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Case Study: Putting Cleveland on Entrepreneur’s Map

This is an excerpt of a story that originally appeared in Private Equity Analyst, a monthly magazine published by Dow Jones & Co. that covers the venture capital and private equity industries.

Nearly a decade ago, a group of community leaders decided to focus on Cleveland’s economic future instead of its past.

They wanted to make Northeast Ohio, once a center of industrial innovation, a good place to start companies again and were vexed by the fact that while Great Lakes pension funds, foundations and endowments were a major source of venture capital nationally, little of that money flowed back to the region.

Tapping state and private funds, the group set out to create an environment to encourage innovation and entrepreneurship. JumpStart Inc. is a centerpiece of that effort. It’s a nonprofit business accelerator providing entrepreneurs with financing and advice as well as promoting economic development initiatives and running outreach programs to encourage entrepreneurship.

Its venture capital unit, JumpStart Ventures, looks to finance technology, health-care and clean-technology companies at the earliest stages to get them to the point where they can attract money from angel investors and venture firms. JumpStart Ventures gets half its money from Ohio’s Third Frontier economic development initiative and half in matching grants, primarily from foundations in Ohio. It doesn’t invest for financial returns. “Follow-on funding is our key metric that we look at,” said JumpStart Ventures President Rebecca Braun.

As a measure of JumpStart’s success, she said that her venture group has invested $16.5 million in almost 50 companies since its launch in 2004, and those companies so far have raised about $120 million in follow-on rounds.

One of the companies JumpStart backed in 2006, CardioInsight Technologies Inc., raised a $6 million Series B financing earlier this year from prior investors Case Technology Ventures and Draper Triangle Ventures. The Cleveland-based company, which was started in 2005 by two doctoral students at Case Western Reserve University, is developing cardiac-mapping technology.

Another company, Cleveland-based OnShift, a developer of employee-scheduling software for businesses such as nursing homes that work in shifts, received a staged financing from JumpStart, North Coast Angel Fund and Early Stage Ventures. JumpStart put in an entrepreneur in residence, “a take-charge, no-nonsense manager” who helped the company sign up 60 customers in less than a year, said Jonathan Murray, the managing director who led the deal for Cleveland-based Early Stage last September.

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