1. “EXTRA” JUNE BOARD MEETING
JUNE 18, 2013

2. MEETING AGENDA
• Welcome & April Minutes Approval
Williams, 5 min.
• Introduction to Strategy Conversation
Acho, 5 min.
• Where Have We Been?
Belk, 15 min.
• Where Are We Headed and Why? Leach & Belk, 3 hours
• Wrap Up
Williams, 40 min.
2

3. INTRODUCTION: JACKIE ACHO
JUMPSTART STRATEGY COMMITTEE CHAIR
3

4. WHERE HAVE WE BEEN?
CATHY BELK, CHIEF OPERATING OFFICER
4

5. PROCESS OVERVIEW
Board mtg Board mtg
Mar - April
Jan
Planning
Feb
Opportunity
assessment
May
Make choices
(identifying
strategies)
June
Build
implemen
-tation
plan
Write plan
Obj: High
engagement
Obj: JS associate
engagement, gather
ideas
Obj: Make informed
choices, prioritize
Obj: ID implement.
approach
Obj: Create one
document to guide path
Activities
• Identify teams
• Identify work
plan
Activities
• Gather and assess
data
• Identify opps and
develop hypoth.
Activities
• Gather data and test
hypotheses
• Develop strategies
Activities
• Assess
capabilities fit
• Develop
organiz.
plan
• Develop
metrics, budget
Activities
• Refine based on
feedback
• Write plan
Thus far planning activities have included:
• Engagement with over 50 people
• Interviews/input from over 50 non-JumpStart individuals
(entrepreneurs, customers, CDFI experts)
• Over 1,200 hours of time in considered discussion
• Over 60 hours of data assessment
• Met with 2 of the ad hoc Board committees (CDFI,
Investments)
We are here
5

6. VISION / MISSION EVOLUTION
Historical
Definition
2004-2006
2007-2009
2010-2012
Vision: Our reason for
being; the future we seek
to create
Mission: How we will work to make
the vision a reality
To solidify, celebrate and
continually grow Northeast
Ohio’s position as a
nationally significant center
for entrepreneurship and
innovation
To accelerate the growth of early
stage businesses and ideas into
venture ready companies through
providing vital, focused resources to
entrepreneurs and the community
The same
To accelerate the growth of early
stage businesses and ideas into
venture ready companies through
providing
a continuum of resources to
entrepreneurs and the community.
To increase the economic impact and sustainability of Northeast
Ohio’s entrepreneurial ecosystem, while leveraging JumpStart’s
experience and expertise to catalyze entrepreneurship nationally.
6

7. FROM FY11-12 STRATEGIC PLAN
5%
What JumpStart is
Deeply Passionate About
•
•
•
Transforming NEO into a nationally significant
entrepreneurial ecosystem
Correlating our practical experience and
expertise to Ohio and other region’s
entrepreneurial strategies
Working to enhance JumpStart’s operating
model to make us more sustainable over time
What JumpStart can
be Best in the
World At (BIWA)
•
•
•
Generating and communicating all the
exceptional outcomes from NEO ecosystem
Helping to build regional entrepreneurship and
innovation ecosystems by leveraging our
practical experience in and outside of Ohio
Building robust public/private/philanthropic
partnerships that support economic outcomes
What Drives
JumpStart’s
Resource Engine
(Cash, Time &
Brand)
15%
40%
40%
Ohio Third Frontier
Match for OTF
Brand
Volunteers
7

8. WHAT WE HAVE LEARNED IN OUR PROCESS?
What JumpStart is
Deeply Passionate About
•
•
•
Transforming NEO into a nationally significant
entrepreneurial ecosystem
Correlating our practical experience and
expertise to Ohio and other region’s
entrepreneurial strategies
Working to enhance JumpStart’s operating
model to make us more sustainable over time
20%
30%
20%
15%
Ohio Third Frontier
15%
What JumpStart
can be Best in the
World At (BIWA)
•
•
•
Generating and communicating all the
exceptional outcomes from NEO ecosystem
Helping to build regional entrepreneurship and
innovation ecosystems by leveraging our
practical experience in and outside of Ohio
Building robust public/private/philanthropic
partnerships that support economic outcomes
What Drives
JumpStart’s
Resource Engine
(Cash, Time &
Brand)
Match for OTF
Brand
Time- Volunteers
New Sources of
Revenue
8

