The ESP program
The Dayton Entrepreneurial Signature Program (ESP) is a $22.5M “loan” and “grant” program that was funded by $15M of Ohio Department of Development Third Frontier Funds (in 2006 and 2007) and $7.5M of local funds, provided by “investors” such as Wright State University, Sinclair Community College, Reed Elsevier, NCR, and the Turner Foundation. It is run by staff at the Dayton Development Coalition (Chris Howard, John Houston, Melissa Aldridge), and companies in the Ohio Department of Development’s Region 4 qualify, including those in Springfield OH MSA / Clark Company. It is used for loans and grants designed to help high-tech start-ups, spin-offs, and small growing companies get new products to market. Since 2007, about 250 companies have applied, and the program has given 37 grants to 25 companies totaling $5M.
(1) Type of company activity – The DDC has identified specific “signature areas”, which are the most favored types of company activity to fund. Signature projects/companies are those involved in the following industries: advanced materials, composites, nanoapplications, and sensors. They can, however, fund projects by companies in the information technology, aerospace, and human sciences, especially in the Springfield OH MSA (Clark County).
(2) Size – They have to have less than 30 employees and $5 million in annual revenue. New spin-off companies are allowed, but there has to be sufficient evidence that they will indeed be operating separately from the parent.
(3) Commercialization Stage & Viability – these points are usually addressed in the proposals that companies put together when applying for funding.
ESP Investments – the “loans” of the ESP program
The word “loan” is in parentheses because they function like a hybrid between venture capital and bank. They are more expensive than fixed-asset bank financing, because they are looking to double their money, but they are like a bank in that there is usually a principle and interest payment on the money. It is similar to venture in that often the terms will include things like royalties, percentage of profits and/or equity (for five to ten years, especially on bigger deals) in addition to principle and interest . The amount of the financing is typically in the range of $100,000 to $200,000 (although there have been on occasion larger loans such as $600,000+ and even $1M in one instance), and this money can be used for operating capital as well as anything else the company needs to accelerate commercialization. Within the program, there is also a quicker and smaller investment program called the “First Fifty,” which is the first $50,000 investment by ESP into a company (yes, they may qualify for multiple rounds), and this really represents the minimum financing through the ESPCould be a loan, license royalties or part of revenue, part of profits % – related to success of business. Looking for interest, $100-200,000. $6-700,000. Even one at $1M. Investments can be quite large. Some would take a position in the company for a period of time, 5-10 years. Or an extra reimbursement based on profits or products sold.
Development Services – the “grants” of the ESP program
The word “grant” is in parentheses because this is not money given directly to companies but to service providers that will help the company move its product farther along the commercialization pipeline. For example, development service grants can be approved for prototype design and manufacture, market research/studies, key personnel recruitment, IP protection, incubation space/services, consulting, and market plan development. Typically, the money goes to outside consultants (e.g., in the case of market studies) which the DDC generally prefers. A good market research study, for example, can be $9,000 to $10,000. The amount of the grants typically range between $10-20,000, but can be larger if, for example, ESP is providing financing as well, especially if it helps minimize risk. For example, if the ESP program was doing a “loan” of $1 million, the program might be willing to spend up to 5 to 10% on development services to help ensure the product goes to market and is successful.
The initial process is relatively simple: (1) Contact an ESP staff person or local contact, (2) have meetings to get a pre-assessment of eligibility and evaluation of product/technology viability, (3) draft and submit a proposal, and (4) move through the rest approval process with an assigned ESP staff person.
Your initial point of contact should be Nancy Bridgman, Director of the NETI Incubator in Springfield, OH. Nancy is on the TechNet Committee (which makes recommendations on development service grants) and can be contacted by email at firstname.lastname@example.org or by phone at (937) 376-6192.
You can also feel free to call John Houston, who manages the financial part of the program, and who is in the interview at email@example.com or by phone at 937.229.9076. And, of course, you’re also free to contact me as well at firstname.lastname@example.org or 937.631.5315.
>> Interview with John Houston on ESP – http://bit.ly/seespi
>> DDC Homepage for ESP – http://bit.ly/CJHaY
>> ESP brochure + proposal outline (application) – http://bit.ly/KroZU
>> 5/15/2009 DBJ article on $5M given out through ESP – http://bit.ly/koQ0D
>> OTF Press release on funding to DDC for ESP – http://bit.ly/teX2X
>> Renegade Materials – one of companies funded – http://bit.ly/18bCpD
>> DDN Photos of Renegade – http://bit.ly/18IMuR
>> Renegade homepage – www.renegadematerials.com
>> RFiD – article on another company funded – http://bit.ly/161as7
>> DDC Staff Contact page – everyone involved w/ESP – http://bit.ly/R3Euf
>> Chris Howard who managed program, WSU alum of year – http://bit.ly/ccEel
>> DDC on LinkedIn, Chris Howard & Melissa Aldridge – http://bit.ly/xgKtX
>> Nancy Bridgman of the NET Incubator hosts conference – http://bit.ly/77D8O