As published in the April 1, 2007 Toledo Business Journal
Steven Weathers
Regional Growth Partnership, president and CEO
Rocket Ventures prepares
to launch
The Ohio Department of Development recently awarded northwest Ohio an $11.8 million state grant. The grant is intended to significantly increase technology-based entrepreneurial business in the region. Six million dollars will be used to capitalize a pre-seed venture fund. In order to deliver services under this program, the Regional Growth Partnership (RGP) has created an organization called Rocket Ventures.
Toledo Business Journal recently interviewed Steve Weathers, president and CEO of the RGP. He shared the following thoughts on this topic.
Toledo Business Journal: Can you discuss the amount and source of the investment capital that has been raised for Rocket Ventures?
Steve Weathers: The Regional Growth Partnership received an $11.8 million grant through the Entrepreneurial Signature Program (ESP). The ESP grant was issued under the State of Ohio’s Third Frontier Project, the State’s largest ever commitment to expanding Ohio’s high-tech research capabilities, promoting technology commercialization and innovation, creating knowledge-based businesses, and creating high-paying jobs.
The matching grant included $7 million in commitments from the private sector in our region. This was unprecedented in northwest Ohio for regional businesses and organizations to step forward with such strong support, particularly the National Electrical Contractors Association and the International Brotherhood of Electrical Workers.
Part of the state grant will be used to create Rocket Ventures, a nonprofit organization that has the sole focus of executing the plan. The remaining $6 million will be used to capitalize a pre-seed for-profit investment fund called Rocket Fund.
We have also applied for an additional $3.2 million, which would establish a business grant called Ignite. This money would be used to fund $50,000 grants to assist and support early-stage businesses.
Through that same Entrepreneurial Signature Program, we have applied for an additional $2 million grant. When combined with the $1 million in existing private sector commitments, we have the potential to secure an additional $3 million.
Overall, we have approximately $20 million in committed and approved funds, with the potential of increasing to approximately $23 million to $26 million in pre-seed investment funds for northwest Ohio.
TBJ: Could some or all of the state funding have been granted if the private sector funding hadn’t been pulled together?
SW: No, we would not have received any funding. The main requirement was a cash match. When we submitted our application to the State, we had $5.9 million in commitments from the private sector. With a 2-to-1 match, we were awarded $11.8 million. I am very proud to say that this was the second highest award in the state, and the highest per capita award of any region in the state. And to my knowledge, the first time ever that northwest Ohio has received an award of this magnitude for the sole purpose of creating knowledge-based businesses and high-paying jobs.
TBJ: What are the key criteria that Rocket Ventures will be looking for in making decisions regarding business ventures in which to invest?
SW: This is a pre-seed fund created to assist companies in the earliest stages of their lives. The two key areas of focus are Advanced Materials and Ag Business. Advanced Materials will support the region’s national leadership in thin film materials, but also includes polymers, nanomaterials and other structured materials. Ag business supports such areas as biofuels and food production.
TBJ: Who will operate and manage this venture fund?
SW: Rocket Ventures will be created as a nonprofit entity providing management oversight and entrepreneurial services to portfolio companies.
Linked to Rocket Ventures will be the Rocket Fund, comprised of a board of directors who will make the investment decisions. There will be two committees to analyze the technical and financial feasibility of each company or individual’s idea and make recommendations to the investment board.
TBJ: How important is the issue of profitability to this fund? Have targets been set?
SW: Rocket Fund is being created as a for-profit fund. Though specific targets have not been set, returns of 10 to 20 percent are normal for such funds. One key area for our investors will be the exit strategy. In other words, will the fund generate the return it requires on each investment? Also, how will we exit the deal? Because these companies are early stage, they will require additional funding beyond what we can invest, and our goal will be to attract additional venture capital investment from around the Midwest. I have already met with venture fund managers from cities including Ann Arbor, Kalamazoo, Indianapolis, Cleveland, Chicago, and Columbus.
TBJ: Does the venture have to be local?
SW: The State has established several criteria, including [a clause] that the venture must be 30 employees or less, the company must have less than $5 million in revenue, and it must be located in Ohio. There could be situations where a co-investment is made outside the region. But for the most part, the majority, if not all, of the investments made by Rocket Ventures will be in northwest Ohio.
TBJ: What are the long-term goals for the future potential growth of this fund or the establishment of additional funds?
SW: The State requires us to show sustainability in our business plan. The Third Frontier program is trying to create a mechanism to sustain and grow investment capital in the state of Ohio. Our plan is to take a portion of profits from successful investments made by Rocket Ventures and seed future funds. We are also working with Fort Washington Capital to attract established venture funds to northwest Ohio.
In addition, we are in discussions with Bowling Green State University with regard to the potential establishment of a second pre-seed fund called Falcon Fund. In order to have the greatest chance of success in creating knowledge-based jobs and opportunities in northwest Ohio, it is critical that we have strong relationships with all of our institutions of higher learning.
TBJ: Can you discuss the planned timing for the market launch of Rocket Ventures?
SW: The State Controlling Board recently released $5.8 million of our $11.8 million grant. Very shortly, we will begin to negotiate the specifics of a contract with the State of Ohio. Our estimated target date for launching Rocket Ventures is the second quarter of this year.
TBJ: Are there any other issues you would like to discuss?
SW: I want to reiterate the commitment our business community has made to establish both Rocket Ventures and Rocket Fund. Without their commitment of leadership and financial resources, this opportunity for northwest Ohio would not exist. It is through their continued commitment that we have this opportunity to create and sustain new knowledge-based, high quality jobs for all of northwest Ohio.