Investing in Entrepreneurs

What are the keys to creating a more vibrant business ecosystem?

BY TERRY TROY

If you look at the events celebrating entrepreneurism in Northeast Ohio, you might think that we are doing more than enough to promote and celebrate companies on the cutting edge of innovation.

During the last quarter of 2022, events such as the Cleveland Chain Reaction pitch days hosted by Greater Cleveland Partnership’s (GCP) Council of Smaller Enterprises (COSE), JumpStart’s Small Business Showcase and the GCP’s Best of Tech Awards — the culmination of Tech Week in October — were held.

Each of those events was sponsored and supported by forward-thinking companies as well as nonprofit, economic development and civic organizations here in Northeast Ohio. But are we really doing enough to support fledgling entrepreneurs and foster innovation and new technology?

The most obvious answer is no. And statistics from Ohio Secretary of State Frank LaRose bear this out. At the end of October, LaRose announced 14,037 new business filings in October 2022, down 103 filings from October 2021 and down 456 filings from September 2022. Statistics for the year to date from Secretary LaRose’s office as of October are also very telling.

QUICK STARTUP FACTS:

• 14,037 new businesses were created in October 2022, down 456 filings from September 2022.

• October 2022 new business filings were down 103 filings from October 2021.

• 152,204 new businesses have been created in 2022 as of October, averaging 15,220 per month. 170,740 had been created at the same point last year.

• 2019, 2020 and 2021 were all recordsetting years in Ohio for new business creation. In 2021, Ohio surpassed the annual filing record with 197,010 new business filings.

And a significant number of those startup businesses are doomed to failure. But in order to support entrepreneurship, we have to define it and better understand exactly what it entails.

“I think you have to look at entrepreneurship in a number of different ways,” says Tom Sudow, director of the Burton D. Morgan Center for Entrepreneurship at Ashland University and a partner in NOVAMedics. “A lot of the entrepreneurship involves small business, and that certainly needs to be celebrated.”

But we can’t think of entrepreneurship solely as the stereotypical tech savvy startup that grows into a Silicon Valley mega-corporation.

Ashland probably launches six to 10 businesses a year, notes Sudow.

“A couple of them sold and got big, but a lot of them are two-, three- and four-people companies making a living for themselves and their employees.”

On a larger level, failure is an option,” says Sudow.

“Not everything succeeds,” he says. “An NFL quarterback who completes 50% of his passes is a failure. In basketball, if you shoot 70% of your free throws, it’s okay but not great. But if you play Major League Baseball and hit .300, you’re a hero. In venture capital, if you are batting .200 (or if two out of 10 things you back succeed) you are a success. So we have to look at entrepreneurship under the proper lens.

“In Cleveland, we tend to think that we are sinking or dying,” adds Sudow. “We have gone through some bad times, and we have come out of them. But when something doesn’t go the way we think it should, we tend to throw up our hands in the air. But we have had plenty of entrepreneurial successes.”

Addressing the initiatives that foster entrepreneurship are more important than ever, given the advancements we have seen this year in Ohio’s economic ecosystem, including Intel building a semiconductor manufacturing facility, automotive commitments to build electric vehicles (EVs) from both Honda and Ford and further commitments to produce lithium ion batteries from the joint venture of Honda and LG Energy Solutions and Ultium Cells in Lordstown — not to mention the re-invigoration of supply chain companies and logistics to support those endeavors. Those efforts are being supported by nonprofits at both the state and regional levels.

“Our mission is accelerating growth of equity and business outcomes in our region, and we do that by reaching out and helping companies expand while attracting new companies here,” says Steve Fritsch, vice president, Industry Advancement and Engagement for Team NEO, a regional partner of JobsOhio, which has done an outstanding job this past year of repositioning Ohio’s economy to embrace those new high-tech companies and industries.

“We can always do better,” adds Bill Koehler, CEO of Team NEO. “But I would also add that we are doing a lot of good work already. The thinking around innovation, emerging technologies and how they are reshaping our industries is permeating all of our strategies.”

“There can always be better coordination in any complex business ecosystem system,” says Ray Leach, CEO of JumpStart Inc., a venture development organization that provides capital, services and connections to help entrepreneurs grow. “When you look at events like Chain Reaction, our Small Business Showcase and all the activities that are happening in the small business space, they are all important because they are celebrating companies that may have a unique capability, product or service.”

