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Ohio County Considers $5M Investment in Tech Startups

A Cuyahoga County, Ohio, Council committee on Monday approved a $5 million loan to JumpStart Inc. to invest in startup businesses primarily related to health care and information technology.

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(TNS) — A Cuyahoga County Council committee on Monday approved a $5 million loan to JumpStart Inc. to invest in start-up businesses primarily related to health care and information technology.

The loan, subject to approval by the full Council, would go to the entrepreneurial support and funding organization, which has offices in Cleveland and Toledo, as part of its so-called JumpStart NEXT II Fund.

JumpStart will use the fund — expected to have at least $30 million — to buy ownership in promising, early-stage companies, most of which are expected to be software-related, JumpStart CEO Ray Leach told council members Tuesday.

Such investments, totaling an estimated $2 million or so each, would likely go to businesses with between 5 and 15 employees, which have already established their first customers and received their first batch of revenues, Leach said.

“This fund is very, very much focused on companies we believe have the ability to create hundreds if not thousands of high-paying jobs in Cuyahoga County over the next decade,” Leach said.

The fund is expected to invest in 20 or more companies based in Cuyahoga County and create an anticipated minimum of 333 new jobs, interim Economic Development Chief Paul Herdeg told the committee.

If approved, the county would get back its $5 million, plus 2% annual interest, at the end of the seven-year loan.

The county could get paid back earlier if start-ups are sold to larger companies prior to the end of the term of the loan, Herdeg said.

The county could also get extra earnings if JumpStart earns more than double its investment, if the company that benefitted from the loan is sold off, Leach said.

The administration of County Executive Armond Budish proposed the county’s contribution in response to March news that the fund secured $10 million through the Ohio Third Frontier Commission. JumpStart is also contributing $10 million to its fund, Leach said.

JumpStart would secure its county loan with something called a “cognovit promissory note.” Such notes promise repayment, and in cases of default, allow a creditor to obtain a judgment against a debtor without notice. JumpStart’s money, inventory, letters of credit, investment properties and other collateral could be tapped if needed, Herdeg said.

Herdeg said this method is similar to the kind of security Cuyahoga County got from JumpStart in 2016 when it gave JumpStart a loan of $4.5 million for similar start-up investments. (That loan has already been repaid.)

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