Archive for Grants Central

Montrose Group Completes Shelby, Ohio Economic Development Action Plan

The Montrose Group recently completed a comprehensive economic development strategy for Shelby, Ohio. Key action steps suggested by Montrose include:

  • Creating a regional PPP to operate economic development in the city
  • Aggressively marketing Technology Park and the Shelby Industrial Park
  • Launching a technology-based economic development strategy known as Start-Up Shelby focused on developing entrepreneurial advisors, a tech company boot camp, STEM workforce, community investment fund and a “makers space” to act as the center of tech company start-up activity
  • Utilizing Ohio’s Downtown Redevelopment District program to redevelop historic properties as central to attracting Millennials and re-creating an economic center for the city

Ohio Addressing the Capital Crunch Spurs Company Growth

Before the financial services crisis of 2008-09, money for growing companies was cheap and easy to access. Private banking options were many and those banks were generally aggressive in competing for loaning money to growing companies. Times have changed. Banks hold 117% more cash and 493% more securities in 2015 than in 2010 based upon regulatory requirements tied to the liquidity coverage ratio which creates a minimum deposit requirement according to the Federal Reserve Bank of Cleveland Fourth District Federal Reserve. Also, banks held $69.5B in cash and $79.5B in securities in 2015 compared to $32.1 B in cash and $79.5B in securities 2010 according to the Cleveland Fed. More troubling, private loan growth is up only 25% in the current economic recovery compared to 64%, 30%, and 87% in 2001, 1990-91 and 1981-82 recession recoveries according to the Treasury Department. Growing companies are facing a cash crunch as a result of federal regulations requiring American banks to keep substantial funding in reserve.

States like Ohio have an answer for this capital crunch. That answer differs based upon the stage and industry of the company seeking capital.

All companies start with an idea. Most likely early company funding starts with the owners, their friends, family and whatever fools they can find. If the idea is technology related, Ohio offers an important source of funding through the Third Frontier program. The Ohio Third Frontier Technology Validation and Start-up Fund’s goal is to create greater economic growth in Ohio based on start-up companies that commercialize technologies developed by Ohio institutions of higher education and other Ohio not-for-profit research institutions. The Technology Validation and Start-Up Fund has been designed to: support protected technologies developed at Ohio research institutions that need known validation/proof that will directly impact and enhance both their commercial viability and ability to support a start-up company, and support Ohio start-up and Ohio young companies that license validated/proven technologies from research institutions. The next round of funding through this program is in the middle of December and having a university partner is essential.

Moving into beyond the idea stage into the incubation stage offers these companies access to a wide range of Ohio regional venture capital firms. While not Silicon Valley, Ohio offers a range of venture capital firms serving all corners of the state for a diverse industry base as listed below.

  • JumpStart– focuses on an array of technology sectors, including companies founded and led by women and minority entrepreneurs;
  • Cleveland Clinic– focuses on medical devices, products and companies spun out from the institution’s researchers;
  • Lorain County Community College– focuses on tech-based companies that are in the imaging or incubating phase of development with special focus in the Northeast Ohio region;
  • LaunchDen Capital Fund– primary focus on orthopedic companies;
  • Bizdom– focuses on web- and tech-based start-up companies- Dan Gilbert, Detroit based fund;
  • Case Western Reserve University– focuses on medical technology, business software, advanced materials, fuel cells, and energy storage;
  • Mutual Capital Partners– focuses on healthcare (medical devices and diagnostics) and information technology (business-to-business and mobility software) sectors;
  • North Coast Venture Fund– focuses on biomedical, pharmaceutical, and software sectors;
  • Valley Growth Ventures– Y-town, focuses on software, energy, advanced materials, and additive manufacturing sectors;
  • Rocket Ventures– focuses on medical technologies and software applications which include imaging, surgical instruments/equipment, implant devices, regenerative medicine, and software applications developed for business and healthcare;
  • NCT Ventures– focuses on adtech, big data, enterprise software, heath information technology, logistics, and marketplace and retail technology sectors;
  • Rev1Ventures– focuses on life sciences (specifically in the areas of pharmaceutical, biological and gene therapies and spin-out companies from Nationwide Children’s Hospital’s Research Institute), software, information technology, additive manufacturing, alternative energy, and other sectors;
  • TechGROWTH Ohio– focuses on digital interactive media, biosciences, bio-agriculture, and advanced energy sectors;
  • CincyTech– focuses on a variety of Ohio Third Frontier targeted industries, including software, medical technology, life sciences, consumer digital, and other aligned sectorsin the region;
  • Cincinnati Children’s– focuses on the biomedical sector; and
  • Accelerant– focuses on advanced materials, advanced manufacturing, sensors, healthcare, information technology, aerospace, situational awareness, and surveillance systems sectors.