Programs like COSE’s Chain Reaction (see related story page 8) play an important role in celebrating and promoting emerging companies — and many of the winning companies this year involve food and food products.

“The program has dual purposes — to highlight small businesses in the region and provide them with support by giving them access to the capital, resources, coaching and mentorship they need to take their businesses to the next level,” explains Megan Kim, executive director of COSE and senior vice president, membership development and marketing at GCP.

But Chain Reaction also helps our city’s economy by placing small businesses in neighborhoods across Cleveland, creating jobs, investment and opportunity.

“The program brings entrepreneurs together as a cohort, creating a community and connecting winners and semi-finalists to learn, share ideas, collaborate and support one another, which is integral to COSE’s mission and GCP’s overall mission of accelerating the growth and prosperity of the region,” Kim adds. “Since its inception in 2017, Cleveland Chain Reaction has received more than 476 applications, coached and prepared 108 small business semi-finalists and connected winning businesses to nearly $1.7 million in capital.”

Other programs like the Best of Tech awards are equally important.

“This is a signature celebration of tech successes,” says Baiju Shah, president and CEO of GCP. “By highlighting businesses and tech leaders, we hope to inspire others to pursue their innovations and business ambitions. We also believe the recognition helps attract and retain tech talent in the region and builds broader awareness that Cleveland is a great place to build businesses.”

But are these events simply celebrating entrepreneurs or are they driving innovation? Yes and no.

While programs like the Best of Tech, Chain Reaction and JumpStart’s Small Business Showcase often highlight smaller, more innovative companies, they also make larger companies aware of what are often unique products or services, which in turn helps the larger companies build their businesses.

The recognition offered by these events helps these fledgling companies communicate with potential customers and partners. Perhaps most importantly, the programs also help attract and retain talent — a key initiative — which helps build a vibrant business and economic community.

“We believe that people want to work in an environment where they can work on fun things, where they are challenged and where they are pressing the bounds of their capabilities and opportunity,” says Koehler. “They want to be a part of something that is bigger than themselves and maybe create some significant wealth while doing it.”

While entrepreneurial events help get the word out about what companies and entrepreneurs are doing, additional communication is also important. It’s another issue that needs to be addressed.

“One of the biggest challenges that JumpStart has is how do we get these successful stories out to the marketplace,” says Leach. “We need to focus not only on what the entrepreneurs are doing, but perhaps more importantly the impact these entrepreneurs are having on their families and the broader community as well. We need to do a better job of being an amplifier on activities outcomes and the impact these entrepreneurs are making in the community.”

While recognition and attracting talent are key initiatives for innovative growth, startups also have basic business needs.

“Everything we do at JumpStart is about bringing three sets of resources to entrepreneurs,” says Leach. “We try to bring capital, business services (such as subject matter expertise and knowledge) and then connections. While talent is always a big part of it, we are also trying to help these entrepreneurs make connections to lenders, investors or customers, as well as people.”

Continuing business education plays a key role, notes Leach.

“We have a very intensive cohort training program where we take about a half dozen entrepreneurs at a time through a multi-week program that is very intensive and allows the business owner to think differently and probably act differently as it relates to issues that pertain to their business,” he says.

JumpStart is now on its 16th set of cohorts (usually doing four per year) and a cohort can range from five to eight participants.

“And we are doing that not only in Cleveland, but in Toledo,” says Leach. “And we’re looking to expand that across Northeast Ohio.”

JumpStart also has a long track record, offering its cohort sessions for more than seven years. It’s been successful because attendance also has benefits that go beyond cooperative education.

“The companies that go through our cohort programs are also eligible for loans from JumpStart,” says Leach.

This can also help build a good foundation for a long-term business relationship.

“When we have a company either going into or out of a cohort, we build a relationship,” says Leach.

JumpStart not only knows what the entrepreneur is doing; it also knows smaller issues, “like when they show up every day or what challenges and issues they have faced over the last couple of months or even the last two, three or five years,” says Leach. “So we have a long-term relationship with them and have an interest in providing capital.

