Economic Development

Comeback Capital Draws Coastal Investor Interest

YOUNGSTOWN, Ohio – Entrepreneurs have an opportunity to receive thousands in investment capital at the Comeback Capital Bowl on May 17.

The competition is part of the Connecting the Coasts to the Heartland conference that day, which will run from 8 a.m. to 6 p.m. at the DeYor Performing Arts Center at 260 West Federal St. The event is the brainchild of Comeback Capital, a venture capital fund made up of coastal and regional limited partners who are looking to invest in companies in the Midwest.

Scott Shane, managing director for Comeback Capital, got the idea after attending the Comeback Cities Venture Capitalist Tour led by U.S. Reps. Tim Ryan, D-13 Ohio, and Ro Khanna, D-17 Calif., in February 2018. As someone who’s been investing in startups for nearly 20 years, Shane said there is a gap between coastal investors and Midwest startups that prevents those businesses from getting the capital they need to advance beyond the first round of investing.

“Entrepreneurs are everywhere, and the problems that entrepreneurs solve are local,” Shane said. “In the Midwest, we have entrepreneurs who are discovering problems and we need to invest in them where they are. But the problem is there is not a lot of capital.”

Because the problems entrepreneurs from the Midwest are solving aren’t relevant to investors on the coasts, the investment dollars don’t find their way into this region, Shane explained. Getting the initial startup capital is one thing, but when a company takes off and needs upward of $15 million to help the company reach its potential, “they need capital from New York and California,” he said.

“What happens is, the investors don’t know them. They’re either not interested, or they force the companies to go to California or New York to reach investors,” he continued. “If we invest early and our limited partners are coming from those coastal funds, we’re building the relationship” so when the companies need the bigger capital, the relationships exist, he said.

For example, Comeback Capital recently invested in Path Robotics, an artificial intelligence company that develops software to control robotic arms for welding and other specialties. While welding presents “real problems” in manufacturing, “that’s a Midwest problem. It is not a New York City problem,” he said. However, an investment from Comeback Capital allowed Path Robotics, originally based in Cleveland, to expand into a new headquarters in Columbus, he said.

Comeback Capital has made two additional investments since starting the fund in April 2018. They raised money until July and made the first investment in August of that year, he said. Everything that’s happened since then, including scheduling the conference and competition, “I hadn’t even anticipated,” he said.

For the Comeback Capital Bowl, which will take place from 3:45 to 5 p.m. during the conference, a committee will select five finalists from the submissions to deliver six-minute pitches. First place will win $100,000 and second place will receive $75,000. The deadline to apply is April 19, and interested entrepreneurs can apply at Comeback.vc/competition. Investment funding is provided by Comeback Capital, Right Side Capital Management, San Francisco, and EV Private Investments, Boca Raton, Fla.

Investors will also provide mentoring sessions for four of the startups, Shane said. “We’re trying to build a connectivity,” he said. “There’s very little connectivity between midwestern startups and investors on the coast.”

Throughout the day, conference attendees can take advantage of presentations and panel discussions by venture capitalists and investment experts, as well as a keynote by Congressman Ryan and a live podcast on “How to Coach” with Youngstown State University President Jim Tressel.

In addition to providing mentoring and networking opportunities for entrepreneurs, the event will raise awareness of investment opportunities in the region and educate would-be investors on how to make smart investments, said Barb Ewing, CEO of the Youngstown Business Incubator. The YBI is an event sponsor.

“We can’t have too much press and too much visibility around events like this because they get people thinking and get people to realize there are resources out there to help them with their ideas and get their products to market,” Ewing said. “As a community, as a region, we need to get more local potential investors into the water and thinking about how they can impact our community and potentially make money. But they’ve got to be smart investors.”

Investing means more than just having the money to invest, she said. Smart investors have a vetting process, understand financials, know how to assess the market and “understand whether or not your entrepreneur has the chops to take something to market,” she said. The conference will provide resources for investors to begin developing those skills and will give them an opportunity to network with other, more experienced investors.

“Those networks of investors really feed themselves,” she said. “If you have a particular interest, like health care, they will bring you more deals and it starts to feed itself and generate investment opportunities.”

While software and digital technology development continue to be the “sweet spot” for YBI, she said biomedical, advanced manufacturing technology, artificial intelligence, machine learning and robotics are other areas “where we think the most interest will be garnered,” she said.

Having events like this can bring new companies into the area who are looking for investment opportunities while getting existing investors to think outside their comfort zone to look at opportunities “to make savvy investments in startups,” she said.

“If you marry up events like these with other events going on, like Valley Growth Ventures, these are the kinds of things it’s going to take to really grow our economy,” Ewing said. “To reinvigorate the wealth in the community, we need to be able to pull in dollars from sales and revenue for investment from outside the area. If you can sell your product around the country and world, you’re importing net new dollars into the region.”

And bringing together “a bunch of investors with a bunch of startups” is the first step, Shane said. Even if a startup doesn’t place during the competition, there might be an investor in the room who is interested in funding that business, he said.

“And if they’re successful, in 10 years we’ll have transformed the Midwest,” Shane said. “This, to me, is the vision.”

Published by The Business Journal, Youngstown, Ohio.