Like many cities in the Rust Belt, Cleveland has struggled to reinvent its economy. The erosion of Cleveland’s manufacturing sector has not only undermined its once competitive edge, it has also triggered massive brain drain. According to the most recent report from the U.S. Census, Cleveland has witnessed an average population loss of 1% each year for the past decade: roughly about 45,000 residents. Job losses have also been immense in the area with the city losing roughly over 150,000 jobs over the past two decades. Even more striking is the fact that Cleveland has witnessed the exodus of many of its largest companies, which has further eroded the city’s base as a global economic hub.
However, beyond all the troubling statistics, Cleveland is well on its way towards revitalizing its entrepreneurial ecosystem. Understanding that the city’s economic future was at a pivotal crossroads, in 2004 leaders from all sectors came together to form JumpStart, a non-profit organization dedicated to providing intensive entrepreneurial development assistance to entrepreneurs leading high potential, early-stage companies. With many early successes it has quickly become a national model for new venture creation. John Torinus of the Milwaukee Journal Sentinel in his most recent article highlights that Cleveland’s jobs commitment is an enviable model. One of the most fascinating findings from Torinus's piece is that the fact that out of all of the 47 companies JumpStart has invested in, only three failed. According to Ray Leach, JumpStart’s CEO, the ventures created by the non-profit have helped to create over 700 jobs. This is a promising statistic, especially in an economy where every job matters.
For Cleveland to succeed in today’s innovative, knowledge based economy, it is clear that small-business creation will need to be a key ingredient. With small businesses accounting for 70% of all new job creation, cities now more than ever need to do whatever it takes to create the right entrepreneurial and regulatory climate for them to prosper. So far, with JumpStart and other key initiatives, Cleveland seems to be doing all the right things to ensure that it can help lead the Rust Belt towards a path of sustained economic vitality.
I am concerned that Ray Leach has made his way to advise this group on entrepreneurship and innovation. If you do a fact check on Ray's claims that he is a serial entreprenuer, you will see that he has never founded anything private startup of any magnitude (job creation, wealth creation for investors/employees, or revenue).
ReplyDeleteRay is the CEO of Jumpstart which is a government funded "non profit" which was formed to invest in and advise early stage companies/startups. Jumpstart is a great example of failures in government trying to create startups. Jumpstart has burned through $60m since it's founding and has very little to show for it. Out of the $60m only $16m has actually been invested in companies. The rest has gone to pay their high salaries and overhead. ($8m out of their $11m budget goes to fund overhead and salaries. Don't worry, it is gov money).
Ray just gave himself a $30k raise to bring his total comp to $428k and the top ten people bring in over $2.3m.
Despite these high salaries and enormous head count and overhead, there isn't hardly anyone on the staff with any startup success. After investing in close to 50 companies since 2004, there are few positive results and the RIO on the state money has been non existent.
There are groups like Jumsptart all over the country. They have produces results 10x that Jumpstart has on 10% of their budget. The reason you don't hear about them is they use their budgets wisely and don't have a 5 person marketing staff (Almost every other group like Jumpstart doesn't have 1 marketing person as they don't sell anything).
When Jumpstart was formed in 2004, its goal was that positive returns on their investments would make them self suffecient. This hasn't happened as they haven't had one positive exit after close to 50 comanies.
No private fund in the world would accept no returns after 6 years and $60 burned though and they would never tolerate that 75% of the fund went to fund overhead vs. 25% of the funds invested in companies.
If you do your research, you will realize that Jumpstart is a huge failure for the tax payers of Ohio. I am not against using gov money for economic development however, in Ohio, it isn't getting to the companies that need it, it is tied up in the many groups who admin the money while paying themselves salaries. Despite the fact that Jumpstart has 35 employees where the vast majority are making tremendously more than they have ever made in the private sector, almost no who works there has had any success founding a startup.
I don't mind that Ohio spends so much toward spurring startups, I mind that it is wasted. I hope the true and proven entreprenuers' voices on this panel drownd out Ray's.