Fledgling businesses could be forced to leave state, find investors elsewhere

An article published in Crain’s Cleveland Business

The past year has seen a large influx of technology and software startups in the Northeast Ohio region. This is primarily because Cleveland is now home to three startup accelerators (now that we’ve joined Bizdom Cleveland and LaunchHouse), and collectively our accelerators add 34 new startup companies to the competitive playing field each year.

We’re proud of this fact, as we know how much innovation and value startups can add to our region, but there is a large obstacle in the way of these startups’ potential.

Local startups are facing heavy competition for a insufficient amount of available capital. Because of this lack of capital, our promising new startup companies may either fail or take their potential (and benefits to the economy) elsewhere.

So why is Cleveland lacking capital?

We know the answer isn’t simply “because we’re not Silicon Valley”. Cleveland has enough potential and grit to overcome this problem.

Shaker LaunchHouse believes our city lacks capital because there aren’t enough angel investors with the confidence to take the risk of investing in software startups. Because of this, LaunchHouse has decided to switch their accelerator’s focus to “startups developing physical products that connect to the Internet”.

Flashstarts is taking a different approach.

“In the past, if a company or investment firm wanted to raise money, they had to have one-on-one conversations with investors. It was illegal for businesses to announce in public that they were looking for capital, until last September, when the U.S. Securities & Exchange Commission changed the rule.

Afterward, Flashstarts launched a marketing campaign designed to convince wealthy individuals to invest in the fund that Flashstarts uses to finance the companies in its program. So far the accelerator has raised more than $2 million.

In additional to taking advantage of general solicitation, Flashstarts is proposing another solution. We would like to issue a call for Cleveland’s able to become angel investors and take a rewarding risk to invest in our local tech startups.

Read the full Crain’s Cleveland article to learn more.