome-guided solid tumor diagnostics: Genomics, or at the study of groups of genes and how they interact in cells, will be increasingly used to analyze the genes in a personâ&#x20AC;&#x2122;s cancer tumor. The analysis can predict the aggressiveness of the cancer, which can reduce the number unnecessary cancer treatments. â&#x2013; No. 3, Responsive neurostimulator for intractable epilepsy: The FDA recently backed an implanted neurological device that can significantly reduce the frequency of epileptic seizures. The device is implanted under the skin of the skull and records electrocorticographic patterns. The device then delivers short electrical pulses to interrupt triggers before any seizure symptoms occur. â&#x2013; No. 4, Direct-acting antiviral oral hepatitis C drugs: The first all-oral hepatitis C treatment â&#x20AC;&#x201D; Sofosbuvir â&#x20AC;&#x201D; is moving through the final stages of FDA approval. The medicine would be the first of a new generation of drugs called directacting antivirals, or DAAs. Oral DAAs have the potential to improve what can be considered a very difficult treatment regimen that can take up to 48 weeks and requires injections

of interferon, a drug that can be difficult to tolerate. â&#x2013; No. 5, Perioperative decision support system: The new anesthesia management system combines the latest in computer technology and microelectronics. It keeps tabs on a patientâ&#x20AC;&#x2122;s vital signs and all the data that can be gathered while a patient is under anesthesia during surgery. â&#x2013; No. 6, Fecal microbiota transplantation: The practice of transplanting feces from a healthy person into the colon of someone else has become an effective treatment for intestinal infections. â&#x2013; No. 7, Relaxin for acute heart failure: Serelaxin, a synthetic version of a naturally occurring hormone, can improve acute heart failure systems after being infused over a 48-hour period following heart failure or heart attack. â&#x2013; No. 8, Computer-assisted personalized sedation system: This new system can deliver minimal-to-moderate sedation during a colonoscopy procedure without an anesthesiologist. â&#x2013; No. 9, TMAO assay: novel biomarker for the microbiome: Scientists have discovered what could be an important biomarker for heart disease that could be used as a screening tool to predict risk of heart attack, stroke and death. It is called TMAO, or trimethylamine N-oxide, and is a microbial byproduct of intestinal bacteria. â&#x2013; No. 10, B-cell receptor pathway inhibitors: B-cells, which are the immune cells in the body responsible for producing antibodies to fight infections, can become cancerous. New, targeted cancer therapies can help stop cancer progression by blocking signals that tell cancer cells to grow and divide uncontrollably. â&#x20AC;&#x201D; Timothy Magaw

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Innovative visions often start at university level Northeast Ohio institutions play ‘very critical’ role in generating ideas By TIMOTHY MAGAW tmagaw@crain.com

niversity of Akron president Luis Proenza likes the word “innovation.” Not as a buzzword, he insists, but rather as the driving force behind the way the University of Akron does business and educates its students. After all, the word “innovation” appears in the university’s latest strategic plan — Vision 2020 — more than a dozen times. Innovation is in the university’s DNA, if you will. Dr. Proenza likes the word so much he touted it in one of the university’s regional Super Bowl commercials. The university even launched a so-called “innovation campus,” a research park of sorts where university researchers can mingle with the business community to launch new ventures. “The bottom line is that universities play a very, very critical and essential role in the innovation ecosystem,” Dr. Proenza said. Dr. Proenza has long been an advocate of higher education serving as the catalyst for innovation. Universities, for one, are where ideas can blossom into fullfledged business ventures. In addition, universities are where students are encouraged to think creatively and formulate ideas that can shape tomorrow’s economy. “If you are able to innovate across the full spectrum of our dis-

UNIVERSITY OF AKRON

From left, Matt Becker, associate professor of polymer science at the University of Akron, is shown in January 2011 at the school’s National Polymer Innovation Center with John Fernandez, former assistant director of the U.S. Department of Commerce for Economic Development; Akron president Luis Proenza; and Frank Douglas, president and CEO of the Austen BioInnovation Institute in Akron. ciplines and the full spectrum of our community, you create the basis for economic success that without which, we would flounder and all whither away,” Dr. Proenza said. The University of Akron, of course, isn’t alone in its efforts to drive innovation. A bevy of Northeast Ohio’s colleges and universities have stressed innovation in recent years, with many launching programs with innovation at their core. Baldwin Wallace University

in Berea boasts its own Center for Innovation & Growth. Kent State, meanwhile, launched its own Center for Entrepreneurship and Business Innovation. On a very macro level, academics view higher ed’s focus on innovation as being driven by the need for the United States to be more competitive on a global scale. The country, after all, isn’t the only superpower in the world generating new ideas and technologies.

Also, companies simply aren’t looking to hire graduates interested only in taking marching orders. “Companies are saying they can’t wait for a new employee to be 40 years old until they contribute a new idea,” said John Lanigan, the director for BW’s center and a retired executive vice president and chief marketing officer for BNSF Railway Co., a Berkshire Hathaway company headquartered in Fort Worth, Texas. “They need them to contribute a new idea when they’re 22 years old.”

Teaching innovation An April 2013 study from the Association of American Colleges and Universities indicated that 95% of employers say they give hiring preference to college graduates with skills that will “enable them to contribute to innovation in the workplace.” Also, employers say skills such as critical thinking and problem solving are more valuable than someone’s field of study. Academics like BW’s Mr. Lani-

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gan insist that it’s possible to teach students to think like innovators. For instance, he said part of the university’s role is to instill that spirit of innovation. BW, for one, exposes its students to entrepreneurs through guest lectures in hopes of giving them the “courage to be innovative,” according to Mr. Lanigan. “A lot of it is getting them in that mind-set and intentionally talking about what it means to be innovative and how you can think of new ideas,” Mr. Lanigan said. “New ideas aren’t always revolutionary, they’re evolutionary. Apple didn’t invent the cell phone. They just took it to a whole new level.” Case Western Reserve University’s Weatherhead School of Management recently launched a department its leaders suggest will inspire students to work creatively to solve problems. Weatherhead’s new Department of Innovation and Design incorporates faculty from the former marketing and policy studies and information systems departments. Richard Buchanan, chairman of the new department, said employers are looking for people who can cross disciplines, think creatively and go beyond “best practices.” Students will interact with practitioners from outside typical business circles, such as product designers and architects. The idea is to demonstrate the creative problem-solving process they experience in their fields in hopes of translating it to the business world. “This is a department that is now oriented to innovation, studying it and creating it,” Dr. Buchanan said. Sergey Anokhin, who leads Kent State’s Center for Entrepreneurship and Business Innovation, said that business schools haven’t always promoted creative thinking. It wasn’t until the 2000s, for example, when higher education really embraced the idea of entrepreneurship as a specific field of academic study. “There’s been a loss of belief in corporate America to an extent,” Dr. Anokhin said. “You can’t rely on a 30-year career with a company, so many are taking entrepreneurship as a second major as a fallback. They’re becoming masters of their own fate.” ■

