Tech growth on the rise in Northeast Ohio

A shorter version of this article originally appeared in The News-Herald and The Morning Journal

Special thanks to the managing editor for feedback and suggestions for tightening it up. At the end of the day, i actually like that version more – it’s more concise with a better ending.

This version contains more detailed information and sources that made the article too long for print, as well as some stuff that was redundant in light of previous newspaper coverage.

technology growth 1

State of the art

A recent Forbes article posits Cleveland as the Midwest’s answer to Silicon Valley.

A growing hub for entrepreneurs in the technology industry, the city and surrounding area of Northeast Ohio continues a trend of upward movement. The latest quarterly report, released in August from Team NEO, a regional collaboration of business leadership partnered with the nonprofit economic development corporation JobsOhio, indicates positive trends.

Business growth

By the numbers

Among those trends are an 18 percent employment growth and gross regional product growth of 40 percent in the headquarters and professional services sector between 2000 and 2015. That is creating almost 21,000 jobs and more than $19 billion in Northeast Ohio economy.

The low cost of doing business, combined with a healthy workforce, the region’s educational opportunities and overall quality of life and cost of living have attracted not only established Fortune 1000 companies to build their presence here, but fostered the growth of entrepreneurs.

More specifically, Team NEO’s data shows 34.9 percent growth between 2000 and 2014 in information technology, including professional services, shows growth. That is about 5 percent above the national average.

And wiith 20 percent since 2007 coming out of a national recession, this makes it one of the few sectors in the state that has exceeded pre-recession levels.

These two industries are grouped together for a couple of reasons, according to Jacob Duritsky, vice president of strategy and research at Team NEO. The direct technology sector, represented by the IT component, includes software publishing and what people tend to think of as “Silicon Valley activity.”

Northeast Ohio is unique, though, because of how embedded IT is in the region’s strong concentration in manufacturing and professional services like corporate headquarters, accounting and similar firms.

Looking at the data this way gives a broader picture of both the direct and indirect impact of technology in the area.

“Thinking about it geographically, it makes sense to look at the data from the metropolitan level, to think about it from the Cleveland (metropolitan statistical area) perspective, which includes Lake and Lorain county, and also picks up Cuyahoga and Geauga, and Medina,” Duritsky said,

“The trend is encouraging,” he said. “It’s certainly impacting the entire metro level through community patterns, through workforce, through job opportunities.”

The Forbes piece is focused primarily on Cleveland-based nonprofit Jumpstart’s CEO, Ray Leach, whose goals are to foster entrepreneurship in the region. He(HE OR FORBES?) projects an additional 10,000 new jobs over the next 10 years and billions in investment dollars.

Northeast Ohio’s rich history of manufacturing and making things is having an impact on this transition as well, with computer product manufacturing projected to be one of the highest growth sectors in the coming decade, according to Team NEO data.

“Think sophisticated, integrated chips that work through aerospace products and automotive products – some pretty high value-add computer components that we’re starting to make here through Eaton, Parker Hannifin and others,” said Duritsky.

Support from business community

In Lake County, growing the technology industry is something area business leaders take seriously, with organizations like the Mentor Area Chamber of Commerce taking action towards fostering that growth.

“The concept of incubators and growth accelerators are starting to really pick up the pace in Lake County,” said Al DiFranco, Mentor Area Chamber of Commerce president and CEO. “There are a couple of groups that are investigating whether or not that makes sense, and we’re definitely doing that in Mentor.”

Along with City Manager Ken Filipiak, DiFranco recently traveled to the Akron Global Business Accelerator, a facility that the city provides to help young companies and entrepreneurs get going.

“We went down there with the understanding that this is something we’d like to think about doing in Lake County, and Mentor wants to take the lead on it,” DiFranco said. “It’s catching it on the startup of the startup, if you will, of the idea – but it’s been there, and it’s just growing that we’re trying to find a way to be able to partner with and help these startups.”

More and more people want to take their ideas and start a business, but might not have the time or resources to take that risk, according to DiFranco. Although still in the early stages, he said, the city and chamber are thinking of ways they can help those with an idea plant that seed by replicating best practices in Cleveland and Akron to promote Lake County entrepreneurs.

“The tech industry of course is going to be at the head of that,” DiFranco said.

Another example of Mentor’s commitment to the technology industry is the Aerospace Updates & Opportunities symposium on Oct. 1, part of a series hosted by the City of Mentor International Trade Initiative. Presentations from NASA, Boeing and other industry giants are aimed at educating local businesses and building networks.

