04.11.04 OVA Lunch NOTES: GLITeC Advisor and Cleveland Tech Czar talk entrepreneurship

Submitted by Norm Roulet on Mon, 04/18/2005 - 02:10.

The 04.11.05 Ohio Venture Association (OVA) luncheon at the Cleveland Union Club featured City of Cleveland Senior Executive for Technology Development, aka “tech czar�, Michael DeAloia. Michael is responsible for expanding information technology focused business development in Cleveland, and his results to date are impressive, as highlighted below. Preceding Michael’s talk was a “5-Minute Forum� by Anthony Margida, Ph.D., the Battelle Company Formation Advisor to GLITeC, making this a very important, tech-centric innovation immersion event.

Following brief opening remarks by the OVA Director, and introductions by all attendees, Anthony makes a friendly outreach to this entrepreneurship community. Anthony is responsible for a critical business development opportunity area in Northeast Ohio – his firm, Battelle, works with GLITeC, “Great Lakes Information Technology Center�, to commercialize technologies developed by NASA at the Glenn Research Center, in Berea. The program, called “Emergent Services�, is an expansion of efforts to promote NASA technology transfer that has previously generated over $40 million in economic activity in the NEO region. Anthony was here to announce Battelle has made the decision to take the technology transfer process to the company formation level – to directly help create new companies and jobs based on NASA technology.

Their expanded initiative is packaging together technologies suited for transfer with strategic business planning, help forming the management team, expanding and leveraging business relationships and supporting pursuit of means of funding. Battelle wants to take advantage of the enterprise development resources already in place in Ohio so they are interested in seeking OVA affiliate assistance – many people who support OVA may have interests for managing or investing in new businesses formed from NASA technology, through this Emergent Services program.

Battelle creates new businesses by first identifying NASA technologies that have potential for business impact – a listing of available technologies is found at the GLITeC website. When interest in a technology is established, GLITeC will help identify business professionals to form a management team able to build an enterprise to take the technology to market. They provide support to develop business plans and form alliances with other businesses interested to partner or commercialize the technology. They further help the new business capture the first round of funding. This strategy follows a three-phase process of assessment, visioning and action.

They view their role as very far “downstream� – at the core value creation stage, before a business is conceived – making pre-seed development possible, leading the technology up-stream to commercial enterprise through relations with other area entrepreneurial business launch resources like NEO411, angels, Jump Start, VC’s, eventually leading to traditional commercial financing. They are looking for entrepreneurship and business development relations to fit their mission, and welcome OVA affiliates to get in touch to discuss alignments.

Today’s featured speaker Michael DeAloia has a long professional history in IT. He speaks to OVA members about his initiatives to enhance “The Cleveland Tech Industry�

DOWNLOAD MICHAEL'S POWERPOINT PRESENTATION HERE (645Kb)

He points out that every day he is confronted by people who say “IT will never take hold in NEO�, yet it represents $1 billion in annual revenues and is second only to healthcare in jobs provided – over 11K.

We need to organize IT industry silos into a more effective cluster – noting the industry here includes 2,800 companies that typically only employ 4 people and have sales of under $500K. There are large players, but they are geographically dispersed – despite the “regionalization� mantra of this area, Michael says Cleveland is trying to pull together into a strong central Cleveland core as many regional IT companies as possible – he sees this as essential to the regional economy, stressing all strong regional economies have a strong core.

Michael explains, to improve the IT industry cluster here we need to work on workforce skills development, flow and continuity of venture financing, and shake up line of credit availability.

Of all the state funding for IT related initiatives, like Third Frontier, Cleveland funding levels typically rank number 1 in the state. Since 2002, $90 million in funding from Third Frontier has come to Cleveland.

He exclaims the importance of the emergence of seed funds for entrepreneurship in the area. Still, the city would like to see more funds for seed and early stage ventures. He sees need to bridge together community supporting entrepreneurship here, represented by Nortech, NEOSA, JumpStart and other development organizations… wants $500 million in emerging ventures funds available by 2010.

Cleveland has vision – heavily recruit tech companies – aggregate capital in tech industry – create a spectrum of entrepreneurial education from grade school to grad school

Recruit/nurture – street level – aggregate companies in downtown – target E 9th, Huron, Prospect, W 6th, W 9th.

Regarding what type of companies city may help succeed here - need to first see revenues before city can provide much help – working with emerging growth.

Incentives – well positioned to provide tech loans - $2.5 million available – looking for business plans to review – fixed interest rates – subsidized mezzanine stage – 50% employee tax rebate – grant options – R&D tax credit – patent credit (if based in Cleveland you get a $500 award for patents)… considering IP as asset base

Centers of excellence – world-class private sector, public supported facilities to invite in other companies – e.g. disaster recovery/business continuity – search engine optimization – MEMS – Fuel Cells – Medical Devices

Support angel fund initiative – New market tax credit fund

Plug and Play – they will co-invest with venture funds and private equity funds on a non-equity basis – use of low-interest loans

Potential/considered strategies – line of credit guarantee – solve the short-term liquidity problems – Venture bank – pool together many banks into new fund/entity

Education – city tech certification – Cleveland municipal school system for five unique centers of excellence – e.g. John Hay will be school of science and medicine – Entrepreneurial academy (e-city) – Venture capital institute – CEO Forum (50 emerging CEOs and 50 old-line CEOs in a room to cross-pollinate) – “The Red Room Dialogues�… private forums of IT and Mayor

Conclusion is very positive – “I am buying stock in Cleveland – it will become a growth stock�.

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