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Jumpstart board meeting 6 18 13

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Jumpstart board meeting 6 18 13

  1. 1. “EXTRA” JUNE BOARD MEETING JUNE 18, 2013
  2. 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. 3. INTRODUCTION: JACKIE ACHO JUMPSTART STRATEGY COMMITTEE CHAIR 3
  4. 4. WHERE HAVE WE BEEN? CATHY BELK, CHIEF OPERATING OFFICER 4
  5. 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. 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. 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. 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. 9. WHERE ARE WE HEADED AND WHY? RAY LEACH, CEO 9
  10. 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. 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. 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. 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. 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. 15. DETAILED SUMMARY ON 8 KEY DIFFERENCES RAY LEACH, CEO 15
  16. 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. 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. 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. 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. 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. 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. 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. 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. 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. 25. DIALOGUE & WRAP UP 25
  26. 26. APPENDIX 26
  27. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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

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