9. WHERE ARE WE HEADED AND WHY?
RAY LEACH, CEO
9

10. HIGH-LEVEL SUMMARY OF THINKING
• Updated Vision: For every community to have a thriving, inclusive
entrepreneurial economy.
• Updated Mission: Over the next decade, JumpStart will drive human
and economic impact by partnering in NEO and with communities
throughout the U.S. to realize their entrepreneurial potential.
• Product offerings:
– Direct to Entrepreneurs:
• Assessments of individual entrepreneurial businesses
• Assistance products including education, talent, access to capital, revenue
acceleration, mentoring, marketing, and enhanced management services
• Access to Capital via loans or equity investment
– Direct to Communities:
• Assessments of their current programs and/or ecosystem
• Products to build the community’s ecosystem including fundraising (for non-profit or
for-profit programs), inclusion, marketing and communications, finance, information
technology/Salesforce/CRM, metrics systems, policy
• Delivery:
– Supported by consistent delivery process and technologies
– Delivered based on operating philosophy and culture:
10
challenging, honest, resourceful, insightful, engaged, fun (under development)

11. WHAT STAYS THE SAME GOING FORWARD?
• Direct services to technology entrepreneurs in NEO
• Leading the ESP NEO Network (16 collaborating orgs)
• Internal capabilities/capacities which support JumpStart
and other ecosystem members
–
–
–
–
–
–
Development
Finance
Grant Administration
Inclusion
Information Technology
Marketing
11

12. WHAT IS DIFFERENT?
Topic
FY14-16
Logic
Mission
(Appendix., 27)
To partner in NEO and throughout the U.S.
with communities to realize their
entrepreneurial potential
JumpStart’s customers are community leaders who
value a diverse set of activities that help them to realize
the potential of their entrepreneurial economy
NEO Investing
(Append., 28-32)
For-profit fund will invest in ~6 NEO early
stage companies each year who have greater
likelihood for quicker outcomes/ROI
Flat in seed stage; 67% decrease in Series A stage
anticipated over next 3 years in NEO; increased
sustainability for JumpStart and OTF; ability to raise
charitable match for investing has diminished
NEO Small
Business
Lending
(Append., 33-38)
Offer lending products to small businesses
through non-profit CDFI subsidiary
Aligns with increased priorities focused on “potential
gazelle” strategies of NEO and national customers
(funders); Significant market demand; leverages
partnerships which enable us to deploy capital;
capability to assess and provide technical assistance to
companies
Work with
leaders in
communities
outside NEO
Shift to selling more discrete products (as
opposed to current comprehensive national
consulting projects)
Better able to meet customer expectations; generate
margin; customer interest
Organizational
Focus
More focus on the customer (who pays)
Sell what customers want and will pay for
Products
(Append., 39)
Create, manage, and deliver discrete standard
products inside and outside NEO
Capture expertise of organization; leverage these
insights in order to generate margin for NEO programs
Organization
One JumpStart organization going forward
Integrate SME’s into developing and delivering
products across the country
Financing
Seeking $1.3M via variety of different
approaches to invest in operating capabilities
Current $1.3M gap in budget for FY14 (could be filled
with any additional cash resources secured)
12