Companies graduating on to having an actual product or service ready to offer customers will often look to angel investors for their next round of financing. Ohio again has a diverse group of angel investor groups that operate all over the state that include:

  • North Coast Angel Fund– focuses on healthcare (medical devices and diagnostics), biotechnology and software sectors;
  • Queen City Angels– focuses on advanced materials, aeropropulsion power management, fuel cells and energy storage, medical technology, business and healthcare software, sensing and automation technologies, solar photovoltaics, situational awareness, and surveillance systems sectors;
  • East Central Ohio Tech Angel Fund– focuses on companies in rural Southeast Ohio with new proprietary, barrier-to-entry technologies;
  • Ohio Tech Angels – focuses on information technology, advanced materials and life sciences sectors; and
  • Impact Angel Fund– focuses on bioscience/medical, advanced materials, automation, energy and power management, surveillance, and information technology sectors.

Companies ready to grow in the marketplace that are beginning to produce jobs are primed for a conversation with JobsOhio. The state’s private sector economic development organization offers a wide range of economic development loan programs tied to job creation and capital investment. JobsOhio focused on industries such as biohealth, IT, advanced manufacturing and aerospace and aviation with established or expansion stage companies generating revenues. JobsOhio wants more than half of the company revenue to come from other private capital sources and they will require job creation and retention, efficiencies gained, additional payroll, fixed-asset investment commitment, project return on investment, project location, within a three year timeframe. JobsOhio Growth Loans range from $500,000 to $5,000,000 for fixed-asset investment.

For companies moving beyond the start of the marketplace and shifting into full-fledged sustainability, the state of Ohio offer the Innovation Ohio Loan Fund. The Innovation Ohio Loan Fund provides capital-funding for Ohio companies with limited access to capital and funds from conventional financing sources due to technical and commercial risk factors associated with the development of new products or services in targeted industries. They finance up to 75% of allowable project costs with loans typically ranging in size from $500,000 to $1,500,000 with a job creation and capital investment required. Again, targeted industry sectors include: Advanced Materials; Instruments, Controls and Electronics; Power and Propulsion; Biosciences; and Information Technology. Innovation Ohio Loans are focused on established Ohio companies with a minimum of two years of operating history and revenues generated developed a proven product for a proven market have customer orders and reasonable prospects for rapid sales growth have attracted third party capital and has reasonable prospects of continued backing from such investors. Allowable costs are defined as costs that can be capitalized under applicable generally accepted accounting principles (GAAP) and a 5 – 7 year loan term at a fixed rate up to 25% of the allowable project costs.

Ohio is blessed with many public financing options for growing companies facing a cash crunch. Understanding which source to gain the funding from and how to negotiate is the only challenge.

Building a Smart Community Brings Economic Success

Smart Communities embrace technology as the key to their economic future. The first step in building a smart community is defining the elements of a smart community and what the economic benefits are from achieving that status.

The economic benefits of becoming a smart community are substantial. Successful technology based economic development is a well-established, five drivers of regional economic success—along with advanced manufacturing, global trade, advanced services and energy. Successful regional technology economies are built on Science, Technology, Engineering and Mathematics occupations. STEM occupations consist of nearly 100 specific occupations consisting of 6 percent of U.S. employment counting nearly 8,000,000 jobs. STEM jobs are high-wage positions paying on average $77,880 and only 4 of the 97 STEM occupations had mean wages below the U.S. average of $43,460. The creation of smart community operating systems for cities also suggests substantial economic gain. According to a study by Accenture, Smart City solutions applied to the management of vehicle traffic and electrical grids could produce $160 billion benefits and savings through reductions in energy usage, traffic congestion and fuel costs.

