JumpStart taps 'a village' to grow Northeast Ohio's tech-based companies
Biomedical engineer and entrepreneur Franco Kraiselburd photographed in his laboratory at Case Western Reserve University on Monday, May 20, 2024.
Dangling from Franco Kraiselburd’s gloved hand is a white, jello-like patch he believes will revolutionize wound care worldwide.
“Imagine this is the next band aid. Do you know what I mean?’’ says an animated Kraiselburd, encouraging visitors to a Case Western Reserve University lab to glove up and touch the moistened patch. “Here's the thing – imagine this integrated into your skin. Right? And it just feels nice.”
Kraiselburd, 22, a recent biomedical engineering graduate of CWRU, is the ebullient, bearded founder and CEO of a startup company that’s hoping to strike it big in the healthcare realm.
Kraiselburd and his team have more than $1 million in hand or committed for the development of their next-generation band aid, made of natural and synthetic polymers that can carry medicine directly to wounds. The promise of large-scale success also makes their company, Asclepii Inc. – for Asclepius, the Greek god of medicine – a prime example of the region’s latest effort to nurture startup companies that draw venture capital and grow to job-generating success.
Asclepii is among 10 companies in the new Trailblazer HealthTech Accelerator managed by JumpStart, the region’s leading venture development nonprofit. JumpStart’s multimillion-dollar program, which also includes an accelerator for software companies (Trailblazer Software Accelerator), wraps the startups in the knowledge and services they need to lure investors.
“It really takes a village to help these companies,’’ said Kaleigh Gallagher, Vice President of Tech Services and Network Management at JumpStart. She describes the free, three-month accelerator as “an intensive offering to fuel rapid growth.”
Area players in tech-based development welcome the accelerator as a needed tool in the network of development organizations, governments, and medical and academic institutions striving to spur successful startups. Cleveland and Northeast Ohio lag the East and West coasts, and other parts of the country, in sparking tech-based companies that draw venture capital, generate jobs and boost local economies, reports show.
JumpStart’s accelerator “is extremely timely and also very, very much needed and helpful in order to take these companies that are in that development stage and move them forward through their various milestones,” said Jon Snyder, Managing Director, Investor Relations, for Ohio Life Sciences, a statewide trade association whose members include two companies in the JumpStart’s health-tech accelerator.
Neema Mayhugh, managing partner of Wave Strategy LLC, a healthcare innovation consulting firm based in Cleveland, said she welcomes efforts to create or attract tech startups. But she has been a critic of the region’s ability to spur companies that draw venture capital and find success, despite the influx of large amounts of federal and state funding for venture development over the years.
“I think it’s fair to say it’s been challenging for us to spin off companies that result in large exits or attraction of a lot of jobs in the region,” said Mayhugh, whose 28 clients include medical centers and universities looking to commercialize healthcare products. Only two of those clients are in the Cleveland area, she noted.
Learning the business
Nearly 70 startup companies applied to the first cohort of JumpStart’s Trailblazer HealthTech Accelerator. The program launched with $2 million from the U.S. Economic Development Administration’s Venture Challenge grant program, which “seeks to start and speed up regional growth through technology-based economic development.” The EDA defines an accelerator as “a program, often sponsored by a university or nonprofit organization, that works with entrepreneurs and start-up companies for a short and defined timeframe to help them reach the next phase in their growth.”
The grant requires a $2 million local match, with funds coming so far from Case Western Reserve University; UH Ventures, the innovation and commercialization arm of University Hospitals; Ohio Third Frontier, the state’s technology-based economic development initiative; and the Taft Stettinius & Hollister law firm.
After running a pilot accelerator last fall, JumpStart in April welcomed Asclepii and nine other health-tech companies that are in early stages of growth. Participating companies must be located in Ohio or planning to relocate. They also must have a viable product or service that’s a good fit for venture capital – basically, a solution to a significant problem that has high-growth potential. Early market validation, along with demonstrated initiative and leadership, are key criteria for the accelerator startups.
Among the 10 companies are Apricity Robotics, which uses robotics and artificial intelligence to do cardiac sonograms remotely; Kilele Health, which fits patients with wearable technology that monitors a key biomarker of heart health; and Radcliffe Watts, which uses a portable phototherapy device for treatment of psoriasis.
The companies don’t have to pay fees or give up equity stakes to participate in the accelerator. Each company is assigned an entrepreneur-in-residence who guides and mentors participants during the three-month program and for two months afterward.