13. NUMERIC & QUALITATIVE IMPACT METRICS / OUTCOMES
RELATED TO EIGHT DIFFERENCES
Topics
Historical
Future
Mission
(Appendix., 27)
NA
NA
NEO Investing
(Append., 28-32)
~$29M committed to 76 companies; $300M
in follow-on funding; helped to create 1,600
direct jobs; has returned $3.6M in capital to
date; $19M in marketable assets between
equity and loans on balance sheet today
Anticipate investing $8M in equity through 2015; $40M
in follow-on funding by 2017; will help to create ~200
direct new jobs; total fund return target of ~$20M, likely
to take 10 years for entire fund life
NEO Small
Business
Lending
(Append., 33-38)
NA
$1M in cumulative net profit by 2016, self-sufficiency
ratio of over 40% by 2016, write-off ratio under 5%
Work with
leaders in
communities
outside NEO
Have generated ~$5M in fees over 3 years;
all on comprehensive assessment projects,
14 projects completed; modest financial
contributions to support NEO programming
Generate resources totaling a minimum of $3M annual
by 2016; fees are able to provide cost-coverage for
NEO HQ staff that also benefit NEO programming as
well as cash to support NEO-focused programming
Organizational
Focus
Primarily focused on serving the state via
the Ohio Third Frontier as key client
Focused on OTF and other customer for $3M annually
or 30% of budget (whatever is larger) by 2016
Products
(Append., 39)
Primarily focused on delivering services in
NEO via Third Frontier approach
Development and management of suite of products to
serve NEO/OTF; leverage these solutions to generate
add’l revenues, increase national customer satisfaction
Organization
Customer-orientation (funders) limited to
CEO and small development team
Increased clarity on needs of existing and future
customers (funders) across the entire organization
All financial resources required on a yearto-year basis historically from new grants
or sources versus leveraging balance
$1.3M add’l to be secured for FY14 budget in order to
have resources required to invest in JumpStart
operations to be able to serve a broader range of clients 13
Financing

14. MOST SIGNIFICANT RISKS & MITIGANTS
Risks
Mitigant
Reduced impact in NEO due to
focus on regions outside of NEO
• Prioritize NEO first and foremost
Inability to close non-NEO sales
• Leveraging the learnings from Bridgespan along with implementing a detailed
business/leadership engagement approach that allows us to prioritize significant
customers while also building a sales pipeline ( challenges of a long sales
cycles)
Staffing
• High attention to change management internally including support: Lee Nielsen
• Deploy internal learning on recruiting talent to our own needs
• Secure investment financing needed to support needed compensation
requiremnts
• Crystal clear expectations, job descriptions for management and staff
OTF’s perceives JumpStart’s
ability and desire to help other
states as a negative
• Deliver desired metrics in NEO region
• Demonstrate transparency and credibility at every opportunity (e.g. Commission
meetings, relationship with DSA members, Commission retreat)
• Provide leadership with ESPs across state to support DSA’s priorities
• Demonstrate benefits of national expertise and relationships to the State of
Ohio
NEO entrepreneurs upset by
JumpStart directly investing in
fewer firms each year
• Demonstrate care for other funds in network including active monitoring of seed
stage capital availability
• Continue efforts to build additional sources of seed capital (e.g. super angels)
Financial risks associated with
CDFI
• Secure grants explicitly to support potential future write-offs (protecting capital)
• Prudent loan loss management policies including all lender/capital provider
approval of each loan after loan loss reserve used
14
• 100% committed to national best-practices and interactions with peers

15. DETAILED SUMMARY ON 8 KEY DIFFERENCES
RAY LEACH, CEO
15

16. MISSION
WHAT:
Over the next decade, JumpStart will drive inclusive human and economic impact by partnering in
NEO and with communities throughout the U.S. to realize their entrepreneurial potential.
WHY:
•
Inclusion is a critical element to our work and a key differentiator from others
•
Impact will be derived from both economic and economic measures: jobs, quality of jobs, capital
invested, revenue generated, per capita income compared to the region
•
We call out both our most important home region and our work in communities across the U.S.
•
We don’t work alone; partnering with the right partners is critical to success
•
Communities are our ultimate beneficiary. A community includes anyone the customer wants to
include– whether just a city or an entire region. The community also implies a specific geography,
as our work is place-based
•
JumpStart typically works with leaders in a community but may also work with entrepreneurs
•
JumpStart will understand success in the context of the community, its existing assets, its
momentum, and its opportunities
OUTSTANDING QUESTIONS, IF ANY:
None
16