Beyond the benefits of pervasive Smart City technology, the potential gains from the deployment process for such technology are also significant since telecom operators are expected to invest approximately $275 billion in infrastructure, which could create up to 3 million jobs and boost GDP by $500 billion.

The debate is over—high technology regions produce communities with high income jobs. Developing the high-tech region is the goal for most communities and getting there involves three clear steps: build a Smart City wireless network to transform local government services; create a STEM workforce; and develop capital access sources for high-tech start-ups.

Building and recruiting technology companies is more credible if the local government embraces technology. On the backs of state of the art 5G wireless technology, the development of wireless, small cell networks are creating economic and public service benefits for taxpayers across the nation. Smart Community networks flow over a 5G wireless telecommunications system built on a series of small cell sites and the network serves a range of government and utility services typically through sensors built on streetlight or utility poles throughout a community. This wireless network provides real time public safety and traffic data that helps big and small communities create safer streets and better flows of traffic. Accenture again notes substantial traffic benefits from smart community networks—that includes reducing traffic congestion by 40% saving drivers and operators in medium-sized cities approximately $100 million annually. Traffic management systems can help deliver these benefits and, thanks to 5G’s ultra-fast speeds, cars will be able to “convoy” or “platoon” in groups, increasing road vehicle capacity, while providing substantial energy savings for vehicle owners. And if autonomous cars are supported by Smart Traffic Management systems, congestion could decrease and deliver additional productivity and quality-of-life improvements to residents. Parking applications and energy savings through smart meters through this network offer substantial public benefit as does public safety. Chicago currently uses its 4G network to provide real time video which allows first responders to assess a scene before arriving. Deployment of 5G in a Smart City will enable the integration of all video surveillance, with access to specific locations, pole by pole, in ultrahigh definition. This capability would allow responders to use facial recognition to identify known criminals or spot missing persons before arriving on the scene. More importantly, the collection of this new data source provides a potential private sector revenue model that makes its deployment financially possible for most communities. Communities seeking to develop smart community networks need to embrace the location of private telecommunications company’s smart networks, adopt right of way ordinances supportive of this smart network and permit and encourage the building of a sensor network throughout the city that enables the community to run a smart community network.

STEM workers constitute about 5 percent of the U.S. workforce but accounts for more than 50 percent of the nation’s sustained economic growth. STEM workforce strategies start early in the educational process and increase the number, rate, and diversity of undergraduates in STEM disciplines and align undergraduate education with STEM industry workforce in targeted areas. They also build STEM alliances among business, education and government. Colorado’s STEM strategy is a national model. STEM-EC is a Colorado based coalition of business and education leaders connecting industry and the K-16 academic community to graduate more STEM students. Industry partners include Qwest, Lockheed Martin Space Systems, BB2e.com, Sun Microsystems, Hewlett Packard and CH2M HILL. Colorado’s STEM effort illustrates that it starts with the leadership of the business and education community. The link to industry is an essential element as the academic community needs assistance in identify specific STEM fields in which jobs are available and what specific training and curriculum structure prepare students for STEM jobs.

