State funding to help local entrepreneurs was rejected on Thursday by the Ohio Third Frontier Commission, which turned down the Dayton Development Coalition’s request for $1.8 million to continue a program that has been in place since 2007.
It makes the Dayton region the only one in the state that is not getting money from the state’s Entrepreneurial Signature Program. And it raises questions about why the private, publicly funded economic development group could not overcome program shortfalls identified with the coalition’s Accelerant entrepreneurship program.
“Certainly I’m disappointed that they aren’t going to receive the funding,” said State Sen. Bill Beagle, R-Tipp City. “I think we need to pull together as a region and figure out where do we go from here.”
Dayton Mayor Nan Whaley said she is disappointed in what she sees as the state’s unwillingness to be a partner with the Dayton region.
“It’s a disappointment that they’re not getting the renewal funding,” said Erik Collins, director of community and economic development for Montgomery County, which committed $900,000 in ED/GE funding to the coalition’s entrepreneurship efforts since 2013.
“Certainly with fewer dollars in the market it will have an impact,” Collins said. “It may slow the velocity of businesses getting reviewed or vetted for funding, for assistance in marketing, for commercialization of technologies in the marketplace.”
The coalition receives public and private funding to provide economic development services in a 14-county region and is the western regional partner of JobsOhio, the private development arm of the state.
The Third Frontier decision is not a reflection on the coalition’s ability do its work with JobsOhio, said David Goodman, chairman of the Third Frontier Commission and director of the Ohio Development Services Agency, which oversees the bond-funded Third Frontier program.
The DDC has “had so many incredible wins for the community in the area of economic development and job creation and we are very excited about continuing to work with them in the future in many different ways,” Goodman said.
Jeff Hoagland, president and chief executive of the DDC, said Accelerant’s help for businesses will have to be scaled back. He said the decision doesn’t impact Accelerant Fund I, a $9 million investment fund - made up of $3 million in state funding and $6 million in private investment - which now serves four area startups and is considering new ones.
“We will still provide services to the companies we fund. We just won’t provide services to businesses that we don’t fund,” Hoagland said. “In the past we provided services to (both).”
For 15 years DDC has helped start-up businesses with accounting, business planning, legal work, and patents.
The Entrepreneurs Center in Dayton, which would have shared in the $1.8 million has been promised a separate state subsidy through the end of the year but officials will have to determine what to do after that, said Scott Koorndyk, president of the center. That may include stepping up to apply for the Third Frontier money next year separately from DDC or in conjunction with community organizations, he said.
“My message to the entrepreneurial community is: There is a path forward here,” Koorndyk said.
DDC nearly lost Third Frontier funding after evaluators in 2012 found its program for entrepreneurs was deficient in several areas and lagged its peers in the number and quality of clients. A Dayton Daily News investigation in early 2014 found that the DDC inflated jobs claims for the program and its other economic development efforts by counting as “created” promised jobs and investments that were pledged but did not exist. Hoagland said the DDC now reports jobs figures more accurately by breaking out actual jobs from pledged ones.
The DDC re-branded its entrepreneurial program as Accelerant in 2013 and made other changes. But evaluators who reviewed Accelerent in November said DDC didn’t have enough financial support from community stakeholders, lacked specifics in identifying technology startups, and had gaps in community support for early stage companies.
“Accelerant has yet to make sustained progress in engaging regional assets and leveraging them toward the success of the ESP,” according to the evaluation submitted by UVG Ltd.
Hoagland said DDC responded with a plan to spin off Accelerant, hire a new president, partner with Cincinnati’s public-private seed-stage investor, Cincy Tech, get a greater cost match from universities and regional businesses, and make other changes. But in the end it was not enough. Seven of the eight commission members present at the meeting - including former DDC board chairman Bruce Langos, chief operations officer of Teradata, voted to pull funding as of June 30. John Minor, president and chief investment officer of JobsOhio, abstained. Langos and Minor could not be reached for comment.
Goodman said the commission voted against the new money because DDC “did not meet the conditions that were set forth by the evaluator.”
State Rep. Niraj Antani, R-Miamisburg, said it is important for the Dayton region to have ESP funding.
“I plan on working with the other members of the Dayton legislative delegation so that we are able to get those funds, whether or not it is specifically Accelerant administering it,” Antani said.
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