17. FOR-PROFIT INVESTING IN NEO (“NEWCO1”)
WHAT:
Current JumpStart Evergreen Fund winds down and we will create a new for-profit fund which supports entrepreneurs
and invests to generate quicker economic impacts and ROI. Key elements:
•
For-profit fund (owned by JumpStart) with for-profit limited partners (limited partners will include Ohio Third
Frontier, NEO Corporations, Fund-of-funds, and/or individuals)
•
Will invest in capital-efficient businesses and those with speed-to-outcomes as proxy for exit (with exit expected in
6-8 as compared to current national average of 9 years)
•
Sectors to include healthcare IT, med devise, business/consumer, software
•
Anticipate ~12 investments from $8M fund, with avg. $650K; range $400K- $1.2M (15% maximum in 1 portfolio
co.)
•
Strongly prefer co-investing with other for-profit investors (angels/VC’s)
•
Typically will control a seat on the board of the portfolio company
•
Invest in same stage companies as before but with an eye towards management talent and speed-to-outcomes
(ROI)
•
Charge 2% management fee and 20% carry on fund
WHY:
•
The significant market failure has moved since Evergreen was formed in 2004, market gap in Series A space
targeted above expected to grow substantially in next five years
•
The seed stage has added multiple new funds since 2004, we are connected to these as well
•
Difficulty of raising charitable match required to access the OTF funds is another reason to shift to for-profit
17
OUTSTANDING QUESTIONS, IF ANY:

18. SMALL BUSINESS LENDING CDFI (“NEWCO2”)
WHAT:
JumpStart investigating creating a small business lending non-profit CDFI in early 2014.
•
Subsidiary expected to grow to $3M in income and $1M in “net profit” annually by 2016
•
Loans to existing small businesses with $250K - $5M in revenue, with a focus on working with those in lowmoderate income neighborhoods (60% of companies)
•
Loans from $50K - $400K with immediate amortization, full collateral/guaranty, and higher than market rates
Unique elements of this CDFI that help to ensure its market and financial success:
•
Historical engagement with this type of small business borrower – the broader market believes we do this work
now
•
Historical network of partners and credibility in outreach with inner city and minority communities, as well as
connection to Goldman Sachs 10KSB program
•
Unique JumpStart capabilities in the areas of 1) borrower (talent and skills) assessment, 2) mentor program, and
3) CDFI & banking experience staff in place; commitment to hire former bankers as the team expands over time
•
Assessment and 3 month TA (technical assistance) requirement prior to submitting a loan application
•
Financial management structure including loan loss reserve grants support specifically for bad loans, and
approvals required post-usage
•
Community engagement and visibility requirements for borrowers
18

19. SMALL BUSINESS LENDING CDFI (“NEWCO2”) - CONTINUED
WHY:
• Direct connection to JumpStart’s vision of creating inclusive entrepreneurial
economies and most particularly, within NEO
•
Strong correlation to increased interest from foundations and business community
who have a desire to focus on assisting high-potential small businesses that are nontech (potential gazelle focus of the Cleveland Foundation, FFEF and corporate
community)
•
Opportunity to meet a need for entrepreneurs and small business owners in the
region, while responding to the interest of our in-region customers
•
Opportunity Finance Network has identified a market need, particularly acute among
those in low-moderate income neighborhoods
•
JumpStart is building relationships needed for capitalization and to strengthen deal
flow
OUTSTANDING QUESTIONS, IF ANY:
• Is the board supportive of the CDFI being in JumpStart’s FY14-16 plan?
19

20. NATIONAL WORK SHIFTS FROM CONSULTING TO
GREATER PRODUCT DELIVERY FOCUS
WHAT:
•
Evolve the current nationally-focused consulting activities to selling and delivering discrete products to ecosystem
customers (vs. today’s longer, customized, complex consulting projects)
•
Staff out-bound sales activity focused on reaching highest priority markets as initially identified by “need-based”
market indicators as well as interest & champion in the region, funders identified
•
Build/ test products before adding to portfolio; initial list indicates up to 18 products would could be desired by the
market (likely to start with recruiting, inclusion, CRM, etc.)
•
Manage successful products; adapt to market feedback; internal integrity and constraints
•
Establish consistent delivery process in working with communities and regions
WHY:
•
Market contacts demonstrate high interest in purchasing discrete products today; limited competition exists today
•
Opportunity for very consistent product delivery
•
Lower price point makes it easier to for a customer to secure funds to pay for the product
•
Opportunity still exists to leverage relationship and upsell for incremental revenue
•
Standardized products are more efficient to deliver over time
•
Easier to be ensured of margin delivery if product pricing model is well-understood and consistent
OUTSTANDING QUESTIONS, IF ANY:
•
None
20