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CRAIN’S CLEVELAND BUSINESS 19

Ideas: Creative ways to keep creating continued from PAGE 15

Allow your staff to take risks and try new ideas. “Years ago where we would have sat around and have 20 hours of committee meetings about what could possibly go wrong, in an innovative culture you say, ‘Give it try,’” said Ms. Hakala-Ausperk, whose organization encompasses libraries in the northeast corner of the state. “For a long time you couldn’t eat or drink in the library, and at one particular library we decided it wasn’t really making our customers comfortable, especially those who were there for hours and hours. We decided to allow people to do it, and that library became one of the most comfortable places to go, especially for teens and adults who were studying.” ■ Vikki Nowak, vice president, Nottingham Spirk, Cleveland “We solve problems that multibillion-dollar corporations can’t solve, and that’s really hard to do,” said Vikki Nowak, vice president at Nottingham Spirk. “Living in ambiguity is the No. 1 key attribute we are looking for because innovation is really unknown in the beginning. Innovation is just a messy process,” she said. “It’s not always easy to see what the big idea is so you have to live in this really uncomfortable space a long time before you come across that idea. We look for people who are naturally comfortable with finding their own way.” Nottingham Spirk, a product development firm, mines talent through internships with the Cleveland Institute of Art and Case Western Reserve University and looks for experienced professionals who have a broad range of experiences. “We have 100 seats in this building, we have 70 people now and we want to make sure we hire people who can apply various skill sets across the innovation process,” she said. “We interviewed someone (recently) who had 10 jobs in the last 17 years. To a normal employer, that resume probably wouldn’t get past the HR desk, but to us, as long

as those moves were justified, that is actually interesting to us. It brings diversity of experience into these walls.” Nottingham Spirk then embraces a simple concept that has been a winning formula for fostering an incredible can-do culture that is supportive and safe. “We get out of the way. And by getting out of the way that leads to a significant amount of empowerment and individual power,” she said. “That’s the secret to our sauce. There is no organizational chart, nobody reports to anybody. There are no boundaries, except those brought to us by our clients.” In addition, the firm offers a collaborative work space and team environment where people are not afraid to fail. “Because you are not asking for permission, when you do fail, you can adjust and learn and apply that learning to the next thing,” she said. One new benefit the company started offering this year was unlimited paid time off. “What creative people tend to do when they are on a roll is they will work 24 hours a day sometimes multiple days in a row. We have to allow for rest and relaxation and freedom to not be worked to death,” she said. “You don’t put a racehorse in a race every day. I can tell the difference. People certainly still work through the night when they need to, but I see happier people.”

■ Erika Yesko, vice president of entrepreneurial talent, JumpStart Inc., Cleveland Erica Yesko, who has degrees in psychology and positive organization development, offered this hit list for organizations looking to foster a creative, innovative culture: Collaboration: “When you can put people in an environment where they are sharing ideas freely and asking more questions than making statements that’s really where you start to draw ideas out of individuals or most importantly how you amplify the smallest voice in the room,” she said. Not only does this promote a broader, richer

conversation, it enables a company to align and move forward more quickly. “If you’re a company that wants to innovate and get to market quickly, getting people aligned around an idea to move forward makes a lot of sense.” Transparency across the organization: Transparency in terms of thought and work — make decisions visible and work visible and people can more freely lend their expertise where it makes sense. “This lessens your chances of missing an important opinion or an important piece of feedback from somebody,” Ms. Yesko said. “Being transparent really drives an atmosphere of trust.” An environment that accepts and encourages creativity and fun: “It’s a scientific fact that when we are in a positive state of mind our brains can make neuro-connections more easily,” she said. “So this idea of fun puts people in the right state of mind chemically and biologically to be able to create.” A shared vision across the organization: This means engaging the hearts and minds of your employees. “In order for people to really feel inspired, which really leads to creativity and innovation, their heart needs to be in it,” she said. “They have to be completely bought into the vision and feel inspired in that vision.” Diversity in staff, expertise and opinions: Simply put, the more diverse the team, the more creative the output. ■ Brenda Kirk, vice president of strategy, Hyland Software, Cleveland Applicants at Hyland are immediately hit with an innovation challenge. “In the hiring process, it’s particularly challenging to try to identify great innovators through the traditional resume and electronic application,” Hyland’s Brenda Kirk said. “We ask every single applicant to write a poem. It can be good, bad or ugly but it’s a different way to tap into that creativity.” Ms. Kirk said a lot of time is spent during the interview process to find

BOB PERKOSKI

LeanDog’s offices are in the former Hornblower’s barge tied to the USS Cod submarine in downtown Cleveland. the best fits for Hyland’s culture. “Innovation is central to who we are and what we do. We are not an organization that is going to give you a playbook that tells you every day what you’re going to show up and do,” she said. “By our very nature, we have to have people who are very inspired and energized by being innovative and by being entrepreneurial; that’s part of the DNA of the organization.” With that in mind, Hyland’s ideal candidates include the kinds of people who want to develop software on Saturday mornings. “They are thinking about cool ideas and new things all the time,” she said. In 2009, Hyland embarked on a formal program to try to mine those new ideas from its 1,700 associates with forums, challenges and a speech series to vet highlevel concepts as a group “It’s a catalyst for positive change across the organization even if a particular idea doesn’t move forward,” she said. “We spend so much time, money and energy on our most important asset which is our people — not to tap into it would just be such a waste of an incredible resource that we are so lucky to have.” In addition, Hyland fuels R&D with 15% of its revenues to innovate new products.

