Cuyahoga County Executive Armond Budish is behind the new private-public partnership, that he hopes to become one of the largest of its kind nationwide. It's part of a revamped Cuyahoga County economic development strategy initiative.
CLEVELAND, Ohio - Cuyahoga County has selected Venture Development Organization JumpStart Inc. as its partner to leverage county investments in innovation and entrepreneurship with a $4.5 million loan.
JumpStart responded to a request for proposals in a competitive process aimed at launching county initiatives expected to attract venture capital and accelerate fast-growing businesses in Cuyahoga County. The county will lend up to $4.5 million as part of its new Innovation Match for Pre-Seed Capital ($2.5 million) and Early Stage Loan Fund ($2 million).
Cuyahoga County Executive Armond Budish is behind the new private-public partnership, that he hopes to become one of the largest of its kind nationwide. It's part of a revamped Cuyahoga County economic development strategy initiative.
"To my knowledge, this is a first in county government - but for us it won't be the last. It is my greatest hope that this is just the start of the type of ongoing, transformational investments that we will be able to make in the future as our current financial condition strengthens," Budish said in a written statement.
Cuyahoga County has set up the investment to virtually eliminate any risk to county taxpayers by requiring that Jumpstart secure these loans. The money is expected to be paid off in seven years with a 2 percent interest rate.
While JumpStart has been recognized nationwide for nurturing high-growth companies and attracting funding, most of the organization's funding comes from grants.
About 50 percent of JumpStart's funding comes from the state's Ohio Third Frontier Commission. Other funding comes from local and community foundations and private sources such as individuals and corporations.
However, it's not the first time JumpStart has taken a loan. The organization paid off a $2 million loan to the Cleveland Foundation last year.
For more than a year, Jumpstart has been trying to raise $25 million in new investment capital from public, philanthropic and private sources. This new loan is expected to help the organization reach its goal by December.
JumpStart's average investment in tech companies is about $380,000. So far, 76 companies have received funds since 2005, a year after the organization was founded.
JumpStart plans to start making much larger investments to tech companies. And instead of focusing specifically on start-ups six to 12-months-old, the organization plans to invest in more mature tech companies that are two to four-years-old.
"We're going to continue to do what we used to do, but now we're also going to be making investments that range from $750,000 to $1.5 million. In other words, we're going to invest larger amounts in tech start-ups," said Ray Leach, JumpStart's CEO.
Earlier this month Cleveland and Columbus were among the top 50+ Entrepreneur Friendly Cities, in a list that includes cities in other countries, according to a ranking compiled by averaging studies from NerdWallet Inc., Entrepreneur, Forbes and Fortune. Cleveland ranked 34 and Columbus ranked 45.
The article referred to Cleveland as a hotbed for innovation and entrepreneurship, noting that while it took a long time to make changes, there's been an increase in seed, angel and early-stage funding sources both at the private and state levels in the last eight years.
Cleveland has come a long way in terms of supporting entrepreneurs. For more than a decade starting in 1990, Leach said Entrepreneur used to rank Northeast Ohio dead last in a ranking that included 61 regions.
"We were the worst region for 10 out of 12 years, and we never ranked higher than 57," he recalled.
Now Leach wants to make much larger investments in tech start-ups in order to make it easier for companies to attract funds from other parts of the country.
"If I need to raise $4 million and I can tell out-of-region investors that I have a local investor willing to put in about a third of money, it's much easier for that company to raise all of the money it needs," Leach said.