21. INCREASED ORGANIZATIONAL FOCUS
ON CUSTOMERS (FUNDERS)
WHAT:
• Evolve our internal culture to focus on building and delivering what customers
(funders) want in addition to what entrepreneurs need
•
Organizational and decision-making alignment around existing customer and
prioritized market opportunities
WHY:
• Philosophy leads to better alignment with our strategy of generating 30%+ or more of
revenue from new sources
•
Enables us to be more efficient
– “Speed to outcomes” philosophy keeps our time focused on companies closest
to generating what our in-region funders want, which is follow-on
capital, jobs, and exits
– Need to be more efficient directing us to build or curate products we can
monetize, such as online education modules
OUTSTANDING QUESTIONS, IF ANY:
• None
21

22. PRODUCT CREATION, MANAGEMENT
AND DELIVERY
WHAT:
•
Each service product we offer to either an entrepreneur or an ecosystem member can be
“productized” so that we can deliver it consistently
•
A “product” would reflect: 1) detailed product definition 2) the exact steps needed to deliver that
service within any market, 3) guidelines on the integrity of that product (what needs fidelity, what
can be more flexible)
•
We can sell and deliver different “flavors” of the same product, e.g. 1) a 2 day workshop at
JumpStart on the product, 2) a longer engagement in a region on the product, or 3) delivery of the
product ourselves (in some cases)
•
We will also establish processes for delivering the flavors and build skills and operating principles
to ensure those processes are followed (e.g. facilitation skills, positivity, etc.)
•
Products are managed over time so the product features and benefits can be adjusted based on
sales/market feedback, but maintain fidelity where needed
•
Currently implementing a cross-organization Lean/Agile business (product) development
framework to enable this to occur as effectively and efficiently as possible
WHY:
•
Through the definition of the product and the flavors, and the standardization of delivery process
and related time, we are able to build pricing models which enable us to generate margin
•
We can better set customer expectations and deliver on those expectations
OUTSTANDING QUESTIONS, IF ANY:
•
None
22

23. “ONE” JUMPSTART GOING FORWARD
(NO OPERATING SILOS BASED ON CLIENT TYPES)
WHAT:
• Redesign the organization to focus on four areas: 1) Sales/consulting and product
management, 2) Product Delivery, 3) Capital (including the new for-profit, the EMF
and the CDFI), and 4) Operations (e.g. finance, IT, marketing, fundraising)
•
Sales/consulting is customer facing; Product delivery is customer facing &/or client
facing (direct to entrepreneur and entrepreneurial ecosystem); Capital is client facing;
Operations is internally facing
•
Inclusion is embedded in all functions as opposed to be separated into own team
WHY:
• Enables better accountability for revenue
• Support consistent development, management, and delivery of products, in NEO and
in communities across the country
• Reflects ongoing commitment to inclusion across the organization
• Enables us to better leverage SMEs for any kind of client
• Efficient use of human resources
• Support a cohesive, transparent, and collaborative culture
OUTSTANDING QUESTIONS, IF ANY:
• None
23

24. SEEKING NEW SOURCES OF CASH
WHAT:
• $1.3M in new cash needed to implement initial FY14 budget from new sources to
invest in the evolution of JumpStart’s operations and to secure 100% outstanding
OTF grant funds
•
Preferred options for seeking these resources:
– Significant new grants received from philanthropy / corporations / RECS
– Additional exits (liquidity events) from Evergreen portfolio companies
– Increased lines of credit and/or bank loans collateralized by equity portfolio
– Sale of equities or early payback of loans:
• Value of current equities: $10.9 (mark-to-market value)
• Value of current loans: $3.6M (book value)
– Foundation Program Related Investments (PRI’s) collateralized by equity/loan
assets
WHY:
• Current Estimated FY 14 Sources: $12.3M (All grants & $1.3M of investment returns)
• Current Estimated FY14 Uses: $13.15
• Current Estimated FY14 Deficit: $850k + $450k to payout FY13 performance (cash
basis)
24
• TOTAL NEED: $1.3M

