Economic Development Podcast
Revitalizing Downtown through Entrepreneurship
Paul Kaboth: Welcome to the Federal Reserve's Economic Development podcast series. I'm Paul Kaboth with the Federal Reserve Bank of Cleveland.
As states and communities emerge from the Great Recession, many have increased their focus on developing businesses locally as a source of employment. Yet comprehensive and sustainable efforts to support entrepreneur activity present many challenges, especially since many start-up firms will fail. Northeast Ohio is one region that has successfully developed entrepreneurs through a sophisticated network of resources, and the model has been touted as an example for communities across the country.
Today we are speaking with two professionals from the region, Ray Leach, CEO of JumpStart, and Joe Marinucci, president and CEO of Downtown Cleveland Alliance, about how communities can better support local entrepreneurs. JumpStart supports entrepreneurs in northeast Ohio and is recognized nationally as a resource in entrepreneur development. The Downtown Cleveland Alliance works in partnership with downtown property owners and creates forums for communication and involvement with a diverse group of downtown stakeholders.
Welcome, Ray and Joe.
Joe Marinucci: It's a pleasure to be here.
Ray Leach: Thank you.
Kaboth:Joe, before we learn about your efforts, I would like to have you provide some context for your work. A little more than 50 years ago, Cleveland was the eighth largest city in the country. Now, it ranks 45th in population, according to the 2010 census. Tell us more about the factors that contributed to this dramatic population loss.
Marinucci: Cleveland, like a number of cities in the Northeast and the Midwest that had significant industrial manufacturing bases, went through some transition over the last 50 years. Part of that transition was movements of some of the manufacturing to different parts of the United States. Others were consolidations of many of the large corporate entities that were centered in cities like Cleveland. As a result, the core city lost some significant job opportunities and some population, although I would point out that northeast Ohio has remained fairly steady in terms of population. But what we've seen is a movement to suburban and exurban areas. So the population is more diffused, more dispersed than it had been historically.
Having said that, Cleveland did retain a significant amount of manufacturing capacity. In the current recession, Cleveland actually has done very well. And in some ways the manufacturers that have remained here have gone through a recapitalization process and as a result those manufacturers are more efficient. They're producing less jobs, unfortunately, but they still remain a very vibrant part of the economy.
Kaboth: Ray, JumpStart was founded in 2003 as an effort to address the disinvestment in Cleveland by large companies. Could you describe the original JumpStart model, as well as how and why it evolved through the years? Also, with the employment environment becoming more challenging, has JumpStart had to adjust its model in recent years to better facilitate entrepreneur success?
Leach: At JumpStart, while our focus has been always oriented and aligned with diverse and minority communities, we've been expanding our range of services and activities over the course of time to try to accelerate a broad range of entrepreneurs located throughout a 21-county region, but with a particular focus on downtown and the city of Cleveland.
Today we have a network of over a hundred organizations that JumpStart collaborates with, including bringing national players like Goldman Sachs and the Blackstone Launchpad to Cleveland to support entrepreneurs in our region. We've also been able to leverage the competency of our organization at JumpStart to also expand opportunities for "for-profit," experienced business professionals to get involved through mentoring. We've also been able to implement recruiting and talent activities where we've been able to recruit over 400 individuals to join boards of directors, boards of advisers, or management teams and these organizations as they've grown.
One of the most exciting aspects of our work is while we're a regional organization we've been able to build what we call "hyper-local" strategies and tactics. We have partnerships with the city of Cleveland and Cuyahoga County, but we also now have partnerships with almost a dozen cities across the 21 counties that want to do something specific and aligned to the assets and the industries and the resources in their region. Since we've been working on this, we're also now seeing a lot more grassroots entrepreneurial activity—coffee clubs, and start-up weekends, and both locally championed models as well as national models that are very much oriented around trying to engage hundreds of entrepreneurs in the region and get them more involved on the everyday activity of supporting each other and building a more robust economy through entrepreneurs.
Kaboth: How does JumpStart track success, Ray? In other words, what are the metrics you use to gauge impact, and what have been your results?
Leach: We're really proud of the results that JumpStart has been able to accomplish around follow-on private-sector funding in the companies that we've invested in, the number of jobs that those companies have created, the payroll tax and general tax receipts that have been generated by these firms. But at the same time we're also very much aligned around the quantitative metrics of how many entrepreneurs and collaborators we've engaged with in the region as well as qualitative outcomes. So we survey both our collaborators and the entrepreneurs that both JumpStart and our partners assist on an every six-month basis.
A good example would be JumpStart in our own fund. We have an investment fund here where we've invested about $26 million into 70 firms located in northeast Ohio over the course of the last seven or eight years. And those firms have attracted about $270 million of follow-on capital from the private sector over the course of that period of time. The ability to leverage the dollars that we're investing by attracting local, Midwest, and actually national and international investors to our community is a really important metric.
This both direct delivery and yet collaborative approach has been highly successful, and we have the outcomes and the metrics to validate and inform us on the things we need to focus on going forward.
