Frequently Asked Questions
Doing Business with JumpStart
When JumpStart Says No
About JumpStart
Economic Inclusion
General Questions
Doing Business with JumpStart
What kind of companies is JumpStart Inc. looking to work with?
JumpStart's target customers will be early-stage, Northeast Ohio companies that are considered to have strong potential to become high-growth businesses. JumpStart considers a company to be early stage if it has $0-$10 million in current revenues. High-growth means that the company can reach $30 to $50 million in revenues within five to seven years.
How does JumpStart decide which companies to invest in?
We start by looking at many companies and ideas. We review hundreds business plans each year. We select about 36 companies per year to proceed to our next step, a formal presentation to our Investment Panel. Based on a rigorous due diligence process, JumpStart will choose from this group ten to twelve companies per year in which to make direct investments. In sum, we attempt to invest in those Northeast Ohio start-up companies that have the most potential for success.
What are the mechanics of a JumpStart investment?
JumpStart is a very active and engaged investor! The JumpStart investment range is $100K-$800K, depending on the stage of development and particular needs of a company. Our business model is this: we approve a total investment amount for a company, and then we release installments of money over time to that company. For example, if JumpStart approves a $300K investment in a company, we may release $100K initially, and then another $100K five months later upon hitting certain milestones, and then the final $100K five months later upon the company hitting more mutually agreed upon milestones. This model of investing is a great, tried and true model that works for many companies because it forges a strong operating partnership between investor and portfolio company. That said, this model of financing is not for everyone. Some people would prefer a more standard arms-length relationship where they only engage with their investors during quarterly board meetings and at report time. If that is your preference, you should seek funding elsewhere.
Core to this active, engaged business model is the concept of “going passive” in some investments. If a company is hitting milestones, JumpStart will continue to release installments of funding per schedule, and JumpStart may in fact approve additional funding. This happens regularly with our Portfolio Companies. However, other companies struggle to hit milestones and do not advance through stages rapidly enough to, in our opinion, be attractive to additional follow-on investors. These companies may well have great ideas with great entrepreneurs, but they just couldn’t grow fast enough (a core part of JumpStart’s mission is to accelerate the growth of companies). As such, if a company is progressing more slowly than projected, JumpStart will reallocate its EIR to another company in the JumpStart portfolio that is progressing more rapidly, and we will cease to release originally scheduled installments of money. This is always a hard decision, but it is fundamental to our business model as “high-velocity” investors.
Does a company have to pay JumpStart for its services?
No.
Do you help with the patent process?
If your business successfully transitions through the ADVISE, APPLY, & ASSIST process and receives a financial investment from JumpStart, a portion of that investment may be used to further develop or secure intellectual property, commonly through patent protection.
Can a company receive business development assistance and not funding or vice versa?
If your company is asked to present to JumpStart you will benefit from our intensive ASSIST process whereby a JumpStart associate works with you to refine your business plan and presentation to make it more "investor ready." This assistance can be extremely beneficial to companies whether or not they progress toward receiving an investment. Obviously, companies receiving JumpStart investments will receive the highest level of assistance.
How long does the investing process take?
From receipt of a potential client's Executive Summary to a decision to fund takes eight to ten weeks. After a decision has been made, due diligence can take an additional two to four months.
Does JumpStart focus on any particular types of businesses?
Yes and no. First and foremost, JumpStart funds companies that fit into its target investing criteria, regardless of what industry they are in. However, JumpStart expects to see a significant number of businesses that are in areas particularly strong in Northeast Ohio: the IT, advanced materials, and biosciences industries. Because investing in the bioscience industry requires a unique set of skills and knowledge, JumpStart expects to work closely with BioEnterprise on these particular opportunities.
Is JumpStart going to run the businesses it invests in?
No. JumpStart believes it is critically important that a company's management team and leader are empowered and motivated. However, we're there to help in any way we can. There could be certain situations, such as those where the entrepreneur has requested more assistance than usual or where a company is not meeting its milestones that JumpStart is requested to become more involved in the business.
Does JumpStart provide grants?
No. JumpStart invests funds and requires equity in return for this investment.
What does JumpStart ask for in return for its investment?
JumpStart typically invests using convertible debt, which will ultimately be converted into equity in the company. We also ask for observer status on your company's board of directors.
How do I apply for consideration for funding from JumpStart?
You can find information on the application process here on the JumpStart website in the Investment Process section. You will be asked to initiate the process by completing the ADVISE Request Form and providing information about your company or idea in a short, electronic format. Following that, if the JumpStart Investment Team believes there is a potential fit, they will contact you to schedule an ADVISE session. If, as a result of that conversation, there is mutual agreement about the potential fit, you will be invited to APPLY by submitting an Executive Summary.
What happens after I apply?