■ Jon Stahl, president, LeanDog, Cleveland “Changing cultures is what we do,” said Jon Stahl from his floating office in the former Hornblower’s barge tied to the USS Cod submarine in downtown Cleveland. “We tear down cubicles. We make everybody fully accountable. We

get our minds and our ideas out of the digital world and physically up on the wall. We teach companies how to have an incredible amount of collaboration and actually have fun doing it.” Mr. Stahl says fun is the most critical element to fostering innovation and attracting the right people. “We know that you can’t really have innovation unless you are in a fun, creative environment. That’s why we work on a 120-year-old boat with a rock climbing wall, and why we have dogs and boat docks and kegs and lunches provided for our employees,” he said. “It has to come from the top down. If the people hiring don’t exude fun and creativity, they aren’t going to be able to attract people that want that kind of environment.” The employees of LeanDog start each day in a circle talking about what they accomplished the day before and their plan of work for the day. Each week, they join together for a retrospective to discuss what is and isn’t working. “We have really fast feedback groups because that’s how we can learn,” he said. “Learning fast is how you get to market fast.” Instead of a command-andcontrol environment, LeanDog preaches and embraces the concept of servant leadership. “My job is to remove roadblocks for people to do the best that they can do, not to tell them what to do,” he said. “We don’t have offices. We try not to have hierarchy. And we empower and trust our people. If we told them what to do, they wouldn’t experiment and without experimentation, you don’t have innovation.” ■

Inventions: America Invents Act has fueled surge in IP work continued from PAGE 15

“It was driven by the consistent demand for IP services in our region, where we have a lot of companies that are innovators,” he said. “In the generation of patents, Ohio consistently ranks in the top 10 of states in the country.” Squire Sanders concentrates in the patent area — the most popular of the four-legged stool of intellectual property, which also includes trademarks, copyrights and trade secrets, Mr. Auvil said. “Without question IP practices across Ohio and the U.S. are growing,” said Mr. Watkins, adding that his firm is presently looking to fill as many as three positions. Patent applications and trademark applications remain the firm’s bread and butter and span areas such as steel processing, tire manufacturing, nano particles, welding equipment, appliances and information technology. “We are experiencing growth in both size and sophistication of the work,” he said. “Businesses are continuing to place a high importance on both recognizing and pro-

tecting their competitive edge; whether that competitive edge is an innovation coming out of the company’s engineering and research departments or whether it’s a trade secret way of doing something better than the competition, or maybe it’s simply branding the company’s products and services in a way to distinguish them.” Five IP attorneys have been hired in the last year at Calfee. “I’ve been doing this for over 25 years and I’ve never seen us grow like this. It’s really been over the last two to two and half years, the business has exploded because changes in the patent laws and attracting new clients. We are still actively looking to hire more attorneys,” said John S. Cipolla, chairman of the firm’s Intellectual Property group, which represents long-time innovators such as Master Lock, Moen and Invacare Corp. “A lot of companies are focusing on innovating a lot more than they had in the past.”

No slowing down About 90% of Calfee’s IP de-

partment is busy doing patent work: obtaining patents that protect client innovations; helping clients avoid the intellectual property of others; defending clients sued for patent infringement; and litigating on behalf of clients who have had patent rights infringed, Mr. Pejic said. “Having a department that’s got 30-plus patent attorneys really allows us to provide a pretty sophisticated level of counseling that our clients find unique and has contributed to major growth in the last couple of years,” he said. His firm tends to work in traditional Midwest industries such as consumer goods, building materials, chemistry and medical devices. Andrew Spriegel, patent attorney and owner of Spriegel & Associates in Hudson, specializes in patent and trademark work as well product development. “We help establish brands and help commercialize their products, whether their products are patented or not,” said Mr. Spriegel, who was the technical

lead and inventor on an Invacare bed. He went to law school in his 40s and now generates many of his new clients from advertising on his green Smart car. “We’re very different than your traditional law firm. I have no trouble getting work, but we do not take on work where we do not feel the idea, product or business will be successful. We believe this longterm view is the best practice.” Final implementation of the America Invents Act, passed by Congress in 2011, dramatically changed patent law and fueled significant work in the first quarter of 2013 and forward, Mr. Watkins said. “It effectively converted the U.S. patent system from a first-to-invent system to a first-to-file system,” he said. “There was a heavy emphasis on taking technology that might be on your shelf and getting an application on file, and we haven’t seen that work slow down.” The act also created several new mechanisms for challenging a patent that might not have been granted if the U.S Patent Office

had all of the relevant information at the time of initial examination. “We are seeing a significant interest by clients in challenging patents issued to a competitor,” Mr. Watkins said.

Not to mention … Affordable global protection of intellectual property rights and patent-assertion entities — also known as patent trolls — are two of the top issues facing the practice area. “A patent-assertion entity is a company that is formed for the purpose of monetizing intellectual property though licensing and litigation,” said Mr. Auvil. These entities are third parties that buy patent rights from original inventors. Patent litigation is extremely complex and can cost millions, he said. “Lawsuits brought by patentassertion entities have been a phenomenon for 10 years, but in the last three years this has been one of the biggest growth areas for most law firms that have a litigation practice.” ■

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CRAINâ&#x20AC;&#x2122;S CLEVELAND BUSINESS

WWW.CRAINSCLEVELAND.COM

OCTOBER 21 - 27, 2013

HIGHEST PAID CFOS-PUBLIC COS. RANKED BY 2012 COMPENSATION

Name Company Rank Title

Total compensation 2012 2011

% change

Salary

Bonus

Stock awards Option awards

Nonequity incentive plan

Change to pension value

All other compensation

Richard H. Fearon/Eaton vice chairman, chief financial and planning officer

$6,416,668 $5,067,285

26.6

$703,566

$584,325

$622,692

$647,034

$971,389

$2,887,662

Darren R. Wells(1)/Goodyear Tire & Rubber Co. executive vice president, CFO

$4,824,833 $4,774,222

1.1

$555,000

$185,136

$529,646

$2,674,733

$846,993

$33,325

Glenn A. Eisenberg/Timken Co. executive vice president, finance and administration

$4,391,642 $5,174,959

(15.1)

$638,840

$582,624

$1,348,005

$1,689,000

$133,173

Jon P. Marten/Parker Hannifin Corp. CFO, executive vice president, finance and administration

$3,665,352 $3,082,765

18.9

$488,925

$633,425

$436,598

$676,401

$1,277,421

$152,582

Sean P. Hennessy/Sherwin-Williams Co. senior vice president, finance; CFO

$3,185,104 $2,468,811

29.0

$601,388

$844,943

$693,428

$809,000

$236,345

Robert G. O'Brien/Forest City Enterprises Inc. executive vice president, CFO

$3,161,111 $3,943,808

(19.8)