Kaboth: Promoting entrepreneurship in downtown Cleveland is an important component of the Downtown Cleveland Alliance. Joe, how does your organization work in tandem with organizations like JumpStart, and what are the benefits to this type of collaborative approach?
Marinucci: We represent the property owners and the business interests of downtown. So what we try to do is create environments where we're touching entities that are generating that entrepreneurial activity.
Let me give me you a couple of examples in terms of that type of support. We've got an organization that is relatively new to Cleveland called Bizdom, a model that Dan Gilbert created in Detroit. Dan Gilbert is the CEO and founder of Quicken Loans, and has created a significant economic impact in downtown Detroit. He's brought this model here and it's essentially an entrepreneurial "boot camp" for aspiring entrepreneurs who are looking to create new companies based on embryonic business models. We think these companies can be germinated here, can grow here, and ultimately we'd love to have them located in downtown Cleveland and grow and prosper and add to the economic vitality of the region.
Another one that comes to mind is a group called Bad Girl Ventures, which is an entrepreneurial start-up competitive process based upon a national model that provides seed capital for female entrepreneurs, again looking at that business start-up mode. A number of their graduates, in fact, have located in downtown Cleveland. And again, we're trying to provide that connective tissue and the environment that would allow them to succeed here in Cleveland.
Kaboth: JumpStart has deployed its approach, which was honed in Cleveland, to other communities around the country. Ray, what attributes make the JumpStart model replicable? And also, what are the benefits and challenges you've encountered in exporting the JumpStart approach?
Leach: One of the tremendous assets JumpStart has, and northeast Ohio has developed over time, is this idea that a collective framework and the fact that public, private, philanthropic, and institutional organizations can come together with a common vision, and each work on different aspects of the opportunity or the problem. JumpStart has tremendously benefited from the idea that in the operating model of it's going to take actors from the institutions, the universities, the public sector, corporate leadership, and most importantly I guess, or one of the real drivers for us, has also been the foundation community. One of the challenges that we have in helping to replicate the way we think about these issues is how do we get major players to step up in other communities and understand that the only way to get to these kinds of solutions is a collective framework. How do we get them to self-identify or get them involved and then get those partners at the table to build a strategy that is collectively informed and also executed? And we've been able to do that in the dozen regions that we've been working in, but that doesn't happen overnight. So using northeast Ohio as an example has been a really powerful way to get communities to think differently about the way they're going to solve their most challenging problems.
Kaboth: And Ray, how does JumpStart engage populations who have struggled with traditional employment?
Leach: JumpStart's had very specific and focused initiatives in the inner city and with institutions that are housed in poor neighborhoods either helping firms land in those communities or supporting from a technical assistance and an investment point of view. Over the course of the last couple of years we've invested in 20 minority and women-owned or women-led companies, that's about 25 percent of our investment portfolio that are located in these geographies and have the potential to have a disproportionate impact on the traditional employment market.
A great example of a collaboration and a partnership we've been able to build of late is with Charter One Bank and their Launch100 program. That has also helped us partner with our First Client Pilot program. And what we do in that scenario is we work with companies that are looking to have greater success in their engagement with minority and inner-city-led companies, and JumpStart serves as both a technical assistance partner to the companies to help them be better prepared to grow their business locally, as well as outside the region, but with an intentional, at least initial focus, locally.
Kaboth: While some economic developers are focusing more on supporting the "grow-your-own" strategies like the JumpStart approach, there exists an opportunity for traditional economic developers to incorporate entrepreneurship into their overarching strategy. Joe, how might economic developers better employ entrepreneurship as an economic development strategy?
Marinucci: I'd look at it in two ways. One is to interact closely with organizations like JumpStart and Bizdom and Bad Girl Ventures. Traditionally economic development has tended to operate more in the realm of retaining existing businesses or attracting new businesses to your neighborhood or to your community. So intersecting with those entities, on the entrepreneurial side, the start-up side, is important.
The second is we have found that place making is vitally important to this effort as well. In the current environment we know that young professionals and entrepreneurial professionals want to be in environments where they can live and they can work in the same neighborhood.
So from our perspective here in downtown Cleveland we pay a lot of attention to the public realm, to the public amenities that are available here in the core of downtown. And what we want is to create an environment where people are comfortable walking, interacting, and creating the type of mixed-use environment where people could live and work in the same place. We know that historically jobs were created by larger companies that, in essence, made decisions on where to locate, and then the individuals seeking jobs went to those locations. We're now finding, though, that people are choosing where they want to live first and looking for jobs and opportunities in a second phase of that decision.
Kaboth: Thanks very much to both of you.
Marinucci: Thank you, Paul.
Leach: Thanks for having me.
Kaboth: This concludes our podcast. We've been speaking with Ray Leach of JumpStart and Joe Marinucci of the Downtown Cleveland Alliance.
Please save the date to join us at the 2013 Policy Summit on Housing, Human Capital, and Inequality, which will be held in Cleveland in September. For more information on this event hosted by the Cleveland and Philadelphia Reserve Banks, please go to www.clevelandfed.org.