COLUMBUS — The taxpayer pump fueling Rocket Ventures LLC may be shut off if the entity providing much of the start-up capital for fledgling technology companies in northwest Ohio fails to demonstrate marked improvement.
The Ohio Third Frontier Commission agreed Wednesday to provide the venture capital entity with $1 million to continue its operations in 2013 but placed conditions on second-year funding of another $1 million.
“From the commission’s perspective, if it ain’t changed, man, it’s gone in two years, because you gotta get there,” said Mark Kvamme, a commission member and president/chief financial officer of JobsOhio, the state’s private economic development corporation.
“It’s such an important region,” he said. “You’ve got a great university partner. We’ve got to make it work.”
He made the comment before the commission opted to provide just one year of certain funding.
Rocket was the subject of a critical report by an independent evaluator hired by the commission to review all six regional organizations receiving state funding under its Entrepreneurial Signature Program. The program provides capital and other assistance to small start-up technical firms until they can fly on their own or can attract other financing from the private sector.
Rocket Ventures, created by the Regional Growth Partnership and now partnered with the University of Toledo, received $15 million in seed money from the state three years ago that was augmented with locally generated cash. The evaluation conducted by the Invantage Group, however, recommended that it be denied additional funding for the next two years because of “relatively weak” results data.
Among other issues, the report noted a third of all Rocket Ventures clients had ceased operations, the firm seemed to have little experience in commercialization, and it did not have enough collaborative partners.
In making his case to the board Wednesday, Rocket’s director, Dan Slifko, was sharply critical of the evaluation, arguing that it attempted to apply a broad template that didn’t properly fit the entity serving 18 northwest Ohio counties. He also argued that the report was at least partly based on factual inaccuracies as he listed 17 economic development groups, corporations, and universities that he counts as investors and collaborators.
“We feel completely opposite from what the independent reviewer said,” Mr. Slifko told the commission.
Rocket claims to have helped to create the equivalent of 260 full-time jobs that pay an average annual salary of $76,000. It has 47 current clients, 24 of which have generated $1 million or more. The investment fund takes an equity interest in each of the companies it invests in.
Mr. Slifko’s presentation changed the mind of at least one commissioner.
“My previous position coming in here was to say no, we’re done, because I had nothing to hang my hat on,” Mr. Kvamme said, pointing to the critical report.
At one point, he turned to University of Toledo President Lloyd Jacobs, who was seated next to Mr. Slifko.
“Would you put your kid’s college education money into Rocket Ventures?” he asked.
“Absolutely, I would. Absolutely,” Mr. Jacobs said.
Rocket had originally planned to ask for $1.5 million in additional funding over two years, but instead made a pitch for $2 million. The additional $250,000 a year would go into a new fund, separate from its investment fund, to provide service support for start-up companies.
It will match the taxpayer aid dollar for dollar with donated private cash and dollar-equivalent services. Mr. Slifko said the entity has already raised $575,000.
“Historically, when you talk about early-stage start-up companies, regardless of whether they’re traditionally based garage technologies or peer technologies, the failure rate’s incredible …,” Mr. Slifko said after the vote.
“There are failures,” he said. “We report them. We don’t say we have 600 companies. We may have started with 600. We just report those companies that are still working, and then we say that they graduated because we no longer provide services or they failed.”
Of the six regional entities looked at, evaluators recommended that just two not be funded.
The other was Dayton, which received approval last month for $4 million over two years.
Commission member William McCreary, vice president and chief technical officer of Pilkington, cited the Dayton decision as he argued for continued support for Rocket.