News from the Ohio Venture Association meeting on January 8, 2010

Keynote Address:

2020 Vision: Accelerating Cleantech
Venture Activity in Ohio
Richard T. Stuebi
Managing Partner,
Early Stage Partners

If Northeast Ohio is to build a cluster in one of the most promising emerging industry sectors—cleantech—it will need a critical mass of innovation from university, corporate and federal labs, leavened by enough investment and leadership talent to build breakthrough companies, Richard Stuebi told the January OVA luncheon.

Mr. Stuebi may be Northeast Ohio's leading figure in rallying that activity. Since arriving from Denver several years ago, he has worked at the Cleveland Foundation, and more recently has split his time at Early Stage Partners (ESP). In his presentation, he said Northeast Ohio probably has enough of the first two constituent elements to make the region competitive in cleantech. But he made it clear he thinks leadership talent will have to be imported from outside the region.

"It's not just someone with great credentials, with an MBA from a great school. It's got to be someone who really knows how to build a business, in a capital-efficient, aggressive and urgent way, extremely attentive to customers. So it's not someone who comes out of a corporate environment, by and large...Those are not commonplace individuals."

ESP currently has three cleantech investments in its portfolio. They include Five Star Technologies, which develops material that improves touch-sensor displays; Arisdyne, which has a proprietary approach for improving yields of hydrocarbon/biofuel refining, and MAR Systems, which has a proprietary system for removing mercury and other heavy metals from water.

He conceded that simply defining cleantech is not easy. "The boundaries of clean tech are a little vague, I grant you." In energy, it often revolves around reducing emissions. It can also be about innovative methods of producing clean water, and in the area of waste recycling, the focus is on reducing the spoilage of land. "That's a fairly amorphous definition, I recognize, but it leads to four or five pockets or segments of technologies."

He's bullish about research developments at five Ohio universities. "I note in particular Ohio State, CWRU, Akron, Toledo and Ohio University," all of which have some pretty interesting things going on in the clean tech area. State government has helped, he said, by encouraging collaboration rather than competition for research funding from the Department of Defense and Department of Energy and by adapting state law to encourage investments in advanced energy.

The state is also home to enough large corporate research labs with the kind of spin-off activity that yields a healthy deal flow. "And between NASA Glenn, Battelle and Wright-Patterson we have a lot of very rare and well-funded talent pursuing some very interesting things. Sometimes these are a little far from commercial applications," but then that's the job of venture capital to help form companies around promising research.

He noted that cleantech is not an easy niche to tackle. "It is a tough sector. It's a capital-intensive sector, typically. It's a sector where there's a heavy influence of public policy, so there's a regulatory/political risk that's out of our control, and it's not subject to pure market forces, and that gets a little scary. You often have customers that are risk-averse. They're regulated, and thus not prone to experimentation, so the sales cycles are longer." Given the inherent boom/bust rhythm of the cleantech sector, he added, investors "have to be very selective and hard-nosed."

Success breeds success, "and there's no substitute for having a good poster child for the cleantech success story in Ohio. We don't have that yet."

More information:

Webcasts from the Meeting:

Click on the image below to view the entire presentation as video.

Webcast produced by Mike Sutyak, The Entrepreneurial Learning Initiative.

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February 25, 2010
Venture Capital Summit V

at Corporate College East

March 12, 2010
Steve Arless, CEO CardioInsight Technologies (CIT)

at The Union Club

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