Finally, developing regional capital access funds is another important step in building a smart community. No one is Silicon Valley—who has half the venture capital in the United States. That being said, even small communities can build a regional capital access fund by leveraging local business, government and bank assets to spur innovation and the creation of start-up companies. Start-up, technology oriented companies struggle to gain financing from typical sources. Small and large communities alike bring government, not for profit, foundations and financial institutions together to develop regional community capital access funds. A Regional Community Investment Fund provides capital to small business and entrepreneurs and encourage investment and development of underutilized and underused assets in the community, including downtown revitalization by providing gap financing for small business and entrepreneurs, and redevelopment project investments. National models for regional Community Investment Funds are based upon the success of the Nebraska Community Foundation and its Hometown Competitiveness Network, West Carrollton, Ohio’s Community Investment Fund and the Community Capital Fund in the Pioneer Valley of Western Massachusetts. The goal will be to raise funds over a 2-year timeframe and should tap into local wealth to make investments in the fund, and those individual’s needs and desires to give back to the community. These regional investors should be approached to bring value and protection to their investment. Investors should be given options of expected return: 1% annual return for a one-year commitment, 2% annual return for a three-year commitment, and 3% annual return for a five-year commitment. There should be no “promise” of return as risk is inherent in these investments but investors should be given some expectation about the potential return on their investment. To ensure proper operation of the community investment fund, an outside financial advisor should be hired to help it attract investments into the fund as well as manage the fund, the investment, and the assets moving forward. Investments should focus on local companies considering company creation or new real estate development projects by providing unsecured loans, subordinated loans, convertible debt, royalty finance, and the right to purchase stock at a specified price.

Building a smart community has big economic and public benefits. The economic reality of technology and innovation is driving economic success to regions embracing this change and will likely leave behind communities that fail to succeed in this new world.

Robinson to Speak at Innovate New Albany – September 29, 2017

Dave Robinson will be speaking at Innovate New Albany on September 29 from 11:30am to 1pm. His topic, “Addressing the Capital Crunch,” gives helpful information to entrepreneurs and small- and mid-size businesses regarding the types of capital they can access. This is a free event (lunch included), but registration is required. For more information, visit innovatenewalbany.org.

Application Window Open for Infrastructure for Rebuilding America (INFRA) Program

The US Department of Transportation (US DOT) on June 29, 2017 issued a Notice of Funding Opportunity for small and large projects through its new program, the Infrastructure for Rebuilding America (INFRA) grant program. This program is a replacement for the FASTLANE program. The emphasis of INFRA is leveraging non-federal funding, particularly projects and have a public-private partnership.

The INFRA program is being funded initially with $1.5 billion dollars. Large projects must be seeking a grant of at least $25 million while small projects can seek a grant of at least $5 million. At least 10% of the projects funded must be small projects. A priority is given to rural projects; 25% of the projects must come from a rural area.

In Fiscal Year 2016, 18 projects were awarded from the FASTLANE program. Ten of those projects were in urban areas and eight of those projects were in rural areas. The average award size was $42,177,778. Eleven of the projects were in the large project category and seven of the projects were in the small project category.

Urban/Rural Project Name Applicant Project Size Awarded
Rural Interstate 10 Phoenix to Tucson Corridor Improvements Arizona Department of Transportation Large $54,000,000
Urban SR-11 Segment 2 and Southbound Connectors California Department of Transportation Large $49,280,000
Urban Arlington Memorial Bridge Reconstruction Project National Park Service, DC Department of Transportation Large $90,000,000
Rural Truck Parking Availability System (TPAS) Florida Department of Transportation Small $10,778,237
Urban Port of Savannah International Multi-Modal Connector Georgia Ports Authority Large $44,000,000
Rural U.S 95 North Corridor Access Improvement Project Idaho Transportation Department Small $5,100,000
Rural Cedar Rapids Logistics Park Iowa Department of Transportation Small $25,650,000
Rural I-10 Freight CoRE Louisiana Department of Transportation and Development Large $60,000,000
Urban Maine Intermodal Port Productivity Project Maine Department of Transportation Small $7,719,173
Urban Conley Terminal Intermodal Improvements and Modernization Massachusetts Port Authority Large $42,000,000
Urban Cross Harbor Freight Program (Rail) The Port Authority of New York and New Jersey Small $10,672,590
Urban I-390/I-490/Route 31 Interchange, Lyell Avenue Corridor Project New York State Department of Transportation Large $32,000,000
Rural US 69/75 Bryan County Oklahoma Department of Transportation Large $62,000,000
Rural Coos Bay Rail Line – Tunnel Rehabilitation Project Oregon International Port of Coos Bay Small $11,000,000
Urban Atlantic Gateway: Partnering to Unlock the I-95 Corridor Virginia Department of Transportation Large $165,000,000
Urban South Lander Street Grade Separation and Railroad Safety Project City of Seattle Large $45,000,000
Urban Strander Boulevard Extension and Grade Separation Phase 3 City of Tukwila Small $5,000,000
Rural I-39/90 Corridor Project Wisconsin Department of Transportation Large $40,000,000
$42,177,778

