Ray Leach, CEO of Jumpstart, Inc.

Ray Leach, CEO of Jumpstart, Inc. will deliver his very own State of the Region Address tomorrow, Thursday October 25 at the Forum Conference Center. He's the Fourth Quarter presenter for the "Smart Business Live! Cleveland Luncheon Speaker Series." He'll focus on Jumpstart's regional collaborations and initiatives making their mark on Northeast Ohio. Anticipate a positive message.'''

Jumpstart was named a Top 10 early stage venture capital firm in the July issue of Entrepreneur magazine, an impressive feat, as it's the only Ohio-based company to make the Top 100. Initiatives like the Ohio Capital Fund, and the brand new Northeast Ohio Capital Initiative announced on October 11, are propelling the region into impressive entrepreneurial and innovative growth. Ohio now ranks 24th in Entrepreneurial development nationwide (up from 61st four short years ago). Clean Tech investment is surging globally, and Jumpstart's no exception. Northeast Ohio is strengthening its alliance with the Pittsburgh area to promote technology and innovation via the two state's congressional delegations.

And what local interview would be complete these days without asking Leach his perspective on the new Cleveland Plus Campaign and Medical Mart project?

Leach is a Summit County native and has 20 years experience leading high-growth entrepreneurial organizations. He originated his career at IBM and worked primarily in Information Technology before forming Jumpstart in 2004. He's a Sloan Fellow and earned his MBA from the MIT Sloan School of Management. He serves on numerous local and regional boards. Conversing with him, you sense his articulate, affable presence and commitment to helping Northeast Ohio thrive in the 21st century. Recently, he, his wife, and two daughters, made a "regional" move from Summit to Cuyahoga County and now reside in Solon. Cool Cleveland caught up with him recently for an interview, which you'll find below:

Cool Cleveland: The July issue of Entrepreneur magazine named Jumpstart, Inc. as one of the nation's Top Ten early stage venture capital firms for Calendar Year 2006. That's a significant award, given that Jumpstart is the only Ohio-based company to make the list.

Ray Leach: One of Jumpstart's initial goals was to be a high-velocity investor. There's no way this region is going to transform from a manufacturing, large company, to a small company, higher growth economy if someone isn't doing a lot of investing, especially in the kinds of firms Jumpstart invests in.

The Entrepreneur article highlights the most significant number of venture capital firms making very early stage investing over Calendar Year 2006. Jumpstart actually made 12 investments last year. Eight of those investments qualified under the magazine's metrics of being an initial, first equity investment in a brand new company.'''

Jumpstart's tying with other venture capital firms for ninth place, demonstrates that in the US, there's an organization headquartered in Cleveland, investing in Northeast Ohio companies, that's actually putting its money where its mouth is.

Jumpstart is on a mission to promote entrepreneurship and innovation in Northeast Ohio. Why are these two entities so important in business today?

The fundamentals of our economy have shifted in a very short amount of time. Today, because of the evolution of the Internet, and flexibility of labor forces, the companies that typically drove our economy have gone elsewhere, or no longer exist.

One of the comparative advantages we have today is the people that live here. The question becomes, how do you take that human capital asset(education), and leverage new economic growth? The only way to do that in today's economy is through innovative ideas. We need to create intrapraneurial, innovative, opportunities at small, medium and large companies via the people who work there, that can help the company grow. But the reality is, 80% of new job growth in North America today is generated by firms of 500 or less employees. These are purely entrepreneurial ideas in product and service innovation.

The challenge is, it's not a perfect science. It's an emerging area of research and expertise. No one really understands, let's say in a short time frame- a generation or less, how does one region or state actually do that?

One of Jumpstart's accolades is that we seem to be able to identify some products that can stimulate innovation and ecomomic development, in an environment where we're creating it as we go.

Jumpstart currently has 23 companies in its Portfolio. What three things do all of these companies have in common, that potential clients should model?

First, can this opportunity, company, or service, scale quickly? Can it go from zero revenue to 30 to 50 million revenue in 5 to 7 years? Most businesses can't scale that quickly. We're looking at it hypothetically. There's no guarantee any of our companies will scale that fast. One of the drivers in that question is "Does the company address an existing 1 billion dollar marketplace?" If the market's at 1 billion in sales, and the proposed company could capture half of 1 percent of that market, it's a meaningful sales number. If it's a category- creating product or service, that's difficult for Jumpstart to invest in. The market hasn't yet been created for successful extrapolation.

