As published in the August 1, 2013 Toledo Business Journal

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Daniel Slifko
Rocket Ventures, LLC

Rocket Ventures has spurred $118M in new investment

312 new jobs created, average salary over $60,000

Toledo Business Journal recently interviewed Daniel Slifko, president of Rocket Ventures, LLC. He shared the following thoughts.

Toledo Business Journal: Can you discuss the vision and mission of Rocket Ventures and describe the type of companies the organization focuses on for investments?

Daniel Slifko: Understanding that in 2007 there was little or no organized commercialization expertise or sustainable funding activities in our region to help early-stage technology based companies commercialize their ideas, Ohio Development Services Agency (ODSA) – Third Frontier Program – took the lead and partnered with other public, private, and academic Institutions in northwest Ohio, creating the resources to start Rocket Ventures in the fall of 2007. Rocket Ventures began with a singular mission to prepare high-tech based start-up companies for funding and sustainability by providing intensive business assistance, enhanced management services, and pre-seed investments. The vision was that this uniquely focused economic activity would create sustainable high-tech, high-wage jobs, enhance economic diversity, and generate wealth within northwest Ohio.

We are technology agnostic but our organization has developed a great depth of knowledge, expertise, and commercialization success in technologies such as; advanced materials, agribusiness and food processing, medical technology, software applications, digital media, automation technologies, and solar photovoltaics to name a few key industry sectors.

TBJ: What is the geography that Rocket Ventures covers?

Slifko: We cover an 18-county region that runs west to the Indiana line and includes counties from Williams to Mercer. In the middle of our region we cover from Lucas to Auglaize counties and in the east from Ottawa to Wyandot counties.

TBJ: Can you explain the size of the venture investments made by Rocket Ventures and other criteria for the companies in which funding is provided?

Slifko: Rocket Venture Fund typically invests between $250,000 and $750,000 per portfolio company. These start-ups or early stage companies need to be located in northwest Ohio with revenues under $5 million and under 30 employees. Funding is considered for technology-based businesses that demonstrate a desire and potential to grow rapidly. These companies must have Intellectual Property owned by, or licensed to, the company and a solid exit strategy with a three to five-year horizon.

TBJ: Can you provide a couple of alternative examples of the structuring of the funding for selected clients?

Slifko: Rocket Venture Fund, the pre-seed for-profit venture capital funding arm of Rocket Ventures, looks to make most deals as a preferred equity position and release funds based on milestones reached. But the Fund is also willing to look at convertible debt deals if the investment fits the criteria required. The Rocket Venture Fund often co-invests with other venture capital funds and angel groups, which leverages greater funding and commercialization assets for company success and investment exit.

Pre-investment funding for prototype development, technology validation, and other technology and marketing development work is also provided through Rocket Ventures Services, a separate non-profit entity. This funding, usually between $25,000 and $50,000, is accomplished through loans to clients in the form of subordinated convertible debt with warrants. The warrants give Rocket Ventures the right to purchase equity at a certain price in the future, while providing the company important high-risk capital.

TBJ: What other services does Rocket Ventures provide to clients?

Slifko: We are uniquely qualified to provide business services for companies in the imagining stage through to commercialization. Specifically, we provide comprehensive business, financial, and strategic planning as well as business management services where we serve in c-level positions and/or as business advisors. We also take the lead in developing funding options to include everything from grants, loans, pre-investment funds and lastly provide access to the rocket venture fund and other venture capital funds.

These services are free to those companies who are qualified.

TBJ: Can you identify the companies in the Rocket Ventures portfolio and describe the products and services offered by some of these companies?

Slifko: We have 17 companies in our portfolio and these are some of the companies that have unique technologies, which are doing well in the marketplace.

• Notice Software – Developed a unique Saas / cloud service to push users back to a mobile website through notifications / alerts. This technology can also be used for internal corporate messaging and was originally developed for Coke. Notice provides a high-priority, compliance driven channel for enterprises to communicate directly with key personnel and committee members.

• InnerApps, LLC – d.b.a. Identity Syncronizer, has developed a cost efficient identity management and reporting software tool for mid-size enterprises. Identity Syncronizer reduces IT security risks and costs relating to computer user password, identity, and access management to software applications, and data residing on-premise on diverse operating systems and cloud applications.

