Advice From Cleveland's Top VC Exec: Hire Older Workers

You don’t need to put down roots in New York or Silicon Valley to thrive in business today. John Dearborn, president of the nonprofit VC JumpStart Inc., offers three tips for maximizing resources in a mid-sized city.

Nowadays, anyone can start a business anywhere and thrive. We’ve seen it in all corners of the country, from mobile-app makers in Durham, North Carolina, to iPad kiosk manufacturers in Salt Lake City, Utah. And yet. Nothing quite compares to bumping into top VC execs at Duane Reade and taking b-school classes at Stanford alongside guys from Google and YouTube. Innovation might abound across the United States, but in the resources department, New York and Silicon Valley still play lead.

That’s not to suggest that smaller cities aren’t rife with incubators, investors, and other support needed to succeed in business. It’s just that sometimes it’s hard to know where to look. Here, John Dearborn, president of the Cleveland-based nonprofit VC firm JumpStart Inc., shares three tips for maximizing resources in mid-sized cities.

Let us now praise older men (and women).

"When you think of startups, you tend to think of what the popular press covers, Facebook and really young firms," Dearborn says. But focusing on sexy young things can miss an enormous swath of potential innovators with experience under their belts. JumpStart’s average applicant is in his mid-40s and out of traditional industry—not necessarily your hip-innovator profile, but definitely undervalued.

Older workers bring not just experience with them, they bring a whole network of people.

Many of these older entrepreneurs bring ideas that were the results of recreational tinkering, either at the lab or the factory: useful innovations their bosses deemed either too small-potatoes or too off-industry to pursue, Dearborn says. Others walk in the door with their early-retirement package in hand, looking to fund phase two of their careers. "Older workers bring not just experience with them, they bring a whole network of people" to realize the idea, Dearborn says.

Need investors? Look under a rock.

A frequent complaint among entrepreneurs in smaller markets is lack of investment dollars. It's not unwarranted: If you live in Grand Rapids or Greenville or Bismarck, you won’t be rubbing shoulders with the VC big boys. But that shouldn’t stop you. Many mid-sized cities are teeming with investors, if you know where to look.

Northeast Ohio, for instance, has a plethora of community investment funds, microlenders, and private-equity and accelerator funds, bolstered by statewide resources like Ohio Capital Fund and Ohio Third Frontier Fund. Goldman Sachs just contributed $15 million in capital to Cleveland via its 10,000 Small Businesses initiative. Ohio also has the nation’s largest angel funds (Ohio TechAngels Fund in Columbus, North Coast Angel in Cleveland) according to the Angel Capital Association. Collectively JumpStart calculates Ohio-based organizations like these have offered $1 billion in startup capital in the last five years—that’s since the Great Recession hit. Not too shabby for a Rust Belt state in post-deindustrialized America.

Repurpose old industries.

Manufacturing is back in vogue, though obviously not on the scale it once was. That has created opportunities for many mid-sized cities to adapt existing industrial facilities and skilled workers to the demands of the 21st century. "Say you’re a startup making widgets," Dearborn says. "You need to get that widget prototyped, get your early runs done, iterate a dozen times to perfect it. You want to do all that close to home. You’ll worry about the per-unit cost later."

Manufacturing is back in vogue.

In Cleveland, clean-tech firms like Echogen Power Systems commercialize waste-heat from factories and other facilities into re-useable energy, while ABSMaterials cleans up volatile industrial spills with "nanosands" and reactive glass products. Firms like these aim to benefit when China’s traditional manufacturing hits the same speed bumps ours once did.

A more offbeat example of repurposed manufacturing skills is Cleveland Whiskey, a bourbon distillery that accelerates production times, reducing costs and still yielded a mellow, smooth-drinkin’ product. Its patent-pending process borrows from its founder’s experience in engineering and thermodynamics—but ultimately stems from bootleg liquors he made in the Navy using sea-water condensers.

"I love the normalcy of Cleveland. There’s regular people there." That back-handed praise (from the king of normal himself, Drew Carey) captures the way your average bi-coastal snob feels about, well, pretty much any city that isn’t New York, San Francisco or L.A. But the rewards for entrepreneurs in smaller cities can be manifold: lower operating costs, fewer distractions, and heck, maybe even a happier life. America's innovative streak runs much deeper than its coast-centric media image; it takes a true visionary to mine it.

Follow the conversation on Twitter using the tag #USInnovation.

[Image: Flickr user Xiaofan Luo]

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3 Comments

  • Mike Burkons

    Shannon,

    Interesting comment and I agree with your point of view.  I find it interesting that people like this reporter look to a group like Jumpstart to provide expert advice.  Since 2004, they have spent over $80m (mostly your tax dollars) while only investing $23m in companies.  So far, the ROI from the $23m invested is about $1m.   They keep defending this terrible investing record claiming it is still early.  We are going on 8 years so you would hope they would have a few more exits in that time period.

    What is sickening is the majority of their budget goes to pay their high overhead and salaries.  There is a group like Jumpstart in every city in the county.   Almost all of them operate on less than $1-2m a year.  Not Jumpstart, $10m to fund their non investment operations.  The majority of jobs created by Jumpstart are for the ones who work there.

  • Bill Sterzenbach

    As a partner in a company that just started a new office in Cleveland, I'm pretty thrilled. We've found quality affordable space, and rich market, and great talent. You really can't grasp the sheer vastness of this market until you work in it. I can agree that Cleveland is a not-so-hidden gem of a market to grow a business.

  • Shannon Okey

    Hey, I've got a crazy idea. How about we talk to someone who actually owns a small business in Cleveland, a business that went from zero to six figures in less than two years with a single owner/employee (and a rotating team of freelancers), a company that was immediately profitable, has been in the black ever since, and yet can't get money from any of the sources you've named?

    That company is mine.

    The Goldman Sachs 10,000 Small Businesses initiative is all well and good if you're not actually already -- OH, RUNNING A BUSINESS. I work 60+ hours a week and still don't get everything done, and the only reason I'm not working 80 is because I hired a part time VA recently. Giving up days to classroom time is not an option, especially when I support the company in part by continuing to present and teach on the road many days out of the year.

    Why not apply for a bank loan? Our bank was touting its increased support of women entrepreneurs, after all. I went through the process. $10,000 would have made a critical difference at that stage in our development. The underwriters couldn't be bothered to pick up their pens for less than $20,000. They offered us a credit card -- which was great, but our printers don't accept credit cards, so it wouldn't do us much good. We declined.

    Then we ran a Kickstarter and raised over $12,000 for one of our book series (we're in a niche publishing field which has a buying pool of millions, inside a billion-dollar-plus industry). I had a great time printing out the final Kickstarter total and putting it on the bank manager's desk, believe me. I also had a spectacular time pointing out the hypocrisy to upper leadership at the bank. Don't claim to support women business owners and then offer them nothing but tea parties and socializing. Yes, "[bankname]4Women," I'm looking at you.

    What my company needs is cash, and Cleveland is not willing to supply it. Thank goodness I can look outside my city for support, because the second you're about to claw your way out of the boiling water, the other lobsters pull you back. 

    The only investments the angels are interested in here are tech, and though publishing has a growing tech component and plenty of opportunity we can't even touch right now because we're underfunded, no one is stepping up to look outside their comfort zone a little. We ARE repurposing an older industry, but because we're not full to the brim with brogrammers, no one is interested. 

    So tell me another tale about this magical Cleveland, ripe with opportunity, because I'm not seeing it, and I'm on the front lines.