The application window for these projects opened on August 1, 2017. Applications are due by November 2, 2017. Eligible INFRA project costs may include: reconstruction, rehabilitation, acquisition of property (including land related to the project and improvements to the land), environmental mitigation, construction contingencies, equipment acquisition, and operational improvements directly related to system performance. Projects that are ready to go from a funding, engineering, planning and construction standpoint will be given priority in funding.

Ohio Venture Capital Firms with a Regional Focus

In the highly competitive and ongoing work of the investments industry to help redefine the U.S. economy, venture capital firms have expanded their focus beyond what opportunities are right next door to include those of a larger regional strategy.  Key economic sectors and technologies require a broader-based resources approach in order to grow companies, industries, and jobs.  Such investment activities include not just access to funds but also resources that encourage innovative new companies, entrepreneurship, and venture capital formation.

In Ohio, four firms having a strong local presence and a regional focus are Central Ohio’s Drive Capital; Southeast Ohio’s Athenian Venture Partners; Northeast Ohio’s North Coast Angel Fund; and, Southwest Ohio’s Cintrifuse.

  • Based in Columbus, Drive Capital was founded in 2012.  The firm raised an initial $250 million fund and then added a second $300 million fund in 2016.  Investments are targeted towards innovative technology, healthcare, and consumer companies in Ohio and the Midwest.  For additional information about Drive Capital, see www.drivecapital.com.
  • Based in Athens, Athenian Venture Partners was founded in 1997.  Investments are targeted towards information technology, digital health, and health care companies.  With a presence in three states, Athenian is able to pursue opportunities in Ohio, the Midwest, and the Southeast and Southern West Coast regions of the U.S.  For additional information about Athenian Venture Partners, see www.athenianvp.com.
  • Based in Mayfield Heights, North Coast Angel Fund, was founded in 2006.  Investments are targeted towards information technology, bioscience, advanced materials, and electronics and controls companies.  For additional information about North Coast Angel Fund, see www.northcoastangelfund.com.
  • Based in Cincinnati, Cintrifuse was founded in 2012 and its initial fund was $57 million.  Cintrifuse was created by Cincinnati’s business community, including stalwart companies Procter & Gamble, Kroger, and Western Southern who depend on Cintrifuse to help them source innovation for their business and to grow the region’s start-up ecosystem.  For additional information about Cintrifuse, see www.cintrifuse.com.

In addition to venture capital funding, these entities have a network of resources for start-up and existing companies.  And, each has extensive connections to assistance and support funded through Third Frontier, Ohio’s $2.1 billion tech-based economic development initiative to accelerate the creation and growth of investable and scalable technology and tech-enabled companies.

$280 M in ODOT TRAC Requests Creates Substantial Competition and Interest in P3s and EB-5 Transportation Funding

Funding for “major new capacity projects” with the Ohio Department of Transportation (ODOT) are awarded through the Transportation Advisory Council (TRAC). Applications for TRAC funding were due on July 31, 2017, and 13 projects filed for a total of $280 M. The Ohio Transportation Budget, House Bill 26, recently enacted allocated $59.5 M in funding for Major New Program funding per year in the FY 2018-FY 2019 biennium, considerably less than the amount spent in this area during FY 2017. The high demand for state transportation funding will create substantial competition through the TRAC process as well as interest in exploring alternative P3 funding options.

 

While the number of TRAC applicants is down the loss of the Ohio Turnpike proceeds for major new highway construction projects has dropped the funding allocation for TRAC projects by two-thirds the previous total (as illustrated by the chart below). In fact, the Cuyahoga County I-90 bridge project awarded TRAC funding in 2016 cost more than all the current TRAC applications put together.