Second, are there comparable or near-comparable companies who've been successful in raising venture capital in the last 2-4 years? When evaluating an opportunity, one success factor is that other investors are going to follow us. After we invest in the first 6-36 months, the private sector is going to continue to invest in the company and generate a runway for the company to grow. If we're looking at a company that's generated minimal to zero venture capital interest, we're not going to invest. Why would we? Especially when there are other opportunities in the marketplace where venture capitalists are investing.

Third, the product or service is strongly differentiated. Even if they're in a billion dollar marketplace, and other venture capitalists are following, we're looking for something unique and accelerable about the business. For example, the quality of the management team or science involved in the business, or intellectual property.

One of Jumpstart's core values is risk orientation. Northeast Ohio has long been viewed as a risk-averse region. Is this still the case? Are we improving?

One aspect of Jumpstart that I'm proud of, is that we're very risk-oriented. There's no way we'd be in the top ten list of most active investors if we weren't. Having said that, we're no where near where we need to be. There's a significant number of individuals and corporate wealth that haven't yet joined us collectively in terms of taking more risk.

At Jumpstart, we hope the day soon comes, when we, and other early stage investors can demonstrate significant economic and financial returns, inspiring private equity markets to follow our lead. From a macro view, we need to become more comfortable at risk taking if we're going to grow this region's economy.

Recently, TechLift launched several regional events to promote the new initiative. Can you highlight what the initiative has to offer Northeast Ohio?

TechLift was created as the result of a $15 million grant that was issued to NorTech and nine other collaborators based in Northeast Ohio, one of which is Jumpstart. Jumpstart and TechLift have a special relationship, as Jumpstart's Diversity and Inclusion intitiative and marketing team are helping to launch TechLift.

The TechLift program is a set of technical assistance resources that are available to technology companies throughout 21 counties in Northeast Ohio. One could look at TechLift as the Technology Commercialization Roadmap entry point. They're there to identify technology companies that have the potential to grow, attract venture capital, create new jobs, and make a significant regional economic impact. TechLift provides a half dozen professionals who have particular expertise in one of the five technology clusters which we view as a core competency of Northeast Ohio.

Clean Tech continues to attract venture capital interest nationwide, and Jumpstart is no exception. How much of Jumpstart's portfolio is Clean Tech?

If someone had said to me three or four years ago that 25 percent of Jumpstart's portfolio would be Clean Tech companies, I never would have believed them.

Why is that the case? It reverts to the top three principles that Jumpstart seeks: First, is it a 1 billion dollar marketplace? If you're talking Solar, Efficient Engine Technology or Geothermal to name a few, these are hundreds of billion dollar markets. We're also seeing a significant amount of private sector investing in these areas as well.

Second, there are a lot of comparables. When Jumpstart looked at a Clean Tech company, three or four years ago, we had to struggle to find a venture capital firm that would be interested in investing in these companies. Now, most venture capital companies recently surveyed by the National Venture Capital Association (NVCA) state that they're open to, and are actively pursuing Clean Tech investments.

We're excited about Clean Tech in Northeast Ohio and the Midwest. It's an industry that we have a comparable advantage, as opposed to Information Technology. Sixty percent of all venture capital investments worldwide are in Information Technology. Silicon Valley, Austin, Boston, and even Pittsburgh with Carnegie Mellon University trump Cleveland in that area.

In Clean Tech however, we have a huge history of industrial infrastructure and innovation with the big companies in town. Many of the bright minds that have worked for these organizations are now starting new companies. Some still work at these institutions, or are looking to join engineering or management teams elsewhere.

We need to find a communal way to leverage that to the hilt. The best way is to demonstrate successful returns in these kinds of companies quickly. Nothing attracts investments like successful exits. We're excited about Jumpstart's Clean Tech portfolio companies. A couple of them have the potential to have very significant exits in less than five years. These companies could make Northeast Ohio a Clean Tech center.

The Third Frontier Project, launched in 2002 by then Governor Taft, is a ten-year, 1.2 billion dollar initiative to promote technology and innovation statewide, which has benefited Jumpstart. Can you address more recent initiatives enhancing the state's economy?

Some people have commented that this is the best time to be an entrepreneur in Ohio, some say in Northeast Ohio. Such comments can partly be attributed to the Ohio Capital Fund. It's an initiative started in the legislature, led by people such as Dorothy Baunach, Jamie Ireland, Rob Briggs, and others.