$550,000

$1,365,905

$366,661

$800,000

$9,170

$69,375

Brian C. Domeck/Progressive Corp. vice president, CFO

$2,470,255 $2,289,738

7.9

$458,846

$1,357,024

$642,385

$12,000

Mark O. Eisele/Applied Industrial Technologies Inc. vice president, CFO, treasurer

$2,220,125 $1,834,028

21.1

$438,000

$331,728

$104,153

$263,326

$1,037,615

$45,303

Vincent K. Petrella/Lincoln Electric Holdings Inc. senior vice president, CFO, treasurer

$2,214,320 $2,215,986

(0.1)

$409,000

$256,319

$264,424

$815,120

$435,306

$34,151

David J. Oakes/DDR Corp. president, CFO

$2,112,093 $2,013,835

4.9

$475,000

$757,657

$252,550

$593,750

$33,136

Jeffrey L. Rutherford(2)/Ferro Corp. vice president, CFO

$1,906,198 NA

$322,500

$325,000

$1,033,439

$208,083

$17,176

Mark R. Belgya/The J.M. Smucker Co. senior vice president, CFO

$1,896,849 $1,586,409

19.6

$410,000

$8,200

$633,750

$199,900

$622,928

$22,071

Bradley C. Richardson/Diebold Inc. executive vice president, CFO

$1,879,149 $2,143,017

(12.3)

$520,032

$722,895

$423,200

$213,022

Gregory A. Thaxton/Nordson Corp. senior vice president, CFO

$1,871,310 $1,685,039

11.1

$345,000

$290,119

$224,674

$325,499

$653,505

$32,513

Terrence E. Bichsel/FirstMerit Corp. executive vice president, CFO

$1,810,325 $1,707,727

6.0

$397,375

$429,989

$360,000

$568,978

$53,983

Christopher M. Hix/OM Group Inc. CFO

$1,648,710 NA

$430,000

$628,422

$304,798

$241,740

$43,750

Michael E. Hicks/Omnova Solutions Inc. senior vice president, CFO

$1,588,501 $895,959

77.3

$392,500

$299,205

$448,607

$429,386

$18,803

Richard J. Diemer Jr.(3)/PolyOne Corp. senior vice president, CFO

$1,553,826 NA

$339,635

$537,100

$185,500

$381,885

$109,706

Brian C. Witherow/Cedar Fair LP executive vice president, CFO

$1,352,204 $388,853

247.7

$346,527

$612,506

$87,507

$286,427

$19,237

Andrew J. Rebholz/TravelCenters of America LLC executive vice president, CFO

$1,226,000 $1,174,000

4.4

$300,000

$490,000

$436,000

John D. Grampa/Materion Corp. senior vice president finance, CFO

$1,172,092 $1,208,323

(3.0)

$412,946

$306,338

$157,994

$100,408

$189,894

$4,512

Michael F. Biehl/Chart Industries Inc. executive vice president, CFO, treasurer

$1,109,857 $1,119,111

(0.8)

$365,000

$276,805

$207,933

$155,980

$104,139

Joseph J. Levanduski/A. Schulman Inc. vice president, CFO, treasurer

$1,020,566 $364,485

180.0

$374,917

$481,188

$140,366

$24,124

Source: Company proxy statements. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues. The Book of Lists and individual lists are available to purchase at www.crainscleveland.com. (1) Effective Dec. 1, Laura K. Thompson, vice president of finance, North America, will succeed Mr. Wells as executive vice president and chief financial officer. Mr. Wells has been named president of Goodyear's Europe, Middle East, and Africa (EMEA) business unit. (2) Mr. Rutherford was hired on April 2, 2012. (3) Mr. Diemer was hired in March 2012.

RESEARCHED BY Deborah W. Hillyer

HIGHEST PAID CFOS-NONPROFIT RANKED BY TOTAL COMPENSATION

Name Title Rank Organization

Address, phone, website

Total Base Bonus and compensation compensation incentive

Other

Deferred compensation

Nontaxable benefits

Assets ($)

Description

990 filing year

Michael A. Szubski treasurer, CFO University Hospitals Health System Inc.

11100 Euclid Ave. Cleveland 44106: (216) 767-8007 www.uhhospitals.org

1,020,294

585,430

249,190

3,136

156,995

25,543

1,508,339,000

Health care

2011

Steven C. Glass treasurer, CFO Cleveland Clinic Foundation

9500 Euclid Ave. Cleveland 44195: (216) 444-2200 http://my.clevelandclinic.org

967,290

860,407

64,099

24,500

18,284

6,349,892,963

Health care

2011

John F. Sideras senior vice president, CFO Case Western Reserve University

10900 Euclid Ave. Cleveland 44106: (216) 368-2000 www.case.edu

503,823

392,583

50,000

4,653

43,764

12,823

2,645,405,127

Higher education

2011*

Michael P. Trainer treasurer, CFO Children's Hospital Medical Center of Akron

One Perkins Square Akron 44308: (330) 543-1000 www.akronchildrens.org

389,833

353,766

2,265

17,150

16,652

670,261,351

Health care

2011

Brian S. Kenyon executive vice president, CFO The Rock and Roll Hall of Fame and Museum Inc.

1100 Rock and Roll Blvd. Cleveland 44114: (216) 781-7625 www.rockhall.com

353,713

258,662

43,000

22,590

7,350

22,111

99,644,317

Museum

2011

Ronald R. Watts vice president for finance Oberlin College

101 N. Professor St. Oberlin 44074: (440) 775-8400 www.oberlin.edu

336,981

261,924

37,313

37,744

1,079,429,732

Higher education

2011*

Mark D. Wright CFO Aultman Health Foundation

2600 Sixth St. S.W. Canton 44710: (330) 452-9911 www.aultman.org

320,503

303,448

577

7,350

9,128

310,198,352

Health care

2011

Kate A. Asbeck senior vice president, CFO Cleveland Foundation

1422 Euclid Ave., Suite 1300 Cleveland 44115: (216) 861-3810 www.clevelandfoundation.org

281,363

244,516

2,322

18,412

16,113

1,496,182,265

Grantmaking foundation

2011

Barry Reis senior vice president, CFO Jewish Federation of Cleveland

25701 Science Park Drive Cleveland 44122: (216) 593-2900 www.jewishcleveland.org

278,178

240,500

5,264

12,250

20,164

416,168,966

Source: Form 990 SEC filings. *2011 filing year with fiscal year end of 6-30-2012. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues.