25. DIALOGUE & WRAP UP
25

26. APPENDIX
26

27. UPDATED VISION AND MISSION/INTENDED IMPACT
Vision
Historical
Definition
2004
2007
2011
2013
Mission
Our reason for being; the
future we seek to create
How we will work to make the vision a
reality
To solidify, celebrate and
continually grow Northeast
Ohio’s position as a nationally
significant center for
entrepreneurship and
innovation
To accelerate the growth of early stage
businesses and ideas into venture ready
companies through providing vital, focused
resources to entrepreneurs and the
community
The same
To accelerate the growth of early stage
businesses and ideas into venture ready
companies through providing a continuum of
resources to entrepreneurs and the
community.
To increase the economic impact and sustainability of Northeast Ohio’s
entrepreneurial ecosystem, while leveraging JumpStart’s experience and
expertise to catalyze entrepreneurship nationally.
For every community to have
a thriving, inclusive
entrepreneurial economy.
Over the next decade, JumpStart will drive
inclusive human and economic impact by
partnering in NEO and with communities
throughout the U.S. to realize their
27
entrepreneurial potential.

28. EVOLUTION AND FUTURE OF NEO “EQUITY” CAPITAL
• Seed stage capital sources have increased with the addition of hyper-local funds, the
Innovation Fund, county funds, and engagement of angels and angel networks
• Early stage capital (A, B rounds) from Ohio sources particularly is expected to drop off
dramatically with lack of renewal of OCF, lack of dry powder, and fundraising
challenges
• Charts reflect JumpStart’s expectations going forward
Deals
Deals
–
28

29. Relative Positioning of Northeast Ohio-Oriented Capital Going
Forward
Imagining
Incubating
Planning
Market Entry
Testing
Proving
Sustainability
Commercializing
Demonstrating
Growing
CCF Innovations
Bad Girl Ventures
LaunchTown
EMF
Alliance Startup
Fund
Mutual Capital
JumpStart’s Fund
Luxemburg
Shaker LaunchHouse
Arboretum
Wooster
Opportunity Loan
Fund
Portal Capital
Akron BioInvestments Funds
Zapis Capital
Canton
Entrepreneur
Launch
RiverVest
Chrysalis
Early Stage Partners
GCIC
Everett Partners
North Coast Angel Fund
Clarion Capital
Hatch
Barberton Growth
Fund
Innovation Fund
North Coast
Opportunities
Technology Fund
RMS Investments
Bizdom
Cuyahoga County Next Step
Edison Ventures
Glengary
Kadima
Concept Capital
Blue Olive Partners
Appleseed Microfinance
Public Square
Partners
NDI Healthcare
Case Tech Ventures
TechSprout
E Capital
Fletcher Spaght
Draper Triangle
Ventures
SunBridge
GREY = closed/out of funds/not investing
29

30. RECENT HISTORY OF ACTIVE NEO INVESTORS
(*) Fund has run
out of funds or
has decided to
close
(**) Funds have
money remaining to
invest, but are not
focused solely on NEO
(***) Funds have
money remaining and
make a high number of
investments in NEObased companies
(****) Estimate of how
many NEO companies a
firm will invest in per year.
Fractions indicate fewer
than one investment per
year in NEO, i.e. 25% = 1
investment every 4 years.
30

31. HISTORICAL AND FUTURE FUND OVERVIEW(S)
FY04-FY13
FY14-16
Business entity
Non-profit (501c3) with funding (grants)
from state grants and philanthropic
sources
For-profit orientation with for-profit
limited partners (the state and private
for-profit investors)
Investing thesis
• High velocity investor (10-15/year)
• “Plant many seeds” approach
• Provide “first outside money”
• Multiple sectors
• Fill gap left by market
• More focused on ROI/exit and
“Speed-to-Level As”
• Co-investments favored
• Multiple sectors
Funding Sources
Grants from Ohio Third Frontier and
philanthropic funders (foundations)
Loans from Ohio Third Frontier and
equity from LPs
Interest from Northeast Ohio Capital
Fund, super angels, and
corporations/foundations
Metrics
FOF, revenue, jobs, taxes, GDP/econ
impact
ROI, payroll taxes, GDP/econ impact,
FOF/revenue as a proxy toward ROI
Operations / Carry
Operating costs covered by state
grants and philanthropy with 100% of
returns coming back to JumpStart
Charge 2% Management fee on LP
money to cover operations expenses
and 20% carry on total fund
31

