June 11, 2014: The Lorain County Community College Foundation received a $3 million award from the Ohio Third Frontier's Pre-Seed Fund Capitalization Program last week for its Innovation Fund. The fund awards early-stage capital to technology-based companies across the 21 counties of Northeast Ohio so they can validate their technologies and business concepts. It's the only one administered by a community college to receive State investment.
"When the Lorain County Community College Foundation began raising money to start the Innovation Fund more than seven years ago, we had a lot to prove," said Dennis Cocco, director of operations for the Innovation Fund and co-director of the Great Lakes Innovation and Development Enterprise (GLIDE), the incubator that administers the fund. "No other investment group was sitting quite so early in the capital continuum, let alone a community college that was venturing into a means of economic development that wasn't the status quo. But the State of Ohio stepped up and, with confidence stemming from the college's track record, helped capitalize a new source of funding for the region's entrepreneurs."
With an initial $400,000 grant in 2007, Ohio Third Frontier helped catalyze the Innovation Fund's existence in the region. Since then, several regional partners have committed both financial and operational resources to the fund, including The University of Akron, University of Akron Research Foundation, Stark State College, Cleveland State University, Youngstown State University, Youngstown Business Incubator, and Northeast Ohio Medical University. These partners, along with the Lorain County Community College Foundation, have matched continued investments from Ohio Third Frontier, which have reached $9.5 million with this most recent award.
"The State's ongoing support of the Innovation Fund has solidified its permanence as a critical resource within Northeast Ohio's entrepreneurial ecosystem. It's the first place our region's entrepreneurs turn after they've tapped out their personal finances and friends and family to keep their businesses going and has been recognized as a required step to accessing later-stage capital programs offered by the State," Cocco said.
Using a process similar to that of an angel or venture capital investors, the Innovation Fund has averaged six funding awards for 17 continuous quarters. Since its founding, the Innovation Fund has made 153 funding awards to 127 companies totaling $8.3 million. These modest awards of up to $100,000 are coupled with intensive business assistance provided by the Innovation Fund partners.
"The Innovation Fund is about giving entrepreneurs the right amount of money at the right time and then pairing it with milestone-based mentoring that helps them prove out their technologies or business models," said Cocco. "We come in when no other investor will because the risk is too high. The Innovation Fund takes on that risk and then starts to mitigate it so these companies can bring in the additional investment that's required to accelerate their growth even more."
This approach has helped the Innovation Fund's portfolio companies attract $5.5 million in co-investments and $145 million in follow-on investment.
"For every dollar the Innovation Fund has invested, its portfolio companies have raised 19 times that amount," Cocco said. "That's a pretty impressive return-on-investment and it's just the beginning as these companies are still young and still growing."
About the Innovation Fund
The Innovation Fund, founded by the Lorain County Community College Foundation, awards early-stage capital to technology-based companies in Northeast Ohio so they can validate their technologies and business concepts. The funding awards of up to $100,000 fill the capital needs of businesses that are at the earliest stage of development, before they can attract angel and venture capital funding. Funds from the Ohio Third Frontier are combined with matching support and contributions from partners to make the Innovation Fund awards. These partners include the University of Akron, the University of Akron Research Foundation, Cleveland State University, the Great Lakes Innovation and Development Enterprise, the Lorain County Community College Foundation, Stark State College, Youngstown State University, the Youngstown Business Incubator, and Northeast Ohio Medical University.