Social services 2011*

RESEARCHED BY Deborah W. Hillyer

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10/18/2013

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Page 1

OCTOBER 21 - 27, 2013

CRAIN’S CLEVELAND BUSINESS

WWW.CRAINSCLEVELAND.COM

Mergers: Profession goes through ‘cycle’ every couple of decades “In this business, if you don’t grow, you die. Top talent will only go to firms that are growing because growing firms have the ability to make new partners, and growing firms are typically more profitable.”

continued from PAGE 1

“What that’s telling me is mergers and acquisitions of the larger CPA firms (are) going to continue at the record pace they’re at,” said Mr. Koltin, CEO of Koltin Consulting Group Inc., a Chicago-based consultant to many of the nation’s Top 500 accounting firms. Already, Mr. Koltin said, M&A activity has become “absolutely unprecedented.” “And I think we’re at just the tip of the iceberg,” he said. Northeast Ohio firms are among those crunching numbers for deals that involve themselves. “In the past five years, we are consistently having conversations with three to five strategic firms that are smaller than we are about the prospects of getting together, and we are consistently receiving inquiries from firms much larger than us who would see us as being a very strategic combination for them,” said Randy Myeroff, chairman and CEO of Cohen & Co., a Cleveland accounting firm with annual revenue of $34 million. Just last week, Skoda Minotti in Mayfield Village announced its fourth acquisition of this year, double the number of deals it did in 2012. Chairman Greg Skoda anticipates the business advisory firm’s revenues on an annualized basis will reach roughly $39 million by year-end 2013 — double what they were in 2010 or 2011. “It’s about as heated an acquisition market as it’s ever been right now,” Mr. Skoda said. “The numbers of acquisitions that are being done around the country are significant, and firms are growing really rapidly.” According to Accounting Today’s 2013 list of the Top 100 firms, the 20th largest accounting firm in the country had annual revenue in 2012 of $185 million. That’s double the $91.7 million in revenue reported by the 20th largest firm in the publication’s 2003 list. “There’s a lot more larger firms, and in order for them to grow and keep pace and keep talent, you have to look to mergers,” Mr. Myeroff said. “You can’t bring in that much revenue through organic growth.”

– Allan D. Koltin, CEO, Koltin Consulting Group Inc.

Grow or die As is the case in many professions, merger deals are increasing because the age of baby boomer top executives is rising. Probably two out of three deals for accounting firms are driven by succession needs, Mr. Koltin said. However, Mr. Koltin said he has noticed in 2013 “a clear change in why mergers are happening.” “We’re seeing mergers between firms where there is no succession planning issue or problem,” he said. “Rather, they’re simply saying that bigger is better.” Growth achieved through increasing revenues from existing operations will be limited, at best, to 3% to 5% a year for the foreseeable future, Mr. Koltin said. So, firms are turning to strategic acquisitions. “In this business, if you don’t grow, you die,” he said. “Top talent will only go to firms that are growing because growing firms have the ability to make new partners, and growing firms are typically more profitable.” The Sept. 1 acquisition by Skoda Minotti of a forensic accounting firm reflects a growing desire among firms to offer specialized services. “The companies today which are our clients and prospects are more complex than they used to be,” Mr. Skoda said. “In the ‘80s and the early ‘90s, if you’re in the middle market, they predominantly did most of their business in Cleveland, Ohio. The services they needed were less complex than they are today. “Today, if you’re going to be a service provider that’s going to help them build and grow their business as opposed to doing tax returns and

financial statements … you’ve got to have more expertise and you’ve got to have more resources to meet their needs,” he said. “If you’re not in a position to provide services to those folks, you’re going to lose clients.”

Hitting the road Geographic expansion is another driver of mergers. Skoda Minotti’s recent deals for a trio of Tampa, Fla., firms and the scheduled opening of a new office there Nov. 1 mean the firm can serve its Florida clients from a Florida office, Mr. Skoda said. The three acquisitions done by Solon-based SS&G Inc. in less than three years were motivated by the firm’s desire to enter the Chicago market, where it is booking new clients and now employs 90 people, said Bob Littman, managing director and CEO. SS&G has its eyes on additional expansion in New England, the Southeast and the West Coast, he said. Howard, Wershbale & Co., a firm based in Beachwood, expanded in Columbus through a 2010 merger and come Jan. 1 expects to close its merger with Deimling Forbes in

Mentor to expand into Lake and Geauga counties, said Stephen E. Stanisa, president and CEO. And Cohen & Co. is in talks with four firms, according to Mr. Myeroff — three local and one whose location he wouldn’t divulge. Client loyalty, geographic positioning and “really significant expertise in a certain area” all are reasons for those conversations, he said. So is the need for talent. “People in the Midwest are very loyal,” he said. “It’s not that easy to get lateral hires. We rely on that (loyalty) on our end, and we face it on the other end. The answer is, you can’t do it (recruit talent) fast enough.” Local firms will continue to buy, sell and merge, anticipates James Sprague, a partner with Independence-based Walthall, Drake & Wallace LLP. It closed its most recent merger with Frank, Seringer & Chaney Inc. on Nov. 1, 2012, expanding into Amherst and Wooster. “There are quite a few firms in the area who have really good folks running their businesses, but they’re approaching that age when they want to slow down,” Mr. Sprague said. “There’s a desire to

cash out.”

The circle of life Though M&A is up, the number of firms known to the American Institute of Certified Public Accountants has stayed pretty steady at 44,000 because for each deal done, there are professionals who splinter off and form sole proprietorships, according to Mark Koziel, the institute’s vice president of firm services and global alliances. Some peel off because they don’t achieve the status at the combined firm they might have wanted, and others don’t like the culture changes, Mr. Koziel said. Most people in the field say the increased merger activity is positive for the profession and its clients because, as firms grow, so, too, do their capabilities and the opportunities for their employees. Mr. Koziel perceives the trend more neutrally. “It’s the circle of life, right?” he said. “I could show you the list of the Top 100 firms from 1974, and you wouldn’t recognize the majority of names on that list. Every couple of decades or so, the profession goes through the cycle.” ■

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20131021-NEWS--22-NAT-CCI-CL_--

10/18/2013

2:17 PM

Page 1

CRAIN’S CLEVELAND BUSINESS

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OCTOBER 21 - 27, 2013

Worthy: Competition in 11th round of historic tax credits is fierce continued from PAGE 1