32. HISTORICAL AND FUTURE INVESTING DETAILS
FY04-13
FY14-16
Talent
Backed entrepreneurs who did not
always possess adaptive excellence
(i.e. A players)
Only invest in A players
Portfolio mix
Variety of sectors (bio, IT/software,
cleantech, bus/consumer)
Can invest in long term projects
requiring many future rounds of capital
Only invest in capital efficient
businesses and opportunity for ROI
Likely healthcare IT, med device,
bus/consumer
Speed of Progress
Projected exits 9-11 years
Projected exists 6-8 years
Total investment/co.
Avg. $400K/co
$250-600K range
Tranche based investment philosophy
Avg. $659K/co
$400K-$1.2M range
Tranche based investment philosophy
# investments for
$8M in capital
~20
~12
Governance/influenc
e
Board observer only
Board seat or control of seat
Stage
Imagining, incubating, demonstrating
(collectively “pre-market entry”)
Same stages (with increased focus on
companies that can progress quickly
and generate ROI)
32

33. SUMMARY OF WHAT WE KNOW RELATED TO CDFI
Summary of potential CDFI
Market need
Structure appropriate for
JumpStart
•
•
•
Loan supply has fallen 20-40% in the last 10 years
There is market demand for small business loans (pre-SBA)
No existing NEO CDFIs have proven capability to meet this
need
•
A non-profit subsidiary of JumpStart, focused on providing
small business loans.
Unique governance.
•
•
Financial summary
Operations
Supporters
•
•
•
•
•
Plan requires ~$12M in total financial resources from
customers over first ~3 years
$10M capital for lending, $2M for ops
Modest profitability based on projections
4 person team when fully established. 1.5 people to start.
Loan servicing outsourced
Back office ops also outsourced (to JumpStart): IT, marketing,
finances
Conversations with at least 6 potential partners in the region who
have expressed interest (regional foundations, regional banks,
family foundations)
•
Metrics
•
Job creation in inner city or job creation among low-moderate
income populations
Increasing sustainability over time
33

34. MOST RECENT WORK: JUMPSTART’S DUE DILIGENCE
OF THE CDFI OPPORTUNITY
•
Key issues for due diligence
–
–
–
–
–
–
•
Further identification of characteristics for potential borrowers
State and federal regulations to consider
Financial management of a small business lending CDFI
Brand, operations, and customer service performance expectations
Alignment with JumpStart’s historical and future work: “why JumpStart?”
Interest from customers/funders to financially support the CDFI
Process for due diligence
– Identify best-in-class and relevant partners to interview
– 27 individuals/organizations identified:
•
•
•
•
•
Small business bank lenders and bank CRA officers (Charter One, Federal
Reserve, Huntington, First Merit, Lorain National Bank, Key, PNC, US Bank)
Best-in-class Ohio CDFIs (Cincinnati Dev. Fund, Finance Fund Ohio, Village Capital)
New CDFIs (ECDI, Ohio Capital Finance Corp)
Best-in-class national CDFIs (Accion, Bridgeway Capital, Hope Enterprise, Pacific Community
Ventures, Philadelphia Industrial Dev. Corp, Wisconsin Women’s Business Initiative)
Other partners within the region (Urban League)
– 22 conversations completed thus far, with others scheduled
– Also reviewed websites and other sources for publically-available information (e.g.
State Dept. of Commerce)
34

35. CHARACTERISTICS OF POTENTIAL CDFI BORROWERS
Tools to support borrowers and
protect CDFI
Overview of characteristics
Financial
History
Personal
characteristic
s
•
•
•
•
•
In business for 2 years
$150K - 5M in revenue
Breakeven or positive cash flow
Collateral protection
Meaningful equity contribution
•
•
•
•
Relevant background
Business acumen
Committed to growth
Coachable; willing to participate
in TA program
Good character and chemistry
•
•
Geographic
characteristic
s
Industry
characteristic
s
•
•
•
•
•
•
•
•
Borrower Interview
Community recommendations
Industry ratios
Loan covenants
Flexible terms
Technical assistance requirement
•
•
Continuous client engagement
Mentor program (various
structures)
One-to-many education
Partner programs
•
•
Initial scope is 21 NEO
counties
Consider specific geographic
areas within the 21 counties to
initially concentrate on
•
Consider community partner
programs and geographic
coverage for deal flow and lack of
overlap
Consider industry-specific
originations (weighed against
portfolio diversification needs)
•
Consider community partner
programs for deal flow
35

