But the truth is, the man who made millions selling air conditioning units and generators to the military has supplied a significant portion -- he won't say how much -- of the $60 million that's been spent so far on the still-growing facility.
Clutter bought Nordic Air Inc. in 1998 when it had 18 employees and 5,000 square feet. When he sold the Geneva company in 2010, it had burgeoned to 300 employees and 250,000 square feet. Not bad for a guy who got his start scrubbing toilets for his father's janitorial company, a business he took over his sophomore year at Mount Union College, after his father died.
Spire sports complex in Geneva compared to an Olympic park | cleveland.com
I love this story because it is the best example yet I've seen of how economic development is supposed to work. I/we found a company. I/we dilute the equity as little as possible. I/we plan and cash out on our exit. I/we then write checks to other promising startup ventures. At least that's my plan. (Pretty simple formula isn't it?) And then I try to repeat that process as many times as possible. Each time writing more or bigger checks.
Years ago I read an amazing story online (I've yet to source) about the insane amount of money people who had cashed out of Google had put back in to the community surrounding their headquarters.
Unfortunately that isn't what the Cleveland/NEO economic development organizations like JumpStart encourage. Their key metric, which some MBA-type came up with at some NEO Foundation, is how much additional capital investment their portfolio companies attract. Even though this has nothing to do with creating value. Why? Because the politicians who are lobbied to vote for Third Frontier, etc. are told additonal capital equates directly to job creation and this they equate with votes.
And I know first hand. Three to four years ago I was "lobbied" myself to encourage a company I had an interest in to take on additonal capital even though they didn't need it. I estimate this would have cut my equity by at least a 1/3 if not more. Hard to tell because some of the deal sheets I've seen float around from VC firms preying on NEO are usury for lack of a better term. They come into Cleveland looking for lopsided deals. Lopsided in their favor as you might guess.
Anyway, hopefully you get my point. In this particular case Geneva would not be getting a $100 Million economic development jolt if 1/3 of the value had been given up for additonal capital, they'd be getting $67 Million. And according to the story they've spent about $60 Million so far so that's a signifcant dent in their plan to "spend money to make money." So as long as attracting additional outside investment is the key metric by which we judge the success of Cleveland/NEO's economic development initiatives, our region is headed down the wrong road.
What do you think?