“It’s a prerequisite,” Mr. Viny said. According to a resolution adopted by Cleveland City Council that supports the partnerships’ application for the tax credit, the Worthington project would consist of 75 rental apartments, indoor heated parking spaces in its basement and 14 condominiums atop the building. The two floors of condos would be constructed so they are not visible from surrounding streets, a feature that would let the rest of the project benefit from federal and state tax credits as a qualifying adaptive reuse of the former hardware warehouse. Some of the commercial space created in the renovation would be retail and would face Johnson Court. Although best known for its sizable office and office/warehouse holdings in the southern suburbs, Dalad Group through Old Cleve-

Contact: Phone: Fax: E-mail:

land Properties helped pioneer in the 1980s the rejuvenation of the Warehouse District west of Public Square as a location for downtown living and mainstream offices. It developed the Hat Factory apartments, 1235 W. Sixth St., and the Hoyt Block office building, 700 W. St. Clair Ave., which it still owns. A partnership led by Old Cleveland bought the Worthington Building in the 1980s from the former George Worthington Co. hardware company as part of a complex of 2.5 million square feet of properties. It initially planned a massive redevelopment project, but later sold some buildings to other developers for loft apartments and sold the Root-McBride Building, 1240 W. Sixth, to the Greater Cleveland Regional Transit Authority for its headquarters. As the city’s Warehouse District took off and residential living downtown became a reality rather than a civic quest, the Worthington

Denise Donaldson (216) 522-1383 (216) 694-4264 DDonaldson@crain.com

Building — the largest building left to be redeveloped in the Warehouse District — and the courtyard beside it both languished. Over the years, several developers have tried to buy the building, but failed. Mr. Viny said various factors now are prompting his firm to pursue the project itself. “We have unique conditions today: state and federal tax credits, city and county support, a low interest rate environment and a hot residential market,” Mr. Viny said. “It’s not clear how long all those tools and conditions will be available. Rather than find that rates rise and programs change and we’re out of the cycle for a decade, we thought we should explore developing the project ourselves.”

Plans for ‘a special place’ Part of the project would involve upgrading a drab, unused courtyard framed by buildings facing

West Sixth and West Ninth streets to the east and west, and West St. Clair Avenue and Johnson Court to the south and north. Offices, apartments and nightclubs on the block overlook the weed-covered, brickstrewn courtyard. Designs for the courtyard are in flux, although the goal will be to transform it into a showpiece. “It won’t be left in the same condition,” Mr. Viny said. “I do think it’s a special place. I hope it’s one of the spaces that, when you have friends in town and show off the city, you would take them to see it.” The Worthington Building is significant to the Warehouse District, according to Tom Yablonsky, executive director of the Historic Warehouse District Development Corp. and a vice president of Downtown Cleveland Alliance, a nonprofit that maintains and markets downtown. “It’s the largest space left to be renovated in the Warehouse Dis-

REAL ESTATE AUCTION

CHARTWELL AUCTIONS | NOV. 14

SW OHIO SHOPPING CENTERS & OFFICE CAMPUS ALL OFFERED ABSOLUTE, REGARDLESS OF PRICE! OUT-OF-STATE RETIRING SELLER ORDERS IMMEDIATE SALE

INCREDIBLE VALUE-ADDED OPPORTUNITIES! SPRINGFIELD CROSSING

1370-1416 W. FIRST ST., SPRINGFIELD, OH 45504

20,332 SF on 2.5 acres located across Hwy. 41 from Walmart, Lowes, & Target. Current occupancy is 90% with $250,000 NOI. Tenants include: Pizza Hut, Subway, National Cash Advance, Capital Cleaners and more. Terrific Investment Opportunity!

SUGGESTED OPENING BID: $250,000 SHOPPES @ HUBER HEIGHTS

6007-6119 BRANDT PIKE, HUBER HTS., OH 45424

54,562 SF on 4.5 acres, NE Dayton, 1.5 miles South of I-70 near WrightPatterson Air Force Base. Current occupancy is 40% with $174,406 NOI. Projected NOI @ 100% occ. $382,000 ($7.00/SF base). Tenants include: T-Mobile, H&R Block, Subway, Papa Johns Pizza and more. Incredible opportunity for user/investor or investor to increase occupancy and add value.

trict, with some 200,000 square feet of space,” Mr. Yablonsky said. “It also contributes to the overall character of the historic district. It’s a unique project.” But, as Mr. Viny indicated, securing a state historic tax credit is the linchpin for proceeding with a makeover, and competition is intense for the current round of those credits, the 11th round to date. With 43 applications for 56 historic buildings pending, developers are seeking a total of $92 million in tax credits while only $30 million in credits is available, according to Stephanie Gostomski, a spokeswoman for the Ohio Department of Development Services. The tax credits, along with government subsidies, are important for the proposed projects because they help developers meet tighter lending standards since the housing market collapse and Great Recession. ■

Copy Deadline: Wednesdays @ 2:00 p.m. All Ads Pre-Paid: Check or Credit Card

COMMERCIAL PROPERTY

MOVING SALE! EVERYTHING MUST GO!! ABSOLUTE AUCTION Industrial Machinery, Equipment and Trailers Auction October 31st-10AM: Cleveland, OH

1 Story Office Building

Rosen & Company Inc. Buddy Barton, Auctioneer

216-469-6170

Preview week of sale from 10am-3pm and day of sale 8am-10am. 4501 Lakeside Ave, Cleveland, Ohio 3 large warehouses, moved into one location. Partial Inventory!! Cargo Mate 24’ x 7’ trailer(double door, tandem, enclosed trailer), 12’ x 8’ enclosed trailer, General Cargo 12’ x 5’9” trailer (single axle, ramp/side door, enclosed trailer), Zero manufacturing industrial dust collector, Metora VMB 280 band saw, Spanco 2 ton Gantry, K&W Rotary drill (4’6” type E26, Serial # 18732), (2) Alfa Lavel Budzar Ice chiller machines, Industrial steel stairs, Atlas Copco Air Compressor (GA18FF Rotary Screw GA18, 2003, 25hp), Sheldon Lathe, Clausing 10” Lathe, Miller 340a ac/dc gas welder, Everett Chopsaw (#GL42381), Clark 8000lb Forkilft (Single mast, dually fronts, Lp, side shifters, tilt, C500y80), (2) Vacuum forming machines, CNC router and table, misc tooling, ladders, gangboxes, toolboxes, scrap pcs, pallet jacks and More coming!