They were able to convince the state of Ohio to allocate tax credits that could aggregate 150 million dollars, investable in a fund- of- funds. That fund -of- funds would be available to make limited partner investments in venture capital firms that are interested in housing themselves in Ohio, and/or investing in Ohio firms. To date, they've distributed about 50 million dollars of those funds. They've attracted six or seven venture capital firms to Ohio over the last year and a half. We project that over the next two years, they'll attract another eight to ten venture capital firms to the state, that have never invested in Ohio before. Realistically, the Ohio Capital Fund will reap 100 million dollars. These new firms will bring in another 300 to 500 million dollars on top of the state's money.

On October 11, The Northeast Ohio Capital Initiative was launched, with a particular focus on Northeast Ohio. Its goal is to raise an additional 30 to 50 million dollars of fund- of- fund capital that would be invested directly in funds that have located in Northeast Ohio. That 30 to 50 million would be leveraging another 150 to 200 million dollars. Between the two initiatives, we'll have about 700 million dollars in venture capital available in Ohio, accredited to both the state and Northeast Ohio initiatives, to fund early stage companies. Jumpstart could be considered the beginning of the pipeline. Excitedly, the next traunches of capital are being attracted to, and made available in the state, particularly in Northeast Ohio. These funds will allow early stage companies to grow and make a long-term regional economic impact.

What will it take for businesses (both products and services), to survive and thrive in the 21st Century?

I hate to use a buzzword, but it's innovation, either in product development or how they go to market. The biggest challenge now is that our competition is global. Your speed to change, how you think about, innovate, and grow your business, faces significantly increased demands.

Never in our country's history, has there been such a time of change, relating to how we keep our companies competitive. There's a whole new set of tools and perpspectives that Northeast Ohio companies are gaining, and need to gain, in order to remain competitive. We're learning as we go, so it's a dangerous tightrope walk. If there's any solace, it's that everyone is in the same position. One of our country's greatest assets, as well as here in Northeast Ohio, is our human capital. We're continually looking for ways to leverage that on a global scale.

What words of wisdom do you have for seasoned workers who are downsized, or dissatisfied in their current job, yet feel trapped due to financial constraints?

Again, there should be some solace in the fact that everyone is going through these same challenges. Even management of prospering large companies clearly understands that our region's workforce is going through a huge transition. It's critically important that we help the individual in our regional workforce make this transformation. The state of Ohio is dramatically reviewing how they spend their workforce development dollars. They're making intense efforts to enable workers to find more interesting opportunities, as well as increase, or maintain their quality of life.

For individuals who've been employed in traditional fields like manufacturing, re-training will be absolutely critical. I realize that's a scary thought for many of the workers in today's economy. We'll need to regroup and work with the public and private sectors to transform our careers.

On Monday October 1, you participated in a daylong work session at Youngstown State University. There, Representatives Tim Ryan, D-Niles and Jason Altmire, D-Aliquippa Pa., unvieled their cross-border initiative to unite Pittsburgh and Cleveland in technology and innovation. Can you comment on the day's events?

First, Representatives Altmire and Ryan should be commended for their proactive stance. This is one of the few national, cross-border initiatives in place today. There's been some activity going on between Pittsburgh and Cleveland for several years regarding technology and innovation. There's an organization in Pittsburgh that Jumpstart was principally modeled after, called Innovation Works. We're in constant contact with the city's economic development community, and are learning from them as well.

Clearly, there are regional opportunities that the two cities can leverage together. Jumpstart envisions the two towns understanding not only their institutional strengths, but their population strengths as well. Jumpstart has also been involved in an initiative called IdeaCrossing (http://www.ideacrossing.org). The initiative enables stakeholders of entrepreneurship, investors in entrepreneurs, and entrepreneurs themselves, to gain access to expertise and capital from the online community, regardless of region.

It's great to have cheerleaders from Washington who understand that the boarders between Ohio and Pennsylvania aren't that relative to the two metropolitan, regional economies. We're hopeful that we can leverage the congressional delegations from Ohio and Pennsylvania for additional support, enabling both regions to transform to more innovative economies.

What interview would be complete these days without your perspective on the Medical Mart project?

I think the Medical Mart project is a substantial piece of the puzzle, and a risk that we need to take. Jumpstart is helping to transform our economy, especially in key industries like Bioscience. Each organization and initiative owns a piece of the transformation.

Jumpstart's piece is raw innovation, or research sitting at the Cleveland Clinic, University Hospitals, etc, or the basement of a Northeast Ohioan today. It's our job to help those ideas and opportunities materialize into something that can make an economic impact. That's our highest priority.