36. FINANCIAL MANAGEMENT OF CDFI
Category
What we want
Approach
•
•
Portfolio
Performance
•
Strong healthy portfolio
•
•
Develop strong TA program: mentor program,
one-to-many education, partner programs
Report on loan portfolio monthly to the loan
committee and board for monitoring and
oversight
Leverage CDFI industry standards to help
committees understand risks
Develop procedures to guide protocol with
borrowers, particularly if a loan appears to be
underperforming
•
Sufficient loan originations
to generate fee and
interest income
•
•
•
Five borrowers in line prior to market launch
Strong partnerships with partner sources
Leverage JumpStart marketing expertise
•
Strong TA from partner
providers for that TA we
seek them to deliver
•
•
Identify strong providers for various needs
Leverage Goldman Sachs program for deal
flow
Pipeline
Technical
Assistance
36

37. WHY JUMPSTART AS A CDFI ACTOR?
Considerations
OFN interviews with board: yes
Proven history with this size “loans”
Two small business lenders on staff
High capability to launch, measure, adjust, learn
•
Does JumpStart have the technical
capabilities?
•
•
•
•
Existing work in inner cities and commitment to
inclusion provide foundation
JumpStart’s draft FY14-16 Intended Impact:
“Over the next decade, JumpStart will drive
inclusive human and economic impact in NEO and
throughout the U.S. by partnering with communities
to realize their entrepreneurial potential.”
Authentic desire to influence “human impact” (jobs,
families, communities
•
Does JumpStart have the desire to serve
this target market?
•
•
Does JumpStart have connections and
credibility in this target market?
•
•
Existing clients will be very small percentage of
potential borrowers
CDFI will be serving new market
Partnerships and new brand will aid transition
37

38. WHY JUMPSTART AS A CDFI ACTOR?
Considerations
OFN interviews with board: yes
Proven history with this size “loans”
Two small business lenders on staff
High capability to launch, measure, adjust, learn
•
Does JumpStart have the technical
capabilities?
•
•
•
•
Existing work in inner cities and commitment to
inclusion provide foundation
JumpStart’s draft FY14-16 Intended Impact:
“Over the next decade, JumpStart will drive
inclusive human and economic impact in NEO and
throughout the U.S. by partnering with communities
to realize their entrepreneurial potential.”
Authentic desire to influence “human impact” (jobs,
families, communities
•
Does JumpStart have the desire to serve
this target market?
•
•
Does JumpStart have connections and
credibility in this target market?
•
•
Existing clients will be very small percentage of
potential borrowers
CDFI will be serving new market
Partnerships and new brand will aid transition
38

39. EXAMPLES OF PRODUCTS / SERVICES
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Recruiting Talent for Companies
Assess and Advise Entrepreneurs (without requiring a direct connection to a specific fund(s))
Educational Services for Entrepreneurs (self-help)
CRM - Dealflow and Metrics System
Inclusion (cross-cutting implementation for ESP)
EMS (services provided to fund portfolio clients post investment)
Due diligence services for specific fund(s)
Mentoring for Companies
Development / Fundraising for Charitable and/or For-Profit Activities
Social Media / IT Platforms for Entrepreneurial Ecosystems
Investment Fund Development & Mngmt. (for non-profits and/or for-profits)
Capital Attraction for Companies
Public Policy Approaches To Accelerate Economies via Entrepreneurship
Regional Marketing for Entrepreneurial Ecosystem
Revenue Attraction Companies
Regional Ecosystem Assessment
101's for Starting up a non-profit VDO (legal, governance, finance, etc.)
Regional Entrepreneurial Ecosystem Approach (Creation and/or Acceleration)
39