For terms and pictures see: www.BIDROSEN.com Buddybartonauctions.com

216-990-1831 • 1-877-Bid-Rosen E-MAIL US YOUR AD DDonaldson@crain.com

SUGGESTED OPENING BID: $200,000

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Ag Real Estate Group, Inc., 216-504-5000 www.agrealestategroup.com

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List your Industrial, commercial, luxury property or Retail Space Here! Crain’s Cleveland Business’ classifieds will help you fill that space.

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KEMPER MEADOW OFFICE PARK

1251-1259 KEMPER MEADOWS DR., FOREST PARK, (CINCINNATI), OH 45240

78,062 SF on 10 acres. Five steel & glass bldgs. of 15,000+ SF in modern one-story landscaped campus. Currently 22% occupied w/$147,623 Gross Annual Income. Projected NOI @ 100% occ. $468,372 ($6.00/SFRESERVE base). Excellent opportunity for corporate headquarters, trade $775,000 schools,PUBLISHED religious, medical and more. PRICE: 1 mile South of I-275, NW Cincinnati.

BIDDING TO COMMENCE $525,000 (ONLY $3/SF) SUGG. OPENING BID:AT: SELLER FINANCING @$250,000 6%

SPRINGFIELD PLACE

1035-1068 UPPER VALLEY PIKE, SPRINGFIELD, OH 45504

38,088 SF on 3.5 acres. Located near Upper Valley Mall, Hobby Lobby & new developments. Currently 22% occupied with $71,000 NOI. Projected NOI @ 100% occ. $228,500 ($6.00/SF base). Great upside potential for new owner-occupant or investor.

SUGGESTED OPENING BID: $75,000

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For Brochure, Inspection Dates & Terms of Sale Call: Michael Berland

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Hanna Chartwell / Chartwell Auctions, LLC Michael Berland, OH Auctioneer, Gordon Greene, CCIM, OH Broker & Auctioneer, Mark Abood, OH RE Salesperson

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BUSINESS SERVICE OWNERS! Submit your business card to promote your service. To find out more, contact Denise Donaldson at 216.522.1383

To place your Crain’s Cleveland Business Executive Recruiter ad Call Denise Donaldson at 216-522-1383

20131021-NEWS--23-NAT-CCI-CL_--

10/18/2013

OCTOBER 21 - 27, 2013

3:06 PM

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CRAIN’S CLEVELAND BUSINESS

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THEINSIDER

THEWEEK OCTOBER 14 - 20 The big story: PPG Industries Inc. confirmed it is planning to move the majority of the 300 jobs at its Sprague Road locations in Strongsville to Pennsylvania by mid-2015. Pittsburgh-based PPG in mid-September announced plans to create a headquarters for its North American architectural coatings business in Cranberry Township, Pa., near Pittsburgh. The Strongsville locations at 15885 and 16651 Sprague Road include a mix of office and research-and-development positions. PPG does not own the buildings on Sprague Road and has been subleasing that space from AkzoNobel, which earlier this year sold the coatings business to PPG for $1.05 billion.

To the gallows: Gallo Displays, a marketing and trade show company in Cuyahoga Heights, has closed. The company said “in the face of continuing industrywide consolidation and financial challenges” it has “ceased operations and is being liquidated.” Gallo said a “major industry competitor agreed to assume some of Gallo’s current customer contracts and offered positions to a number of former Gallo employees who have already transitioned to serve those accounts,” but it offered no further details.

Center stage: A joint venture of Chicagobased Inland Real Estate Corp. is the new owner of Cedar Center South after paying almost $25 million for the shopping center anchored by a Whole Foods store at 13908 Cedar Road in University Heights. Inland, a real estate investment trust, said it acquired the property through its joint venture with Dutch pension fund advisor PGGM. The seller was Coral Co. of Cleveland, which developed the center. Inland said it assumed an $18.4 million loan on the center. Brand new: Starwood Hotels & Resorts Worldwide said it’s bringing an upscale Le Méridien brand hotel to Cleveland. The hotel operator said Le Méridien Cleveland is expected to open in January 2016 at 1001-1101 Euclid Ave. as part of a project that will connect the John Hartness Brown Building, constructed in 1901 as a multistory office building with retail space, and 1101 Euclid Ave., built in 1915 as an office building. The hotel will have 206 guest rooms and suites. A good sign: 7signal, a company in Akron that has developed technology that monitors and troubleshoots wireless local area networks, said it has closed a $4 million round of Series B financing led by Allos Ventures and Mutual Capital Partners Funds. The round also included existing investors such as North Coast Angel Fund. The money will allow 7signal to continue the rollout of its Sapphire product line throughout the United States and selected international markets.

Bad news: Ohio’s Patch community news websites are losing their editors. Editors across the media company’s 17 sites in Ohio posted farewell messages; Tuesday, Oct. 15, was their last day. Patch readers still can access and post to the sites, but local news coverage will not continue. In August, Patch’s parent company, AOL, announced plans to close, sell or find partners for about one-third of its approximately 900 Patch sites. On the road: The Cleveland Orchestra said it will do a week-long residency next year in Lakewood, featuring solo and chamber performances in unique locations, educational programs at local schools and artistic collaborations with neighborhood arts and cultural organizations. The residency will take place from May 17-24, 2014. Its centerpiece will be a free, public concert at the Civic Auditorium in Lakewood on May 24.

REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS

IT jobs have it all over medical technology ■ I would have guessed Ohio was more of a medical technology state than a software state. Seems I’m a bad guesser: As of 2011, Ohioans were 20% less likely to have a job in the medical technology sector than the average American, and that sector was growing faster in other states, according to data from Battelle Memorial Institute. Ohio’s software sector compares only a little better to the rest of the nation, but it’s growing particularly fast, according to the Columbus-based think tank. The number of Ohioans employed by software companies grew by 21% over a 10year period, to nearly 72,000 in 2011. That’s more than double the national growth rate over that time. By comparison, the state’s medical technology business, which employed about 24,000 people in 2011, grew in employment by 13% over that same 10-year period, but the national growth rate was about 20%. Battelle expects both sectors to keep growing, but would it make sense for the state to focus more on growing jobs in information technology, given its growth rate? In some areas — such as medical imaging or cardiovascular technology here in Northeast Ohio — Ohio has the critical mass needed to create globally competitive industry clusters, according to Deborah Cummings, senior program manager at the Battelle Technology Partnership Practice. But she stressed that the medical sector isn’t like the IT business, where a state quickly can help people launch startups out of dorm rooms and garages. “It is a very highly competitive, complex industry that takes a very sophisticated ecosystem of support to scale globally and create jobs,” Ms. Cummings said.

