Jerry Frantz: While the number of startups grows, the investment capital pool is lagging

The buzz about entrepreneurship continues to explode nationally — today, there are more than 1,200 incubators, 200 accelerators and 450 crowdfunding platforms available across the country to help young companies grow. Also in the mix are networking, training and support programs such as  1 Million Cups, Venture For America and Startup Weekend.

Higher education is another driver of the entrepreneurial spirit: According to the Kauffman Foundation, there are now 2,335 full-time undergraduate and graduate entrepreneurship programs. 

What is true nationally is true here in Northeast Ohio. With the support from Ohio Third Frontier, JumpStart and its partners have formed a network of seed funds, mentors, incubators and accelerators, all intent on working together to accelerate the successes of the region’s diverse, high potential entrepreneurial firms.

While this support is helping our young firms make progress faster, it is also creating a new, unintended, challenge. The pool of startup companies is getting bigger and stronger nationally, but the pool of investment capital is not. Competition for money is increasing as entrepreneurs vie for their share of the follow-on funding pie — whether it’s from venture capital funds, angel investors or government grants.

Efforts need to speed up

In light of these factors, and to increase our regional competitiveness, we must continue to accelerate efforts to help local startup companies stand out and attract resources needed for growth. For example:

  Select Northeast Ohio companies are becoming more interested in startups as a source of innovative technologies — a trend we hope increases. Support from regional corporations — whether as a beta customer, subject matter expert and/or investor — can bring critical resources to young entrepreneurial businesses while offering the large companies an early look at new technologies.   

  University-based technology transfer offices are increasing their focus on new ways to drive commercialization. Key initiatives include forming new seed funds to help develop innovative technologies and implementing new commercialization training programs.

■  High-net-worth individuals engaging more with organizations in our region to gain insights on how to navigate through the risks and rewards of investing. Organized angel groups such as North Coast Angel Fund are a valuable source of follow-on capital while ARCHAngels provides a forum to connect entrepreneurs with potential funders and resource providers. An ever-increasing number of highly qualified individuals are volunteering their time to help the region’s most promising young tech companies. With the support of the Burton D. Morgan Foundation, JumpStart has introduced a mentoring program to efficiently and effectively expand our ability to deliver assistance directly to some of the region’s most promising entrepreneurs.

 

The future is clear

Why is all of this support so important? Young entrepreneurial companies are our nation’s new job creators: According to the Kauffman Foundation, between 1980 and 2005, all net new job growth in America was produced by companies less than five years old.

Although the momentum we have built around a culture of entrepreneurship in Northeast Ohio has been substantial, our work isn’t done. Increased collaboration — and plenty of creativity — can further strengthen our entrepreneurial ecosystem and drive significant economic impact.

Jerry Frantz manages the entrepreneurial services and investing team at JumpStart Inc. and has helped provide advisory support to more than 75 portfolio companies. Contact Frantz by email at [email protected]. For more information, visit www.jumpstartinc.org.

 

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