Whether homegrown entrepreneurs are staying in Northeast Ohio, companies are relocating here or native Clevelanders who moved away are coming back, which DiFranco refers to as a “boomerang effect,” he pointed out that people recognize the region as a great place to raise a family with reasonable cost of living.

DiFranco said that at an Aug. 25 Lake County Chamber of Commerce luncheon to discuss the Republican National Convention, Destination Cleveland CEO David Gilbert remarked that the delegation was hearing more and more good things about Cleveland and the city’s continued growth.

“One of the things the Chamber does very well is we try to represent small businesses in a way they can’t themselves,” DiFranco said, noting networking as one of the things the Chamber can assist with. “That’s why the Chamber is definitely going to be involved in these conversations.”

In Lake County, larger, established companies like Steris and Avery Dennison know where entrepreneurs are coming from, DiFranco said, and they’re looking for people to partner with. Through the Chamber, mutually beneficial relationships can emerge, he said.

financial symbols coming from hand

Finding the funds

One of the biggest challenges for startups and entrepreneurs is the practical matter of securing funding, as noted in the Forbes article, and Jumpstart is just one of many resources in the region that exist to help those with an idea turn it into a marketable business.

The Great Lakes Innovation and Development Enterprise, on the Lorain County Community College campus, is another of those resources. In addition to providing support services, GLIDE offers the Innovation Fund, a pre-seed funding program that gives early stage monies to startup technology companies, according to Dennis Cocco, co-director of GLIDE.

“We deal with companies in the very early state,” Cocco said. “They generally have an idea, they have technology that they either have a patent for or in the process of patenting. They may need to build a prototype. They may need to validate a technology’s market presence. And we help them at that early stage.

“We’re the first money other than friends and families that those companies receive,” he said.

The GLIDE fund, which covers the 21 counties in Northeast Ohio economic development region, has encouraged partners to help source the fund. Youngstown State University, NEOMED, Stark State University, University of Akron and Cleveland State University are all partners along with LCCC who support GLIDE with both funds and services.

Since starting in 2007, GLIDE has given out over $10 million, to about 170 companies, according to Cocco. Those companies have gone on to raise over $200 million through what is called “follow-on funding.”

The State of Ohio looks at three factors as far as what GLIDE is creating: how many dollars of follow-on funding do award recipients generate, how much revenue they’ve given and how many jobs they’ve created – over 500 new jobs so far.

“One of the things we require of every recipient is to help give back to other young entrepreneurs, either through lectures, coursework or internships,” Cocco said. “That way, students at the universities in Northeast Ohio can work next to the entrepreneur and learn what it’s really like to start a business.”

But it’s not just money that GLIDE offers, according to Cocco. Though funding is certainly an important element for entrepreneurs, they need lots of other things as well, and resources like GLIDE exist to offer those things.

For first-timers new to running a business, tasks like hiring employees, securing insurance and a host of other matters can be overwhelming. GLIDE and similar organizations exist to help them understand what the owner of a technology business needs to be successful.

“Every one of them has to raise millions of dollars at some point in time,” Cocco said. “It’s our job to show them how to prepare for that. Besides giving the money it’s coaching, counseling and mentoring – those are just as important.”

After the region experienced huge growth in the manufacturing industry in the mid-20th century, Cocco described a sort of complacency in the1960s and ’70s that led to stagnation.

“One of the things we were not doing well is our job growth was not going well and we weren’t creating new enterprises at the rate that other regions were, particularly the east coast and the west coast,” Cocco said. “We stopped being creative, we stopped being innovative, we stopped creating new enterprises.”

But in the last decade or so, there has been a concerted effort by many in the state to change the course and create pathways for people to start new business – and there are people in the region like GLIDE who want to help them do that successfully.

“We have great support from Columbus and the State of Ohio, and Ohio Third Frontier, probably better than almost any other state in the Union,” Cocco said. Ohio Third Frontier is an initiative to expand research and technology economic development in the state. He also cited the region’s university base as a major component of what makes Northeast Ohio attractive to entrepreneurs.

“I also think, quite frankly, that it’s Northeast Ohio itself and the people here,” Cocco said. “We want to make this a good place to be, and when you come here, people are amazed at how willing people are to help.”

Nuts and bolts

Armed with knowledge and funding, entrepreneurs with technology startups often face challenges when it comes to production as well. Firms like JPG Advisors, based in Painesville, specialize in technical and operational solutions to help overcome those challenges.