Software companies have had an easier time attracting investors lately, too. For more on that, see the story on Page One. — Chuck Soder

Turn shipping containers Into stores? That’s the plan

Greasing the skids for good science teachers

■ Downtown Cleveland is starved for shop■ Lubrizol Corp. wants Lake County teachping, and the Historic Warehouse District ers to make sure Development students are Corp. hopes it can well-versed in jump-start retail science, so it’s in its neighborcontinuing a prohood. gram that reThe communiwards the county development ty’s best science organization teachers. wants to convert Along with used shipping Partners in Scicontainers into ence Excellence, small stores and Lubrizol sponplace them in sors an annual parking lots. awards program Thomas Starinthat gives $5,000 sky, the group’s associate direc- A rendering of the proposed retail project for the for teaching expenses to the top tor, said attract- Warehouse District. elementary, miding retailing to his dle or high school science teacher in Lake patch of downtown is a struggle. County. The runner-up receives $2,500 for “In the Warehouse District we have largteaching expenses, and both the winner and er spaces and higher rents (than elsewhere runner-up receive $1,000 to attend the Nadowntown), so startups and entrepreneurs tional Science Teachers Association nationdon’t have a low floor of entry,” he said. al conference in Boston next year. “This creates that.” In the 19-year history of the award, LubriMr. Starinsky said he hopes to raise zol has honored more than 90 Lake County $30,000 to buy and outfit at least three conteachers, the company reports. tainers that would be set together on the “For Lubrizol to remain a world leader street edge of a parking lot in the district. and for our country to thrive, we need more He has applied for several grants, one of graduates pursuing careers in science, techwhich is a competition. Whichever of about nology, engineering and math,” said Dave 10 finalists raises the most money at Enzerra, president of The Lubrizol Foundawww.crowdrise.com/smallbox by Nov. 8 tion. — Dan Shingler gets $10,000. Mr. Starinsky hopes to raise a

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COMPANY: Braden Sutphin Ink Co., Cleveland OCCASION: Its 100th anniversary

Excerpts from recent blog entries on CrainsCleveland.com.

It’s a digital age, but there still is huge demand for printed material — and Braden Sutphin Ink Co. brings a century of experience to make sure those materials look good. Braden Sutphin bills itself as the “oldest privately owned printing ink company” in the United States. It was founded in 1913 by Jim Braden, who later joined forces with Al Sutphin to form The Braden Sutphin Printing Ink Co. Mr. Sutphin bought 100% control of the business in 1929, and it has been owned and operated by the Sutphin family since that time. (As the company points out, the Sutphin name is wellknown to old-time Cleveland sports fans. Mr. Sutphin owned the Cleveland Barons hockey team during the 1930s and 1940s, and he built the old Cleveland Arena.) Today, Braden Sutphin has expanded to include 12 distribution centers and more than 50 dealers throughout the United States, shipping products to more than 1,500 customers. Braden Sutphin in recent years “has experienced significant growth in its flexographic printing inks” used in product packaging, the company says. Braden Sutphin’s flexo ink is used on products including Wendy’s French fry trays, KFC clamshells, Walmart and Sam’s Club pizza boxes, and colored envelopes for AT&T and Verizon. For information, visit www.bsink.com.

total of $30,000. “We know it’s a good idea,” he said. “We know we can fill it with retail because we’ve talked to some people who are interested.” — Jay Miller

Things are still ‘very muted’ ■ On CNBC, KeyCorp CEO Beth Mooney discussed the challenges in finding new revenues and bringing down costs in an economy that still has no tailwind. “What we’re seeing is continued caution Mooney among our business clients,” Ms. Mooney said in a CNBC roundtable discussion. “Our clients (are) putting their thoughts about the level of growth into 2014 now,” she said. “So borrowing for expansion is less, but our clients are doing well. They’re highly liquid. American business is very profitable. But it is still a very muted economy.” Banks, she concluded, “are highly competitive for the good assets, good loans and good customers. You have to grow your own capabilities, grow your own revenue and really invest in being productive.”

More for your money ■ The most expensive U.S. cities “aren’t just unaffordable for the average American middle-class family,” according to an analysis by TheAtlanticCities.com. Increasingly, “they’re unaffordable to the relatively welloff middle class by local standards, too.” The website noted the median household income in metropolitan San Francisco is higher than it is in Akron by about $30,000. But that smaller income will buy you much, much more in Akron. “To be more specific, if you make the median income in Akron — a good proxy for a spot in the local middle

class — 86% of the homes on the market there this month are likely within your budget,” according to the site. If you’re middle class in San Francisco, on the other hand, that figure is just 14%. Put another way, the website noted, “the median income in metro San Francisco is about 60 percent higher than it is in Akron. But the median for-sale housing price per square foot today is about 700 percent higher.” The analysis included a chart with data from Trulia.com showing that Ohio is a hotbed for cities with relatively affordable housing markets. In Cleveland, for instance, 82% of homes are considered to be within the budget of a family making the median income. And the median size of that affordable home, in both Akron and Cleveland, is nearly 1,400 square feet. Columbus matched Cleveland, with an 82% home-affordability rating. Cincinnati was at 82%, while Dayton was at 85%.

How do you steal a tractor, exactly? ■ Ohio ranked 10th nationwide last year in the number of heavy equipment thefts reported to law enforcement, according to a new report from the National Insurance Crime Bureau. There were 10,925 thefts of heavy equipment — primarily mowers, loaders and tractors — in the United States last year, down 7% from 11,705 in 2011. The National Insurance Crime Bureau said heavy equipment theft has fallen 19% since 2008, when there were 13,511 reported thefts. Texas ranked No. 1 in 2012 with 1,401 reported thefts. In second place was North Carolina with 1,037 thefts followed by Florida, California and Georgia and South Carolina, in a tie for fifth. Ohio was No. 10 with 309 thefts. The three most stolen heavy equipment items in 2012 were as follows: Mowers (riding or garden tractor: 5,363); loaders (skid steer, wheeled: 1,943); and tractors (wheeled or tracked: 1,459).

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