A recent article in Crain’s Cleveland Business raises some questions about JumpStart, the entrepreneurial advocate and venture development organization serving Northeast Ohio. JumpStart has received a lot of national attention lately, including a new initiative announced by President Obama called JumpStart America.
Critics of the organization, led by three entrepreneurs who have failed to secure financing from JumpStart, suggest that too much of the nonprofit’s funds are spent on salaries (Ray Leach, JumpStart’s CEO reportedly makes over $323,000 a year) and not enough is invested in companies.
What is less obvious to observers is that JumpStart is doing the same work that many in the incubation industry have done for years, but has succeeded in selling itself as a new model for entrepreneurial success.
But, isn’t investing in start-ups, offering mentorship and business assistance exactly what many organizations around the country have been doing for over thirty years?
To be fair, JumpStart has some decent metrics in terms of jobs created and new investments attracted for the companies they have assisted. But so does Maine Technology Institute and i2E in Oklahoma and Ben Franklin and others who have been doing this for years. And, I am pretty sure they don’t have CEOs making over $300,000 (from state funds, no less).
The entire mini-controversy avoids the essential question – what can be done to encourage start-ups, and to quote Don Dodge, make them Finish-ups? Is it just funding? That’s what most entrepreneurs will tell you, but those of us who have been around this business for years will tell you that most business failures don’t come from lack of capital or even technology failure, but management failure. As so, to the extent possible, mentorship and business training is exactly what most entrepreneurs need, and few acknowledge. After all, the biggest failure is to not know what you don’t know.
In Maine, we have seen this writ large. All of our studies, year after year, note that some companies with MTI funding do grow, but that we are not seeing many (only 5 or 6 a year) make it past the 9 employee stage – in other words, they aren’t finishing up. Where is the biggest hole in Maine’s R&D investment policy? In entrepreneurship. The incubators in the state have been cut and cut and starved to death, and then vilified for not having results. Well, there is a minimal amount needed to field a sustainable program, and the state hasn’t stepped up to provide it. And MTI, in all its wisdom, has not filled the gap, arguing that the legislature doesn’t want to fund these centers, so they shouldn’t either.
This year, MTI’s budget is proposed to increase by $400,000 or so. We think that these funds would create a much greater impact if they were added to the incubator budget instead. MTI hasn’t spent it complete appropriation for many years, so they are not leaving any deals on the table and don’t need these funds. But an additional $400,000 per year would TRIPLE the incubator funding!
And, by the way, JumpStart spends $175,000 a DAY on entrepreneurship in Northeast Ohio, more than Maine spends in a YEAR.