For many business owners, scaling the wall is getting a venture capitalist or an angel investor to plug money into their company. It’s a goal usually attainable only after several years of solid financial returns. Even a bank loan requires careful planning and at least some collateral.
Then along came the Internet.
It seems like all you need to do is add .com to your company name and people can’t throw money at your business fast enough. And while the IPOs of companies such as Amazon.com have become the dream of many an e-venture, companies that support e-commerce have had to find ways to raise capital without going the traditional route.
“The model has changed — how to get the money without any assets,” says James Cookinham, executive director of the Northeast Ohio Software Association. “Forty years ago, when you started a manufacturing company, it was a very gradual type of thing.”
There are some e-commerce enterprises able to take smaller loans and maintain lifestyle companies, but to become a successful company, to grow and survive, Internet-oriented businesses must maintain unprecedented growth.
“If you look at our industry, if you’re standing still you’re sprinting backwards,” says Brian Powers, chief operating officer of Vantage One Communications Group, which has recorded better than 1,000 percent growth in each of its last several years. “You’ve got to be going at this pace, otherwise everybody is going to pass you by. This is the business that’s defining our generation.
“This is like the oil industry was in the 1880s, or the auto industry was in 1910. This is defining our economy, and the growth can be explosive. We need to be able to continue this growth. There’s no other option.”
The industry has implications for more than just individual companies. The region as a whole needs to support e-commerce and help those companies scale the wall.
“In my mind, as the world becomes more globally competitive, we need to make sure we stay in this,” Cookinham says. “I think some of these brilliant people like to cluster with other brilliant people. And if we’re thought of as a nonbrilliant people place, that’s not good.
“If every brilliant student from MIT says, ‘I won’t go to Cleveland, I’ll go to Silicon Valley or I’ll go to Seattle, but not Cleveland,’ that’s a problem. It’s a much bigger problem than for (just) the IT industry.”
Companies such as Vantage One would be the first to feel the heat. To survive, Powers needs to get the top-notch talent to handle continued expansions.
“You become irrelevant pretty quickly if you’re not able to grow and meet the demands of your clients,” Powers says. “Our client list is mainly Fortune 500. They demand cutting edge. They demand full-scale resources. They demand that we be creative beyond what they can read in magazines.”
For Vantage One, growth means three things: organic growth, bringing in new clients and expanding opportunities with existing clients; acquisitions, moving into new markets; and adding new offerings to its menu of services. That means finding the right people.
“We need to put ourselves in the position to develop managers,” Powers says. “We need somebody to develop into the lead in the Phoenix office. We need somebody to develop into the lead in the Dallas office, and into the office to be named next. That’s part of my job. It’s my job to make sure we are developing, preferably internally, people to take us to even the next level.”
To get to that next level takes money, as any business owner facing the wall knows.
“There’s a lot of old money here,” says Robert D. Hisrich, a professor and A. Malachi Mixon III Chair in Entrepreneurial Studies at Case Western Reserve University’s Weatherhead School of Management. “It’s not that there isn’t wealth here. There’s great wealth here from the old days. That wealth hasn’t been accustomed to investing in start-up businesses.”
Cookinham agrees the money is there. It just hasn’t been trained in this new way of business.
“Our background in this area is more working for large companies for long periods of time,” he says. “It doesn’t come from that risk that you have to take to do these things. In Silicon Valley, (if) it doesn’t work and it goes under, many people are looking for you to try another one. You’ve now experienced some of the problems.
“I think we need to have a culture that doesn’t say, ‘Oh yeah, he’s the guy who went under.’ (We) need to understand that a significant percentage of these companies are not going to make it. And that’s not negative.
“One of the things we need to do is praise those who have taken the risk,” he says. “Great wealth is being created in North America.”
And Cleveland is in a position to become a part of that.