The JumpStart team will review your Executive Summary and contact you about one to two weeks later with feedback and to determine any next steps. If you are not selected to move on to the next stage, it doesn't mean your idea is bad. It could mean that your written plan didn’t convey the idea as compellingly or simply as it could have, in which case you have the option to rewrite and resubmit it. It could also mean that the idea does not have a sustainable competitive advantage or differentiator. Or, it could simply mean that your growth objectives are not aligned with our investment objectives (for example, you don’t plan to raise additional equity investment from other investors). We welcome entrepreneurs back into our process if they are able to address any obstacles that we have identified or if there are material changes to their business of which we should be aware.
When JumpStart Says No
My business was just turned down for JumpStart financing. What gives? I thought JumpStart had a lot of funds to invest in Northeast Ohio businesses.
JumpStart does have a significant pool of money to invest in businesses in Northeast Ohio, which we define Ashland, Ashtabula, Carroll, Columbiana, Crawford, Cuyahoga, Erie, Geauga, Holmes, Huron, Lake, Lorain, Mahoning, Medina, Portage, Richland, Stark, Summit, Trumbull, Tuscarawas, and Wayne counties. We expect to invest a total of about $3-$4 million per year over the next five years in area companies and ideas, and while that's a considerable sum, it is not an endless pot of money. Because we expect our investment in any one company to range from about $50,000 up to as much as $800,000, and to average about $300,000, it's clear that the number of companies we are able to finance is finite. In fact, we expect to invest in about 10-12 companies per year for six years, for a maximum of 60. Compare that to the fact that, on average, we are receiving one new business idea every day.
But I have a very promising idea for a new restaurant. I've done my research, I have a lot of experience, and I'm sure it will work, and I'll probably employ twenty or twenty five people.
A restaurant is an excellent business to open. It's what we refer to as a "lifestyle" business, an owner-operated venue that can provide excellent returns and personal wealth, and certainly can employ a number of people in good jobs. Other lifestyle businesses might include a dry cleaning business, or a small retail shop, or even a small manufacturing facility, for example. But this type of business is not what we refer to as a high-growth-potential business, which, by our definition, means a company that will reach $30 to $50 million in revenues within five to seven years.
Why do you only consider funding what you call "high-growth-potential" businesses, and not "lifestyle" businesses like restaurants, or small retail stores, or even, say, a small manufacturing operation?
There are several reasons why JumpStart was mandated by its owners and funders to concentrate its efforts on high-growth-potential companies.
As an economic development organization partly funded by the State of Ohio, JumpStart's mission is to THINK BIG, to look for companies and ideas that have the opportunity to create wealth and employment on a very large scale. Fifty years ago, there were many such companies in Cleveland. Think TRW, Standard Oil, the steel giants. Many of these companies have either departed or no longer exist, and what our mission requires of us is to help identify and grow the replacements to these giants.
Think of us as working to renovate an old-growth forest by carefully and selectively tending to the seedlings of the future Giant Oaks and Redwoods. While we want that forest to be carpeted with lovely wildflowers and smaller trees, our job is to nurture the giants.
Another reason, of course, is that there are many other sources of money for smaller businesses to tap. Such traditional sources include angel investors, SBA loans, and government grants.
If JumpStart turns me down for financing, does that mean there is nothing you can do for me?
No. Every idea and business proposition that comes to JumpStart is carefully evaluated by a member of our investment team. There is also an abundance of community assets that can supply the specific resources you need to grow your business. We want EVERY new business to succeed, and we have put together a comprehensive list of Northeast Ohio resources on the Useful Links page of this site.
We also work very actively through our JumpStart Exchange program to provide networking venues and educational activities to unite you with other entrepreneurs, funding sources, service providers, and other relevant assistance to help you get your business up and running.
The bottom line is that it takes more than just money to grow a business, and even if JumpStart can't finance your business, we can help in other ways. Like yours, our time is finite and we need to stay true to our mission.
I believe my business does have the potential to achieve the kind of sales figures you talked about, and is in a high-technology area with a huge market potential. Why was I turned down?
Excellent question. There are several possible answers.
First, we may simply disagree on the potential of your business. Our decisions aren't personal; they're based on a lot of hard work and a fairly classic due diligence process. When we look at a company, we consider these broad topics:
- Potential of the company's technology and/or product/service offering
- Attractiveness and viability of the target market
- Experience and talent of the management team in place
- Financial model and revenue projections
- Potential to generate return on investment through an exit strategy
Of course you feel that all the above criteria are strong ones for your company, but we may not view things the same way.
Another possible reason is that your business may already be too far advanced for assistance by JumpStart. One important aspect of JumpStart's mandate is that we work with pre-seed and seed-stage companies. If you have advanced your company to the point where you're selling a significant amount of products or services, are profitable, or have already raised a significant amount of equity capital, you do not fit the profile of the kind of company JumpStart is looking to invest in.
To put it simply, you may not really need us.
In the final analysis, it comes down to the fact that we have a limited pool of money and time to invest in a select number of high-potential companies and we have to make hard choices, just like any other venture capital firm does, every day.