Companies receive up to $125,000 in services, covering all of the first $50,000 in eligible expenses and 35% of next $215,000. Services available through a Preferred Partner Program include firms specializing in legal, financial, marketing, product development, clinical and regulatory matters for startup companies.
The entrepreneurs behind each of the startups are steeped in curriculum. Weekly workshops with experts in their field provide deep dives into regulatory, clinical, and commercialization strategies, along with how the startups’ products might qualify for reimbursement from insurers. The workshops and other events afford the young companies’ founders and executives time to network with each other and JumpStart’s array of entrepreneurial professionals.
Companies learn how to quantify the clinical and market potential for their products. Essentially, they are building a roadmap for venture capital readiness, JumpStart’s Gallagher said.
“These companies need to be able to sit in front of all the different healthcare stakeholders and say we have a very sound clinical, regulatory, reimbursement and commercialization strategy,” she said. “We've talked to the right people. You know, we're working with the right partners, and here's our plan to be successful. And when we're bringing all those players into the same place, because we have a cohort of companies that are learning from each other, and … investors who are interested in this high-quality deal flow, that’s what we're hoping to create.”
Asclepii’s Kraiselburd said he’s learned from experts and the weekly work sessions about tapping into the right markets for his next-generation band aid.
“It's identifying those areas … where there's a pressing need and you can tackle it quickly, build that revenue quickly, scale it quickly, and then grow your company,” said Kraiselburd, who credited multiple experts in the accelerator program for their guidance, including Entrepreneur in Residence Gary Smith, a veteran founder and CEO of medical device and diagnostics companies. “So we’ve definitely been thinking about our three-, five- and 10-year plan very intensively.”
Biomedical engineer and entrepreneur Franco Kraiselburd shows a prototype of a product that could replace traditional bandages in his laboratory at Case Western Reserve University.
Asclepii has a working version of the band aid patch that Kraiselburd says has been effective with 200 patients. The patch is made of natural and synthetic compounds that integrate and absorb into the skin, serving as a pathway for antimicrobials and other treatments to heal chronic wounds, such as those suffered by diabetic patients. Treatment of chronic foot sores can cost tens of thousands of dollars and, if unsuccessful, result in amputation. Asclepii’s patch treatment costs hundreds of dollars, Kraiselburd said. The product could be easily manufactured in the region, he said.
The accelerator is also helping Kraiselburd and his team decide how to best use their capital. In the near term, they are looking for a $2 million investment, Kraiselburd said.
Advice from accelerator experts is also shaping Asclepii’s approach to the tests and data needed for product approval from the U.S. Food and Drug Administration, which Kraiselburd said will be about a two-year process. Kraiselburd said he has talked with Julie Jacono, JumpStart’s CEO and the former chief strategy and innovation officer at The MetroHealth System, who has suggested some time-saving and less expensive strategies to handle the regulatory review.
After his May graduation from CWRU, Kraiselburd and his company left the university and set up in the nearby 11000 Cedar Startup Incubator, where Asclepii will likely remain for several years, Kraiselburd said. Kraiselburd praised CWRU for its entrepreneurial support and its Center for Modular Manufacturing of Structural Tissues for his company’s development. The center’s Senior Research Associate, Miguel Fuentes Chandia, is Asclepii’s Chief Science Officer.
Kraiselburd’s father, Santiago, is president and joint founder of Asclepii.
“He helped me learn some of the business side, and I did the science,” Kraiselburd said of teaming with his father, who is a business consultant, veteran startup executive and Vice Rector of Research at Tecnologico de Monterrey in Mexico, according to the Asclepii website.
JumpStart’s accelerator is helping Kraiselburd grasp and strategize for the tasks ahead.
“Thanks to Jumptart, I know how VC (venture capital) thinks. I know how the region thinks,” Kraiselburd said. “I will have a way better picture of how hospital economics work, how healthcare economics work, and have been able to establish great networks, which is spectacular.”
Thorny landscape for startups
The accelerator culminates in a pitch event and introductions to investors and other interested parties in August. It will be a challenging time for the accelerator companies to find investors.
Nationwide, a lot of investment capital is on the sidelines, especially for so-called seed and pre-seed capital that goes to young companies looking to scale up, according to the National Venture Capital Association/PitchBook quarterly report.
