Here's a novel concept: philanthropic organizations joining forces to transform a flagging regional economy by fostering entrepreneurship. Sound improbable? In Ohio, 80 entities formed Fund for Our Economic Future to do just that.
The three-year initiative launched in 2004 has raised $35 million, which is earmarked in part for fostering entrepreneurship and business formation in sectors with strong growth potential. "Our goal is to shift the regional economy from traditional industries to promising areas such as advanced energy, nanotechnology and electronics," explains Bradley Whitehead, who oversees implementation of the fund's initiatives.
Rather than investing directly, the fund bestows grants on nonprofit venture development entities like BioEnterprise and JumpStart. These, in turn, offer assistance to early stage ventures in the region, ranging from lending expertise to providing funds. JumpStart, for example, advises and funds companies across industry sectors, investing between $50,000 and $500,000 in its portfolio companies. BioEnterprise focuses on offering a broad spectrum of assistance to companies in the health-care sector and on gaining recognition for the region among the national VC community. In the past three years, BioEnterprise has received $3.65 million from Fund for Our Economic Future--money it has employed to help early stage firms build management teams, commercialize innovations and reach out to investors.
"BioEnterprise provided us with three major areas of support," says J. Lloyd Breedlove, 58, former CEO and current board member of Imalux, a medical imaging device company that benefited directly from the fund's grant to BioEnterprise. "They helped with early fundraising, including connecting us with potential investors; assisted in preparing materials; and made introductions to our current CFO and chief medical officer, as well as to our investment bank and to key contacts at medical facilities."
The trickle-down approach is also paying off for the region as a whole, says Baiju Shah, president and CEO of BioEnterprise. "Prior to 2002, Cleveland was barely a blip on the radar for attracting health-care VC funding," he reports. "We were getting roughly $30 million a year through the [dotcom] bubble. Last year, we attracted $171 million."
While Fund for Our Economic Future remains something of an anomaly in the region, other would-be hotbeds of innovation are taking notice. "We've had interest from lots of people looking for the magic elixir," says Whitehead. "We've heard from Buffalo, Houston, Toledo and even Ireland, but we haven't seen anyone pull it together yet."