“Welcome to Believeland!,” was the enthusiastic greeting from Ray Leach, CEO of JumpStart, Inc., to an audience of entrepreneurs, venture capital investors, nonprofits, foundations, government entities, universities, and corporations, who were among the hundreds gathered for JumpStart, Inc.’s Second Annual Startup ScaleUp event in Cleveland.
Believeland is a fitting moniker for a city that is celebrating its first professional sports championship in 52 years, will host one of the nation’s preeminent political events, and represents the forefront of the vibrant, diverse and active entrepreneurial ecosystem growing across Ohio. Chief among the priorities of Ohio leaders in innovation and entrepreneurship is a focus on leveraging its greatest asset – their people. In Cleveland, a majority minority city, people of different ethnic and racial backgrounds, women, immigrants, students are all playing a central role in revitalization. NVCA has made diversity and inclusion key priorities in our work to support the entrepreneurial ecosystem.
“We think about inclusion from the perspective of supporting innovation in diverse geographies and leveraging the talents of people of diverse backgrounds, gender and races,” Bobby Franklin, NVCA President and CEO, told the audience. “Ohio has a lot to share with the rest of the country.”
This year, JumpStart, Inc. announced the Focus Fund, a $10 million venture capital fund that will exclusively fund women and minority-led startup companies based in Ohio or, willing to relocate to Ohio. The Ohio Third Frontier, a public sector technology-based economic development initiative, has made diversity foundational to its mission to accelerate the growth of startups and invested $5 million in the Focus Fund. The Focus Fund is one of the very first funds in the country to integrate diversity into its investment thesis. The fund itself is an achievement – even before it deploys any capital – and is emblematic of the public-private partnership that seem to define much of the successful development in the state.
Walking around Cleveland, one finds many reasons why an entrepreneur might choose Ohio. With 38 colleges and universities, The Cleveland Clinic, affordable real estate and a growing venture capital ecosystem, the state has the talent, capital and resources to attract top companies. The outward signs of progress are paralleled by the long-term vision of Ohio corporations, venture capital firms, government entities, nonprofits, universities, foundations, and life sciences and technology companies to advance a concerted and collaborative effort to build a sustainable entrepreneurial ecosystem.
The rise of Ohio’s increasingly diverse entrepreneurial ecosystem becomes clear in the data. Our 2015 Venture Investment MSA Report tracking venture capital investment by metropolitan statistical areas (MSA) showed Ohio cities Columbus, Cleveland and Cincinnati occupied three of the top 35 slots. Venture capitalists within and outside of Ohio collectively invested $263 million in Ohio-based companies in 2015, according to the NVCA/PwC MoneyTree Report.
The number of venture capital deals in Ohio has grown at a rate of 2 percent annually from 2010 to 2015, with the rate of VC dollars invested in the state growing at a rate of 4 percent over that same time period. To put this into perspective, Ohio ranks 24th for deals and 32nd for dollars, nationwide. Within the state, Columbus has seen the highest growth in recent years: 20 percent growth in annual number of companies receiving venture capital funding from 2010-2015 and ranks 14th among nationwide MSAs, according to the MoneyTree Report.
The investment flowing into the state is an early sign that the commitment of the entrepreneurial ecosystem to growth in Ohio is working. In 2005, seeing an enormous gap between the availability of private capital and the number of growing startups in Cleveland, then-mid-twenties business partners Wayne Wallace and Bill Trainor founded Mutual Capital Partners. Mutual Capital Partners focuses on healthcare and IT businesses and has helped to close the Series A Gap that hinders entrepreneurial activity across the country. NCT Ventures in Columbus have shaped the national conversation around the importance of diversity, particularly around the untapped pipeline of minority owned businesses in the U.S.
On this end-of-June day, over 1,000 founders, investors, nonprofits, students from across Ohio’s entrepreneurial ecosystem and beyond, gather for JumpStart’s Startup ScaleUp event in the newly-hip Gordon Square neighborhood of Cleveland. In the words of Leach, Startup ScaleUp hopes to accomplish one simple goal: to build networks among diverse groups of innovators. These new networks will be critical to growing Ohio’s technology and life sciences sectors, and in the long-term, the prosperity of the state.
In the Near West Theater in Gordon Square, Leach, Emily Mendell of Polaris Partners in Boston, Mia Hegazy of Catalyst Investors in New York, Rod Robinson, founder & CEO of ConnXus, and Chris Powell, CEO of Blackbook HR are onstage to discuss pathways to expanding diversity in venture capital firms and venture-backed companies. There is no sweeping over the reality – fewer than ten percent of leaders within venture capital are women or underrepresented minorities.
As a testament to the change happening within the industry, Mia cites the Catalyst team’s consistent focus the importance of diversity and their mission to bring more diverse independent directors onto their portfolio company boards to drive change. Robinson, whose company is based in Cincinnati, agrees diverse company leadership is key. It is the day-to-day work of firms and companies to shift long-standing behaviors to build diverse teams that will foment change that is critical to the competitiveness and future of the ecosystem.
Amid the streets of Gordon Square, the presence of one Cleveland’s most prominent citizens, one of the visionaries of the venture capital industry, its pioneer, its stalwart champion cannot be seen, but his impact is evident everywhere. David Morgenthaler, founder of Morgenthaler Ventures and founding member of the National Venture Capital Association, started his firm in 1968 to realize the uniquely American vision of risking capital for an idea that could change the world. With his recent passing on June 17, Morgenthaler left his home city with an incredible legacy. Morgenthaler Ventures has funded more than 300 companies, including Apple, NEXTEL, Lending Club and Siri to name a few.
The public policies David championed, the trade association he founded, the entrepreneurs he supported all shepherded venture capital from a cottage industry to one of the driving forces of the American economy. On this day, with thousands of entrepreneurs from different backgrounds testing ideas, building connections, and leading product demos, the spirit of entrepreneurship that Morgenthaler helped instill carries on.