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Startup City 

Never mind the rust. Young tech companies are hot in Cleveland, where creating a startup has never been easier.

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"When we first came here, Jumpstart was just being born and there were no angels and no accelerators," says Bennett, who worked in the insurance industry in Canada for years before striking out on her own because she wanted to do something more inspiring. She came to Cleveland when her husband got a job at Progressive.

"I've seen a huge change in the past 10 years and it's really accelerating," she adds.

Not that it was easy. Bennett and cofounder Alex Krooglik stumped for two years to find an insurance partner. Pet insurance is common in the U.K., yet less than 1 percent of U.S. pets are covered because good products weren't available, Bennett says. Her idea was to introduce new, improved products and grow the once-sleepy U.S. market. They finally found a partner in Lloyd's of London and the firm has been growing ever since.

"You have to kiss a lot of frogs to find the prince," says Bennett, who met with dozens of insurers. "We just so believed in the idea. We talked about giving up for one night, and then woke up and said, 'OK, the last one didn't like us—let's go find the underwriter.'"

Gordon Daily of BoxCast, a startup whose product is a device that plugs into cameras and allows users to stream live coverage of events, also got a boost from seed-stage programs. He won $200,000 from GLIDE at Lorain County Community College and North Coast Opportunities Fund, enabling him to hone his product and hire people.   

"If you're a startup, you can't go to the bank," he says. "They won't give you any money unless you put your house on the line, and I can't risk my house and my family's future. That's why these programs are so special: they give me the chance to take a run at it."

Getting to the next stage

Although nearly everyone agrees it's harder to fundraise for early-stage companies in Cleveland than coastal cities, in some ways that's come to define the area's startup culture. It's better for startups to prove their concept before accepting investment.

To David Levine, a serial entrepreneur who cofounded Wireless Environment in 2006 when he saw a gap in the marketplace for battery-operated LED lighting solutions, having to prove your idea actually works before taking money isn't a bad thing.

"The fantasy is that people raise big amounts of money right from the start, but that's actually the worst path," he says. "Until you're aimed in the right direction, it's like a rocket: Adding more fuel will only cause you to go faster in the wrong direction."

Levine has "bootstrapped" his business by putting in partner equity and raising money from friends and family, and he's seen growth of 650 percent since he started in 2008.

Angel investors—high net worth individuals who invest money in companies—have stepped up to the plate to fill some of the early-stage funding gaps, says Dearborn. That's allowed startups to keep growing until they're able to secure venture capital. Because of this change, finding funding for startups is getting easier in Cleveland.   

Adam Roth of Streamlink Software, which launched its first product in 2008 and now has 25 employees working in the Caxton building in downtown Cleveland, says that early stage funding is never easy to find but it's available for persistent individuals.  

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