I attended an e-commerce conference in January hoping to discover Northeast Ohio’s hidden technology leaders and hear about the region’s upcoming emergence as an e-business leader.
Instead, I found what I’d suspected all along: We’re a region filled with ideas and potential, but lacking clear leadership and investments.
Nearly everyone I speak with — from CEOs of major corporations and presidents of small start-ups to investment bankers and consultants — touts e-commerce and says it’s time to climb aboard the e-train.
There is little doubt they are correct.
Why, then, do the financial powers-that-be fail to make crucial investments in Northeast Ohio businesses, specifically those companies that aren’t making the transition from brick-and-mortar to click-and-order? If you’re not a company with capital-intensive physical assets, securing top flight financing from local investors and lenders is, to be blunt, harder than it should be.
Nationally, venture spending has reached epic proportions — more than $3.3 billion has been invested in Silicon Valley companies. Midwest firms have received about $300 million in capital.
Those numbers are revealing.
They say local pundits are correct in asserting the time is now to fund these types of ventures. But, for whatever reason, venture capitalists and banks don’t see Cleveland area businesses, especially those plying the strict e-business model, as viable investments.
At least two regional consulting firms — Arthur Andersen and Ernst & Young — have launched strategic e-business solution initiatives, further underlining the importance of e-commerce. E&Y has even started an e-incubator (Arthur Andersen is considering one as well).
But despite having a Cleveland company involved, E&Y’s incubator is located in New York, not in Cleveland, where the firm’s global headquarters stands.
Over at McDonald Investments, where investment analysts push heavily for e-commerce and say they see new business plans weekly, the technology lending group (owned by parent company Key Corp.) resides in Seattle. McDonald execs readily admit the two “hot zones” are on the west and east coasts, not in the Midwest.
So do these actions suggest there are no regional companies worth investments?
Absolutely not. The reality is that there are plenty of Northeast Ohio businesses that merit investments. The problem is that regional lenders seem more interested in cashing in on the e-revolution on the coasts than in looking in their own backyard to see who’s ready for a prime time stage.
You may have noticed that over the past five months, SBN has taken up the challenge of analyzing the regional economy and peeling away the layers to see what’s really driving its success and where we, as a region, fit into the e-business race.
Success for Northeast Ohio is more than getting local lenders and investors to buy into the notion of e-commerce. They have already done that. Rather, financial institutions must redirect their attention to reinvesting money in regional businesses.
Despite what you hear or read about barriers coming down and the virtual office model taking over, local investment will always remain crucial to a region’s economic success. And if nothing changes, Cleveland will one day find itself asking one very poignant question, “What went awry?” Dustin Klein ([email protected]) is editor of SBN.