[A] Medical [M]art is a perfect example of creating a unique marketplace that will enable young, small companies to have access to customers, as well as strategic partners. Jumpstart's Biomedical portfolio companies (and other companies as well), could soon be at a venue where they could literally go down the street and talk to huge, multinational, billion dollar organizations. These companies could be strategic partners or investors in these emerging firms.

One aspect of the medical mart not being addressed by the media, are the location-based advantages for companies to stay here. A startup company in Northeast Ohio, holding a medical invention, could meet all kinds of investors and companies visiting the medical mart. If they're able to convince one of these companies to invest in their business, the fact that they met at the medical mart, a nationally recognized medical resource center, is one key reason why they would keep the company in Cleveland, as opposed to moving it to Boston, Austin, or California. The region's comprehensive, world-renowned health care facilities are another reason why these companies would stay here.

At Jumpstart, we're committed to helping companies originate, grow, and remain here. Medical mart could be instrumental in enabling these young companies to prosper locally, create jobs, and make a regional economic impact.

Imagine a medical convention held here in town in the absence of the medical mart, and an attending company meeting a strategic investor. There would be no sense of place longer term for that investor to have a vested interested in keeping the company in Cleveland without the medical mart.

The medical mart, properly executed and realized to its full potential, could be a huge competitive advantage for Northeast Ohio companies. They'd be able to stay and grow in Cleveland, as opposed to having been founded here, but ultimately growing their business elsewhere.

What are your thoughts on the new Cleveland Plus Campaign?

It's crucial that the counties outside of Cuyahoga County feel that their parochial and broader economic initiatives are being satisfied, or I think the campaign will have failed. The "Plus" is there because we have other regional core assets besides Cuyahoga County to leverage. No community, county or city, regardless of where they're located, can go it alone. So, I strongly agree with the program. We need to make sure we're satisfying our inter-regional partners.

We need to be able to bring all the assets and stories that relate to Cleveland Plus and present them to the super regional and national media. We have some great stories to tell. Leveraging these stories to the media at large, I'm hoping, will give them encouragement to take a closer look at Northeast Ohio and what we're doing.

Finally, from a Jumpstart perspective, I think the Cleveland Plus Campaign is an opportunity for all of us to do a better job of being regional partners and collaborators. Regionalism is a buzzword that people here have been talking about for some time. It's one thing to say it. It's another thing to walk and talk it. My Summit County background, and Jumpstart's team and board's regional composition, models our regional commitment. As Cleveland Plus gains momentum, I hope it not only helps us tell our story outside the region, but also enables us to build a tighter community and leverage our regional assets.

What concluding imprints do you hope to leave on Cool Cleveland readers?

The vision and consensus that's been built in the public and private sector around initiatives like Jumpstart and others, is right. The priorities that have been placed on entrepreneurship and innovation, teaching entrepreneurial skills, and the skills to access capital, whether it be federal grants or venture capital, are all existing areas where we can make a regional impact.

Second, it's all up to us. Each of us as workers and Northeast Ohio citizens have a role to play in the evolution, growth and transformation of our economy.

Lastly, it's working. One of the most significant secrets today, that I don't think will be a secret five to ten years from now, is that Northeast Ohio has a level of depth and vision that's extremely unique. We're able to articulate plans and strategies, and ultimately in some cases, build organizations that can help accelerate our transformation. Currently, we have dozens of companies and initiatives coming to Northeast Ohio every month, looking at different economic development models that we've built here.

Jumpstart alone is seeing three to five inquiries a month. To go from 61st in the country in entrepreneurial performance, to 24th in four years, many people are asking how we did it? Jumpstart played a role with its good team, focused plan, and knowing what to measure. We were able to do it because of the consensus level developed in the early 2000's between the foundations, and corporate and non-profit communities.We all agreed that this is something we should work on, that it's something that can make a difference. If we continue to sustain our consensus level of what our priorties should be, Northeast Ohio could very well be the business case of how the public and private sector came together, and in less than a generation, transformed their economy from an old line manufacturing, Rust Belt economy, to an innovative, high-growth, knowledge-based economy. We're well on our way.

Interview by Cool Cleveland contributor Tim Zaun tmzaunATyahoo.com. To learn the three biggest mistakes people make when writing a business plan from Ray Leach, visit Zaun's blog, http://www.timzaun.com. (:divend:)