A City For Entrepeneurs
by Susan Fine
published: 11/08/2009
Cleveland has always had a “Once upon a time” feel to it. Once, America put a huge canal there to connect the transport hub of the Great Lakes to the export cities of the East. The General Electric Company built one of the nation’s first industrial parks there. Cleveland is also where John D. Rockefeller Sr. started Standard Oil.
More recently, however, such achievements just seemed like ancient history. A 1969 fire on Cleveland’s main river, the Cuyahoga, made the city infamous for its pollution. The loss of 150,000 manufacturing jobs over the last two decades further contributed to an image of decline. From 1990 to 2002, the onetime launch pad of GE and Standard Oil ranked in the bottom three of the largest American cities as a place to start a company.
In 2004, the city’s business leaders, government, and foundations came together and created a nonprofit corporation called JumpStart to make sure entrepreneurs would remain in the Cleveland area—or even move there. “Every large company started in someone’s garage or basement,” Lt. Gov. Lee Fisher says. “Why shouldn’t it be in Ohio?”
JumpStart brings together private and public funds to invest in local entrepreneurs and nurture their growth through expert mentoring. The organization invests only in companies that have a chance to grow to between $30 million and $50 million in sales within five years and that offer innovative ideas to change the way we live. JumpStart keeps a share of each company’s stock, with the intention of selling it at a profit and re-funding its programs.
More than 1800 would-be entrepreneurs have applied to JumpStart for investments. The group has worked with 200 of them, assigning each an experienced former CEO to help design a detailed business plan. As of today, JumpStart has made loans to 40 companies and offered technical and business support to many more. The $9 million JumpStart spent last year generated $75 million in local spending—in addition to the $8 million Cleveland made through payroll taxes.
Aaron Lemieux, 35, was hiking in Appalachia and stopping too often to charge his Walkman. He wondered why his own energy could not recharge his battery. Obsessed with that possibility, LeMieux quit his job to invent a gizmo that could concentrate kinetic energy from natural sources. He walked around his neighborhood for hours with his invention, ignoring the stares of neighbors. Today, an hour’s walk with LeMieux’s 9-ounce Personal Energy Generator (PEG) produces enough power to almost fully charge a cellphone. JumpStart offered LeMieux advanced scientific help, introductions to venture capital, and rehearsals before those meetings. LeMieux plans to manufacture the PEG in Cleveland and has rented space to accommodate as many as 50 workers. He’s now exploring the same technology to harvest energy from waves.
JumpStart offered Laura Bennett, 43, tough love during the three years it took to turn her graduate-school business plan for a new kind of pet insurance into a company that will gross more than $2 million this year. JumpStart made her meet milestones in order to receive installments of the $800,000 it invested. An entrepreneur-in-residence spends one day a week at Bennett’s company and even accompanied her to London for critical business negotiations.
also helped Phil Davis, 50, create his business. After his restaurants closed, the only job the Stanford University graduate could find paid $8.50 an hour. His eureka moment came one morning in the shower as he was wishing for a hot-towel treatment before his shave. He visualized a portable mini microwave cube, then he began imagining other uses—for the disabled, physical therapists, or even for road trips.
JumpStart helped him shape his idea into a business, figure out a marketing strategy, and find potential investors. “They forced me to rehearse for investors again and again,” Davis says. Singer Carrie Underwood, one of more than 4000 people who have purchased the mini microwave, says she can’t live without it.
The U.S. has always been a nation of entrepreneurs—one in 10 American workers is self-employed. Today, at least 10 venture-development organizations across the country are using public money to encourage the next big idea and the job growth it might bring. JumpStart based its program on Pittsburgh’s Innovation Works, which began providing start-up capital to technology companies 10 years ago. In the last year, more than 80 communities have approached JumpStart to learn how to create similar programs. The Obama Administration sees the Cleveland program as a national model and is considering asking JumpStart to replicate its success with entrepreneurs in several cities.
Cleveland’s success has made it “a hotbed for entrepreneurs,” Phil Davis says. Adds David Levine, 42, whose company, Wireless Environment, has patented energy-efficient lightbulbs: “I can call a business leader or a fellow inventor, and they will return my call. That’s why my wife and I have stayed.” JumpStart has even begun its own online portal, Idea Crossing, to connect would-be entrepreneurs with investors.
Still, Ray Leach, JumpStart’s CEO, is realistic about what the nonprofit organization can do to stem job losses. Phil Davis’ microwave, for example, has not brought new factory jobs to Cleveland—instead, it’s being manufactured in China. Each day, Leach and his team spend hours persuading young companies to locate their first factories and offices in Cleveland.
But Leach believes that as entrepreneurs continue to create new companies, more jobs will come to his city. Meanwhile, Cleveland is teaching communities how to take good ideas and a commitment to hard work and turn them into a growth engine of our economy.
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