• Blue Water Satellite, Inc. – Developed out of BGSU, the company utilizes satellite images to identify threatening algae blooms, phosphorous, aquatic vegetation, and temperature in drinking reservoirs and bodies of water.

• AquaBlok, LTD – has developed a patented bentonite-based composite barrier technology for use in a variety of underwater remediation from pond to geotechnical applications. This includes capping or blocking contaminated sediments in rivers, lakes, and ponds to ensure the integrity of fresh water supplies and manage water levels.

• Branam Oral Healthcare Technologies, Inc. – engages in the development and distribution of a proprietary line of all-natural toothpastes, tooth gels, gum and orthodontic pacifiers. Branam’s product line particularly addresses tooth decay, the number one childhood disease in the United States, through the use of xylitol.

• Image Integration Systems, Inc. – d.b.a. DocuSphere, provides a full-spectrum accounts payable process solution with technology that automates the capture of invoices across multiple mediums (paper, e-mail, and fax), properly routes invoices, manages for errors and exceptions, and finally posts invoices for payment within the client’s ERP system. DocuSphere uses customized rules and approvals on Oracle and SAP platforms in the Enterprise space (over $300 million in annual revenues).

TBJ: Can you discuss the results obtained by Rocket Ventures in terms of new investment and job creation from clients?

Slifko: To date, we have reviewed well over 1,500 ideas and opportunities with a net result of over 100 companies beginning operations with varying degrees of success. Beginning in spring of 2008, when we made our first investment, these companies have generated almost $100 million in sales and brought in $118 million in investments (non-State of Ohio money) and grants.

These same companies have created 312 new full-time equivalent jobs with an average wage exceeding $60,000.

Just five short years ago none of this activity was taking place!

TBJ: Can you explain the funding from the Ohio Third Frontier program and also private funding sources?

Slifko: In 2002 the State of Ohio created the Third Frontier Project, which was to be a 10-year, $1.6 billion initiative designed to: build world-class research facilities, support early stage capital formation for the development of new products, and finance advanced manufacturing technologies to help existing industries become more productive.

The Entrepreneurial Services Program was developed in 2006 as part of the Third Frontier Project and was funded with $90 million dollars to be divided equally between six regions within the State and intended to last three to five years. The focus of this program was to improve the capacity of Ohio’s entrepreneurial ecosystem to deliver services and attract capital necessary to create and grow scalable technology-based enterprises.

The Regional Growth Partnership (RGP) took the lead in 2006 and raised roughly $7.5 million dollars to be used as matching funds to qualify and receive $15 million for our region. The total amount of $22.5 million dollars was divided between the Rocket Venture Fund and the Rocket Venture Service’s operational side. The fund was started with $13.5 million and $9 million was allocated for services and grants.

The northwest Ohio matching dollars were raised from over 60 investors who represent a broad spectrum of business owners, corporations, banks, and other public and private concerns who all share a common goal of creating positive and sustainable economic development in our region.

TBJ: Can you share performance metrics in terms of return on investment for investors?

Slifko: Rocket Ventures functions as a provider of services (entrepreneurial services) and works closely with the Rocket Venture Fund, our for-profit venture capital arm.

On the service side, the Ohio Third Frontier establishes the metrics requirements and based on its criteria we have delivered 23.7 to 1 A-metrics return to the State. As importantly, these new start-up companies have generated a direct payback to the State of $5.4 million in sales tax and $2.4 million in payroll taxes. This direct payback will only continue to grow and in the very near future will far exceed the amount of money that was provided by the State.

Our Rocket Venture fund is in its fifth year and has a positive net value for the

Investors, however it is premature to estimate a final return.

TBJ: Are there any other issues that you would like to address?

Slifko: Rocket Ventures LLC is clearly accomplishing its mission of helping early- stage, technology-based companies to accelerate the commercialization of their products and services, with the end result being new job creation and wealth generation in the community.

Like any successful organization, our challenges going forward include making sure that our business model is operationally sustainable by continuing to demonstrate that there is a direct benefit to the region in such a way that they will continue to support our activities; we continue to leverage the regions assets such as research and development, technical know-how, and expertise; and lastly that we engage the community in helping us raise the funds to start a second for-profit Rocket Venture Fund which is key in continuing the commercialization success for current and future clients.