The most important thing that we've learned so far in the program is you can have a great product. That doesn't mean you're investor-ready. You can have a great pitch but that doesn't mean it's built for the people who need to listen to it. I think JumpStart is helping us connect our science to an investable market."
Franco Kraiselburd, founder and CEO, Asclepii Inc.
High interest rates and uncertainty about the November presidential election are holding venture capital back, said Mayhugh of Wave Strategy LLC.
“That said, this is also a good time to be priming the pump,” Mayhugh said. “No matter what happens in the election, it’s going to clear up. So by June, September of next year, people are going to be investing again. And that’s where it’s critical right now to be forming those relationships, so when the dam opens up, people are familiar with what you’re doing.”
JumpStart’s HealthTech and Software Accelerators will likely increase the flow of venture capital deals in a region that “is still building a culture of startup entrepreneurship,” said Todd Federman, managing director and founder of North Coast Ventures, a Cleveland firm investing in early-stage companies. His team talks with JumpStart regularly about young companies that are venture capital candidates.
“We are definitely fans of the accelerator model and what it can do to help create and drive companies’ success,” said Federman, whose company has invested in at least 10 companies that have been through accelerators elsewhere. “I think the presence of an accelerator here in Cleveland will be a big asset to help spark the creation of new companies and help them grow in the early stages.”
Several of the accelerator companies are members of Ohio Life Sciences, the trade association representing 4,200 organizations statewide, including biotech, pharmaceutical and medical device companies, as well as research and academic institutions.
Putting a company together “is a daunting task. Many times you don't know what you don't know,” said Ohio Life Sciences’ Jon Snyder, a successful medical device entrepreneur. “So having a formalized program like JumpStart’s accelerator will greatly aid these companies moving forward.”
Mayhugh of Wave Strategy LLC said the JumpStart accelerator program “is another piece on the menu that should give our companies a chance.”
But she is skeptical that the region will see a bump in venture capital-fueled growth of tech-based companies. The region lacks the leadership, collaboration and focus to get tech-based venture development done on a larger scale, said Mayhugh, whose company has done health-tech innovation strategies on the East and West coasts.
“I think that a lot of the work that's been done here over the years has been very hodgepodge,” Mayhugh said. “And so it hasn't been as concerted an effort as it needs to be.”
“Unless you have deep commitments from academia that are generating the tech, and industries that are saying, ‘Yes, we're interested in supporting and moving this tech forward,’ and then investors that are saying, ‘This is what we want and you're doing the things that we're going to invest in,’ it's very challenging to be successful,” Mayhugh said.
JumpStart CEO Julie Jacono said she disagrees with criticism of the region’s potential as a venture capital and technology hub. She cited a recent Forbes article about Cleveland and other second-tier cities that are on the vanguard of startup growth, due in part to a lower cost of living and investable, tech-based solutions that help old-line industries adapt.
Those leading the way on tech-based startups in the past faced a “monumental task,” she said.
“And through trial and error, those efforts have positioned Northeast Ohio for substantial growth,” Jacono said. She pointed to a number of recent developments, including news that JumpStart and its venture capital division received $35 million from the federally-funded State Small Business Credit Initiative (SSBCI) Venture Capital Program. The money will go to four JumpStart funds investing in early-stage, tech-based companies. North Coast Ventures received $15 million from the same federal source for two of its investment funds.
The accelerators are receiving “incredible” support, JumpStart officials said. More than 50 service providers and subject matter experts, many from the tech-development and venture capital community, have donated time or discounted their services for the accelerators.
JumpStart’s first software accelerator started this month – the10 startups are from across Ohio – and another health-tech accelerator will convene in the fall. JumpStart is planning four accelerator cohorts – two health tech, two software – next year and in 2026, for a total of 100 startups served over three years. After that, more funding will be needed to keep the accelerators going.
“We are planning to make it a sustainable asset for the region beyond the three-year period,” Gallagher said.
Right now, JumpStart’s Trailblazer HealthTech Accelerator is helping Asclepii grow to another level, Kraiselburd said.
“The most important thing that we've learned so far in the program is you can have a great product. That doesn't mean you're investor-ready. You can have a great pitch but that doesn't mean it's built for the people who need to listen to it,” Kraiselburd said. “I think JumpStart is helping us connect our science to an investable market.”
Read More: https://www.ideastream.org/economy/2024-07-29/jumpstart-taps-a-village-to-grow-northeast-ohios-tech-based-companies