About JumpStart
What is the mission and vision of JumpStart Inc.?
The mission of JumpStart Inc. is to accelerate the growth of ideas and businesses into venture-ready companies through providing vital, focused resources to entrepreneurs and the community.
JumpStart's mission derives directly from its vision: To solidify, celebrate, and continually grow Northeast Ohio's position as a nationally significant center for entrepreneurship and innovation.
So, exactly what does that all mean?
JumpStart builds businesses. It invests funds in early-stage Northeast Ohio companies that have solid prospects for high growth, and then provides business services to help them achieve that growth.
JumpStart also organizes a variety of events intended to draw together Northeast Ohio's entrepreneurial community through its JumpStart Exchange program.
And how do you define Northeast Ohio?
JumpStart Inc. serves the entrepreneurial community in a 21-county area including Ashland, Ashtabula, Carroll, Columbiana, Crawford, Cuyahoga, Erie, Geauga, Holmes, Huron, Lake, Lorain, Mahoning, Medina, Portage, Richland, Stark, Summit, Trumbull, Tuscarawas, and Wayne counties.
When was JumpStart founded?
JumpStart was created early in 2004, when its founders NorTech and Case Western Reserve University decided to combine the efforts of four existing organizations all geared towards entrepreneurship.
Why was it founded?
It's no secret that the Northeast Ohio economy has lost a great deal of manufacturing jobs in recent years, and did not benefit as extensively as other regions in the wave of technology-based job growth that occurred in the 1990s. There is a clear need to create new jobs and wealth for the region's residents in coming years.
Who owns JumpStart Inc.?
JumpStart is owned by its founding entities, NorTech (the Northeast Ohio Technology Coalition) and Case Western Reserve University. It operates as an independent not-for-profit organization, however, with its own board of directors. It is a 501(c)(3) organization.
Who works for JumpStart?
JumpStart Inc.'s executive team is comprised of experienced entrepreneurs, investors, and business development professionals, many of whom have themselves either personally started or participated directly in starting and growing for-profit businesses. JumpStart's board of directors consists of entrepreneurs, economic development professionals, and academic leaders from throughout Northeast Ohio.
Is it a government organization or a private business?
JumpStart Inc. is a private, not-for-profit organization. It is not a government agency.
Where does JumpStart get funding?
JumpStart receives funding from several sources, including the State of Ohio, the Federal Government, Northeast Ohio corporations, Greater Cleveland Partnership, and area foundations, including the Fund for Our Economic Future, Cleveland Foundation, John S. and James L. Knight Foundation, Burton D. Morgan Foundation, and others. JumpStart also generates some revenue through event fees.
What makes JumpStart Inc. different from other economic development organizations?
Several things. JumpStart:
- Has its own pool of investment funding and makes equity investments in start-up companies
- Expends resources only on companies that have high-growth potential rather than on "lifestyle" businesses (restaurants, small-scale retail, etc.)
- Is very focused, concentrating its efforts on just two key areas: providing the development assistance and investment dollars that can make companies more successful, and doing events that bring entrepreneurs together
How does JumpStart measure its success?
We are highly accountable to our funders and customers and will report periodically on how we're doing. We measure JumpStart's success in several ways, including:
- The number of companies that receive business assistance
- The number of companies that receive funding
- The amount of additional funding received by our portfolio companies from outside investors
Economic Inclusion
What is economic inclusion?
Economic inclusion represents the process of overcoming the obstacles and barriers that serve to prevent or impede any segment of the population from participating fully in the workplace or marketplace. Economic Inclusion seeks to provide all people with equal consideration and access to available resources to most effectively compete for business and employment opportunities.
How many minority or women owned companies has Jumpstart invested in?
Jumpstart has made five investments in minority or women owned businesses in addition to providing in excess of 500 total hours of technical assistance to these companies. These companies include Day-Day, Ltd., CardioInsight, HF Food Technologies, Embrace Pet Insurance and MAR Systems LLC.
General Questions
What specifically is venture capital?
The Venture Capital (VC) Industry is a major source of funding for the entrepreneurial community. Venture Capital is capital provided by outside investors for financing of new or high growth businesses. Venture capital investments generally are high risk investments but offer the potential for above average returns. In exchange for the investment, the VC receives an equity stake in the business. The VC also helps the business develop its management team, and takes seats on the board of the company. VCs are typically interested in making a few large investments, due to the manpower needed to support each investment (recruiting and board seats). They focus not only on the business opportunity that is presented to them, but closely on the management team that is offered.
What is an angel investor?
An Angel Investor is a person who provides financial backing to very early-stage businesses or business concepts. Angel investors are typically entrepreneurs or executives who have become wealthy. Often these individuals are looking for a higher rate of return than would be given by more traditional investments and will be looking to play an active role in the management of the company. Instead of investing in the stock market or mutual funds, Angels take high risk investments with new companies.