First, communities hoping to gain funding for their transportation project through the ODOT TRAC process need to fully implement a project financing program. Successful project financing strategies will involve advocating aggressively for TRAC funding, increased ODOT support for the TRAC budget, forming Transportation Improvement Districts (TIDs) and alternative funding sources from private infrastructure financing through Public-Private-Partnerships (P3s) and EB-5 funds.

Highway transportation project financing needs to start with efforts to gain TRAC funding. TRAC funds Major New Capacity projects greater than $12 million which increase the capacity of a transportation facility or reduce congestion, impact economic development, have local financing and a strong overall financing plan. All projects that cost ODOT greater than $12 million, request Major New funding, and add capacity to a transportation facility must come before the TRAC. This definition includes all new interchanges proposed for economic development or local access, any significant interchange modifications, bypasses, general purpose lane additions, intermodal facilities, major transit facilities, or Intelligent Transportation Systems (ITS). TRAC put out specific limiting criteria for this round of funding focused on projects with non-ODOT funding commitments in the amount of 30% or greater of the total project cost and:

  • Projects that are an existing TRAC funded project (Tier I, II or III) and additional funds are needed to advance the project to the next stage of development; or
  • new projects that demonstrates significant impact to jobs, regional economic impact and has significant non-ODOT funding commitments.

ODOT Program Management Staff reviews the applications submitted and scores applications in accordance with TRAC policy to provide a draft project score based upon four factors- transportation, economic, local investment and project financing. Draft scores are shared with project sponsors to determine if any additional information is needed. Once a final score has been assigned, ODOT Program Management Staff provides the information to TRAC for their evaluation and consideration. Also, the TRAC will hold public hearings around the state in September and October, providing project sponsors with the opportunity to convey information about their respective projects that may not be captured as part of the on-line application process. After the public hearing process, TRAC will develop a DRAFT funding list which is published for public comment. Once public comment has been received and reviewed, TRAC will move to adopt a FINAL Major New Construction Program Funding List. From application submission to adoption of a FINAL Major New Construction Program Funding List is approximately six months to allow for sufficient time for review, questions, and public comment.

The fact is TRAC is not allocated the funding it needs to support all the applications filed. In fact, the TRAC applications nearly total the entire highway construction budget for ODOT. TRAC funding could be support by additional funding from the Ohio Turnpike Commission. ODOT is planning on $250 million in Turnpike infrastructure bond funding in the Major New projects area in FY 2019. Additionally, ODOT has pursued the financing of large Major New projects through P3 agreements in recent years. This has led to the private financing and building of the Portsmouth Bypass, estimated to cost $1.2 billion. This financial arrangement allows the state to make payments over a negotiated period of time, reducing the amount of upfront outlays needed to pay for these types of projects. P3s are driven by global private infrastructure companies that fund highway construction projects. The Portsmouth Bypass proves they will work in Ohio and P3s are an option for major highway construction projects.

Forming a Transportation Improvement District (TID) could also provide additional major highway financing options. Multi-local governmental entity reaching agreement on funding for a specific transportation project. TIDs fund improvements to streets, highways, parking facilities, freight rail tracks and necessarily related freight rail facilities, or other transportation projects that are newly constructed or improved as well as the administrative, storage, and other buildings or properties, and facilities the district needed for the operation of the TID. The recently passed ODOT budget has funding for TID projects but it is capped at $250,000 per project. However, TIDs ability to develop local financing options through a multi-jurisdictional revenue model offer substantial funding sources.

Finally, major transportation projects have been funded by EB-5 funds in Pennsylvania that may provide a new model for transportation funding in the Buckeye state as well. Entrepreneurs (and their spouses and unmarried children under 21) are eligible to apply for a green card (permanent residence) if they: make the necessary investment in a commercial enterprise in the United States; and plan to create or preserve 10 permanent full-time jobs for qualified U.S. workers and transportation projects have qualified for EB-5 investments as construction jobs qualify as job creation. A major interstate project in Pennsylvania was funded through the use of EB-5 funds and may provide a model for major highway financing for Ohio projects searching for funds.