“I formed (JPG Advisors) to work with businesses in transition,” said Jim Gray, owner. “Originally it was with troubled businesses, but now a lot of it is businesses that are going to the next level.”

Gray, an industrial engineer who also holds an MBA from the Weatherhead School of Management at Case Western Reserve University,

“I’m an operations guy,” Gray said. “You’ve got the technology – now how are you going to make it? You have a widget, I can help you develop a plan to make the widget.”

Considerations of what equipment is called for, production costs and facility needs are just a few of the things Gray helps clients with as a process specialist. His strength lies in taking a prototype model that an entrepreneur developed and translating to a practical production method by refining and improving the process.

“Lake County has almost the full spectrum of manufacturing processes,” Gray said. “There’s a lot of small manufacturing businesses around here – it’s one of the strengths of Lake County. If you know the players, you can find a source to help you build a product.

“We’ve got a lot of capabilities here – how can we leverage that up? Even if you don’t have the product, you might have the processes. Somebody might develop the product elsewhere, and they can come to the Lake County area and say ‘why don’t you make this for us?’

“Even though I know the other ends of the business, I like to put the focus on how to get something built. Not everybody thinks that way. They think about the product, they think about the finances. There’s a lot of those resources available. So I look at ‘how do you make it?’ ”

Steps to success

Getting to the production stage is one thing. Between having an idea and putting a product onto the market, a whole lot of education takes place – whether at a formal institution or not.

Education in science, technology, engineering and mathematics – collectively called STEM, or STEAM, made popular by a growing awareness of the contribute of art to advancing the other disciplines – has been a topic of focus for several years.

Here in Northeast Ohio, there is a strong commitment to exposing and encouraging youth to STEM education during early years at school.

In Lake County, the recently opened School of Innovation in the Willoughby-Eastlake school district opened its doors to grades three through five on Sept. 15. Inside the new school, students experience a new approach to learning, incorporating a quarterly capstone project and partnerships with active area businesses to serve as not only resources and mentors, but as an audience for student exhibitions as well, explained Gina Kevern, director of curriculum, instruction and assessment for Willoughby-Eastlake City Schools.

“For this first quarter, the entire school is working on the same capstone, with each grade addressing specific essential questions,” Kevern said. “All of the students are investigating the outdoor space to learn about the property and determine which areas might be the best spots for different learning opportunities.”

By mapping the property, identifying ecosystems and topographical features, studying the plants and animals and learning about soil and erosion, students are developing features like a garden and walking path, and how those projects could impact the environment.

“The concept behind project-based learning units is helping students understand how to solve problems through the research and design process,” Kevern said.

As regards to business partners, school Principal Brian Patrick is arranging weekly “Career Moments” meetings for students to hear presentations from people in different fields to get exposure to their options during their K-12 education.

“As the school grows each year, eventually becoming a grade 3-12 building, our business partners will be crucial as students participate in shadowing and internship experiences,” Kevern said.

To help students expand on the practical learning opportunities, the school has a fabrication lab outfitted with laser cutters, 3-D printers, a milling machine and more. Patrick McKinney, director of technology at Willoughby-Eastlake Schools, explained the importance of the school’s approach to education.

“We live in an obviously tech-driven world,” McKinney said. “We’re really excited to put a fab lab in the school, so we’re exposing our kids to that technology early. These digital-native kids will be building on the programs so they’ll be ready to go.”

On a larger scale, facilities like the brand-new think[box] on the Case Western Reserve University campus welcomes anyone to visit and tinker or invent creatively.

The newly-renovated space that opened Oct. 1 is a seven-story, 50,000-square-foot facility. Touted by CWRU as one of the world’s largest university-based innovation centers, the $35 million facility offers the public not only space and technology, but guidance from industry experts to transform ideas into viable products and businesses.

At the end of the day, to answer the Forbes article’s question, there are no shortage of examples in education, funding and guidance at each step of taking an idea from pitch to production in Northeast Ohio.

Boasting what many consider to be the region’s low cost of living, combined with solid manufacturing base and strong infrastructure – plus a powerful commitment from state government to supporting technology industry growth – the Cleveland area could certainly be considered a contender for the title “Silicon Valley of the Midwest.”

However, what is more important is that Northeast Ohio has evolved and emerged with its own unique identity as an attractive place for technology to thrive.

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