State of Technology in Cleveland

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State of Technology in Cleveland Ready for
Impressive Growth
NOITR Presentation April 29, 2005
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State of the Industry
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The Cleveland Tech Industry

• According to NEOSA and TeamNEO, the Cleveland
  area tech-based community now includes 2,800
  companies.
• Employees nearly 11,000 individuals.
• Enjoys 1.0B in revenues.
• Second fastest growing industry segment in
  Cleveland, behind health-care.
• Deep knowledge in software development, medical
  devices, biotech, MEMS, fuel cells, SEO, ICE and
  satellite systems, disaster recovery, managed
  security.

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The Cleveland Tech Industry

• Concerns with the industry.
• On average each Company has four employees and
  enjoys 357,000 in revenue.
• Geographic dispersion.
• Additional management/technical talent.
• Continuum of capital.
• Short-term liquidity.

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No Successes for Cleveland?

• Third Frontier Action Fund
• Cleveland (1) - 13,896,436 (38.4)
• Bio RD Transfer Trust Fund
• Cleveland (1) - 34,347,478 (43.0)
• Wright Capital Funds
• Biosciences (2) - 19,765,170 (27.2)
• Non-biosciences (1) - 18,000,000 (45.0)

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No Successes for Cleveland?

• Fuel Cell Initiative Awards
• Cleveland (2) - 1,827,044 (23.4)
• Validation Fund/Seed Fund Initiative
• Cleveland (T1) - 2,500,000 (41.6)
• Third Frontier Internship Program
• Cleveland (3) - 920,100 (21.9)
• Ohio Research Commercialization Grants
• Cleveland (1) - 1,216,813 (58.2)
• Innovation Revolving Loan Fund
• Cleveland (1) - 2,254,439 (70.0)

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No Successes for Cleveland?

• Since the Creation of the Third Frontier in 2002,
  the State has awarded 244,027,866.
• Clevelands Take 85,763,210 (35.1)
• Estimated to be over 90.0MM by the end of 2005

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The Emergence of the Seed Funds.

• JumpStart (2004) - 9.0MM
• Case Technology Ventures (2002) - 5.0MM
• Ohio Innovation Fund (1997) - 12.5MM
• Early Stage Partners (2002) - 44.0MM
• Draper Triangle Ventures (1999) New Fund
  40.0MM
• Fund for Our Economic Future (2004) - 30.0MM
• Mutual Capital Partners (2005)
• SB180 and OVCA

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The Emergence of the Seed Funds.

• Tech community should work with Nortech,
  JumpStart, NEOSA and other agencies to aid in
  capital aggregation.
• Potential goal should be 500.0MM by 2010.

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The Strategic Vision
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The Path to Follow.

• Heavily Recruit Tech Companies to Cleveland and
  Nurture the Companies Already Established
• Aggregate Capital to the Clevelands Tech
  Industry
• Create a Spectrum of Entrepreneurial Education
  from Grade School to Grad School

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Recruit/Nurture

• Aggregate Tech Companies in Downtown.
• Target Euclid, East Ninth, Huron, Prospect, West
  Sixth, West Ninth.
• Target Street Level Space with Signage.
• Target Company with seasoning, employees from
  10-50, success in generating revenue.
• Discount smaller, entrepreneurial companies
  Absolutely Not.

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Recruit/Nurture

• Set of incentives
• Loan Programs
• Tax Abatements
• Employment Tax Rebate (Legislation)
• Grant Options
• Potential/Considered Incentives
• RD Tax Credit
• Patent Credit

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Recruit/Nurture

• Centers of Excellence
• Disaster Recovery/Business Continuity
• Search Engine Optimization
• MEMS
• Fuel Cells
• Medical Devices

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Recruit/Nurture

• Scorecard
• 32 Companies (Two from outside region).
• 1 has signed lease, five others negotiating
  letters of intent.
• Discussions on three Centers of Excellence.

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Capital Aggregation

• Support Angel Fund Initiatives
• Discussions with two groups to date.
• New Market Tax Credit Fund
• Next allocation secure 150.0MM in NMTCs.
• Use NMTCs as an incentive to invest in emerging
  growth companies within the City proper.

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Capital Aggregation

• Plug-and-Play
• City will co-invest with venture funds and
  private equity funds on a non-equity basis.
• Use of low-interest loans, tax abatements, etc.,
  to enhance viability of the transaction.

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Capital Aggregation

• Potential/Considered Strategies
• Line of Credit Issues Solve the short-term
  liquidity problems of tech companies.
• Line of Credit Guarantee
• Venture Bank Either recruit a VB or establish a
  partnership with various banks to establish a VB.

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Education

• Create a spectrum of entrepreneurial
  empowerment/education and technical training.
• City Tech Certification
• Cleveland Municipal School System
• Entrepreneurial Academy
• E-City

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Education

• Create a spectrum of entrepreneurial
  empowerment/education and technical training.
• Venture Capital Institute
• CEO Forum
• The Red Room Meetings

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Final Thoughts

• Success usually comes to those who are too busy
  to be looking for it.
• Henry David Thoreau

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Thank You
Michael C. DeAloia Senior Executive for
Technology Development 216.664.3644
(O) mdealoia_at_city.cleveland.oh.us