“A lot of capital providers in our community are doing great work, but many also require personal guarantees or other requirements to get access to capital.”

But JumpStart is not often as restrictive on its capital requirements.

While tech-oriented companies are in higher demand in Ohio right now, due to emerging industries, innovation should never be confined simply to tech.

“Originally, when we were first founded, we only cared about technology and focused on that side of the equation because technology companies not only create a lot of jobs, they also create a lot of spillover jobs,” says Leach. “But today, JumpStart is equally engaged and involved in small business startups that aren’t tech companies and that is a reflection and recognition of how important those companies are to the execution of our mission

— particularly when it comes to womenand minority-led businesses. That is true across all dimensions: geography, inner city, suburban or rural; gender and race and industry. But having said that, we are not spending a lot of time with small nontech businesses in the wealthier suburbs, but are focused more on the residents of the City of Cleveland.”

“We believe the quip that ‘all businesses are tech businesses,’” adds Shah. “Technology transforms a business’s potential through top-line growth, through innovation and customer connection and operational efficiency, both of which drive profitability. Companies are investing in technologies to innovate.

“GCP is focused on creating an environment and ecosystem to promote dynamic businesses and innovation institutions and to develop the talent needed to support the growth of those organizations. This includes working with partners that support start-ups, scale-ups and innovation in established companies and advocating for resources and public policy that drives more small business capital, innovation growth, and industry-institution collaborations.”

While high-tech companies seem to get the lion’s share of the ink, there are industry sectors where we are well-positioned when it comes to long-term growth. One of the first is manufacturing.

“We work with a number of partners, including MAGNET, to drive something we call a Smart Manufacturing Cluster,” says Fritsch. “That cluster exposes companies to industry 4.0 technology, such as industrial internet of things, additive manufacturing or automation and robotics.”

Through this cluster, companies are better able to understand how these new technologies impact productivity and ultimately a company’s profitability, which puts them in a position to grow, says Fritsch.

“What we try to do is to bring together seekers of these technologies and get them in touch with companies that can help solve technology adoption challenges,” Fritsch adds.

In many cases, the solvers are smaller companies, the one- or two-person entrepreneurial shops that may have spun out of a larger enterprise to produce something that is not only of interest to them but also of value to an industry segment or specific manufacturer.

“That’s a very big part of our mission as well,” notes Koehler, “to support the companies we have here already and making them more competitive over time through investment in these new technologies.”

“It’s important that we have the opportunity to bring people together so we can learn from each other, and discuss the opportunities,” says Koehler.

That helps to foster a common understanding of the opportunities as well as the gaps in knowledge that can help encourage an alignment of activity for better outcomes.

“So we are all rowing in the same direction,” says Fritsch.

Earlier this year, Team NEO worked with Kent State University on a Smart Manufacturing cluster partnering with Manufacturing Works, the Ohio Aerospace Institute and the Youngstown Business Incubator.

“We had an EV Conference that was extremely well attended, attracting over 350 people in one day,” says Koehler. “We talked about the opportunities as well as the assets that are developing across our state.”

Team NEO is also talking to Manufacturing Works about what they are doing on autonomous vehicles.

But Northeast Ohio has opportunities beyond manufacturing and automotive, according to both Leach and Koehler. And those industries offer plenty of opportunity for future innovation. The first is in logistics.

“We are seeing a ton of logistics-oriented software innovations,” says Leach.

“Obviously Cleveland and Northeast Ohio has always been a long-standing logistics hub.”

“We are also working with the Greater Akron Chamber on what they are doing with their Polymer cluster that they are developing,” adds Koehler.

Another industry that offers plenty of opportunity is health care and, more specifically, drug discovery and therapeutics.

“There are major initiatives going on right now in Columbus and Cincinnati that are focused on advancing companies in the area of drug discovery,” says

Leach. “That’s an area where we could be doing a lot more.”

It’s also one of the reasons JumpStart is partnering with health care institutions, startups and other entities to help move the needle in therapeutics.

“There are plenty of opportunities out there, and JumpStart is open to partnering with anybody,” says Leach. “You don’t have to be affiliated with the Cleveland Clinic, MetroHealth, University Hospitals or Akron Children’s Hospital to have something to bring to the party.”