Q&A: Elizabeth Edwards on Cincy's entrepreneurial ecosystem
Gene Monteith |
Thursday, September 09, 2010
Why did you found Metro Innovation, and what's it all about?
I wanted to do something out on my own and tackle projects that would bring me into contact with even more entrepreneurs, which is really what Cincinnati Innovates is all about -- discovering the technologies and products that are under development in our own back yard. Metro Innovation is a catalyst for innovation and entrepreneurship, and we're focused on helping cities, states and countries around the world figure out better ways to strengthen -- or even start -- to develop their entrepreneurial ecosystems. There are about 50 different organizations, programs, events, grant programs, loan programs just in greater Cincinnati alone. And our goal is to highlight some of those for aspiring entrepreneurs, bring them out of the woodwork, and connect them with those resources.
Tell me how Cincinnati Innovates got started.
When I was at Neyer Holdings, investing in startup companies, one of the main problems that we had was deal flow. We really struggled to find both quantity of deals and enough quality deals to invest in. So, that was really the genesis of InOneWeekend, which is a program we do with the universities where we take 100 people and we create a startup over a weekend. Now that program's in its third year. So we felt that was pretty effective, but we weren't necessarily identifying specific deal flows. So that's why we created Cincinnati Innovates, and that was based on a program developed by Kathryn Connor in Pittsburgh, and Kathryn helped us put together the plan for Cincinnati Innovates.
How does it work and how do people get into it?
Anyone can enter, anyone with a greater Cincinnati connection. There are grant awards, so they are not loans or investments, so it is free money. They are donated by 23 sponsors because those are folks who really want to support entrepreneurship and innovation locally in Cincinnati. The awards are used for commercialization of that product, that technology, that idea. You would really see a full spectrum of types of companies, types of technologies, and stage of development. Last year, our top award winner was an idea that was really at the concept stage. They didn't have a working prototype yet, and the $20,000 grant that Michael Bergman won (Bergman developed the Facebook-based game Numbskull, to help prepare students for the SAT) went toward actually creating that beta version of his game. And then the top patent award winner Jason Heikenfeld, a professor at the University of Cincinnati, went on to get a $3- million innovation award from the Ohio Third Frontier (for his company, Gamma Dynamics). So, that patent award got him one step closer to protecting intellectual property.
Are these all tech-based companies?
They're not all technology companies, and one of the frustrating things with venture capital is that it's been so narrowly focused on IT and biotech, and more recently on clean tech. You look at companies like Procter & Gamble. P&G is a consumer products company; and it would never qualify today for venture investments. Someone who says say "hey, I've got a really good idea for soap or for toilet paper." But at the time, P&G received angel investment from the father in law (of the founders). The Ohio Third Frontier has broadened that a little bit, which is good for Ohio, but it's really important to look beyond the traditional venture capital sectors and start to look at some of these new things, because that's where the returns are.
You're talking about this in the context of venture capital, right?
In terms of the state of growth for many of our startup companies, it's not just a function of how much VC capital we have available. When these companies walk in the door, what stage are they at? What level of quality have they achieved, or how much traction have they gotten? So we've been hard at work in the angel and venture capital industry here in Cincinnati. But it's only now with the Ohio Third Frontier programs that we're seeing even more activity, and even support for companies at the seed stage. When you look at venture capital investment in Ohio, versus other states, the average venture capital deal in the country is $7 million. That's because those companies have been in business for five years -- maybe two years. The companies in Cincinnati are newer, younger, and you see in Ohio that the average deal is $1 million. We're doing things to try to strengthen the deal flow pipeline, to bring more capital into the region. But that's really going to be driven by what quality deal we can showcase that can attract local and nonlocal investors.
How would you describe Cincinnati's environment with regard to innovation and entrepreneurship?
We're seeing a lot more deal flow, we're seeing a lot more participation in things like the Greater Cincinnati Venture Association, which is serious traction because if I were to say what's more important, having the capital or having the talent -- it's much more important to have the deals identified. Capital's not loyal -- it will move given the opportunity. So I think if I were to characterize it I would say it's exploding, and it's probably at a good time too, because a lot of these resources that have been in place for 25 years or more are seeing better utilization, higher quality utilization.
You've been an investor and an innovator yourself. Do you have any advice for those who are trying to get an idea off the drawing board and into the marketplace?
I think the greatest mistake that people make is they don't talk to mentors early enough and often enough -- patent attorneys, the Small Business Administration, lenders, angel investors, venture investors. I think that people kind of wait until they've, in their mind, perfected their solution. The second group entrepreneurs don't go to early enough or often enough are customers. We all think we are solving a really critical problem and then we go to customers after we've invested a million dollars and (launched) a marketing campaign and the sales don't come and we say why aren't people buying -- and maybe that's the first conversation you have with a customer, and that's way too late.