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FEBRUARY 28 - MARCH 6, 2011
WWW.CRAINSCLEVELAND.COM
CRAIN’S CLEVELAND BUSINESS
Packaging specialist expands in Streetsboro after growth
Golf tech company hits rough patch
By STAN BULLARD sbullard@crain.com
By CHUCK SODER csoder@crain.com
Expansion needs at Automated Packaging Systems Inc. of Streetsboro have taken off the market the largest empty industrial building in the Portage County town. A maker of packaging machinery and provider of packaging materials, Automated Packaging bought the hulking, 173,000-square-foot building at 600 Mondial Parkway from Playtex Manufacturing Inc. of Westport, Conn., for $5.23 million Feb. 16, according to Portage County land records. Daryl Manzetti, Automated Packaging’s chief financial officer, said the company has experienced “a significant amount of growth the past three years” and needs the added space. “We’ve expanded globally and are up against it in terms of capacity,” Mr. Manzetti said. Mr. Manzetti said air pouches and mailbags are growing product lines for Automated Packaging, and the new plant would make those products as well as others the company is developing. “This is a big deal for us,” Mr. Manzetti said of buying the building. “We committed to the state that we would create 85 jobs in the first three years. But we see it as a 10-year project. By the end of that time, we will have invested $47 million in the plant and have 200 to 250 jobs there.” The state of Ohio last December
approved a 45% Job Creation Tax Credit for seven years for the project, which includes buying the building and equipment to operate it. The state estimates the incentive will save the company a total of $224,000, but it requires Automated Packaging to operate in the building at least 10 years. Jeffrey Pritchard, Streetsboro city planning, zoning and economic development director, said he was pleased the company acquired the building from Playtex, which had marketed it for more than three years. “I feel we’re blessed,” Mr. Pritchard said. The former Playtex building would serve as Automated Packaging’s third plant in Streetsboro. Mr. Manzetti said when the new plant goes into production, it will be Automated Packaging’s largest factory under a single roof. The company operates five plants, including one in the United Kingdom. Online real estate ads say the property at 600 Mondial originally hit the market in 2008 with an asking price of $8.15 million. However, Terry Coyne, a Grubb & Ellis Co. senior vice president who represented Playtex in the sale, said the original price reflected the hot industrial market before the recession struck. “We got the price we wanted,” Mr. Coyne said. The building dates from 1995 and sits on 32 acres, Mr. Coyne said. ■
Drop in charity tournament bookings hurts Verishot
Verishot has hit a sand trap. Golf technology company Nine Iron Innovations Inc., which got money from state-funded investors, has shut down almost all its operations. The Independence company on Jan. 1 sold its core line of business, Verishot, a video monitoring service for golf courses that run contests, to the company’s former customer service manager, Paul Westdyk, said CEO Dan Quigg. Verishot had no employees at the time, said Mr. Quigg, who would not disclose terms of the deal. Nine Iron Innovations, which at its peak employed five people as well as several seasonal part-time employees, retains the rights to ShareGolf, a prototype-stage social media platform for golfers. That line of business is on hiatus until the company finds more money, Mr. Quigg said. Mr. Quigg cited the economic downturn as the main reason the company sold Verishot. Verishot expanded to provide video monitoring services to about 70 courses in 2009, up from 13 in mid-2008. All the while, though, golf courses were booking fewer charity tournaments for 2010, he said, which reduced the need for Verishot’s verification services. By contrast, another area company
providing similar services has achieved profitability, according to its owner. Nine Iron Innovations founder Mike Burkons 18 months ago started Charitee Golf LLC after agreeing to give up his equity in the original company to have his noncompete agreement dissolved. Mr. Burkons said the Shaker Heights company’s small staff, which consists of him and two part-time employees, has helped it reach profitability on an investment of less than $100,000. Shrinking the size of Nine Iron Innovations’ staff to Charitee’s size was not an option, Mr. Quigg said. Some of the investors that financed Nine Iron Innovations — including JumpStart Inc. and North Coast Angel Fund, both of which received money from Ohio’s Third Frontier economic development program — were looking for higher returns than could be delivered by a company with one or two employees, he said. “When you go to raise money, people expect you to grow a business,” Mr. Quigg said. Mr. Burkons wouldn’t comment about Nine Iron Innovations, but he did say JumpStart and North Coast Angel Fund need to focus more on getting companies to profitability than on getting the companies they finance to raise more money so they can grow quickly. He said his company eventually might raise more money, but being profitable gives it
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“When you don’t (make money), you have no choice but to raise money or go out of business.” – Mike Burkons, founder, Charitee Golf LLC, which he says is profitable after 18 months options. “When you don’t (make money), you have no choice but to raise money or go out of business,” Mr. Burkons said. JumpStart would support a portfolio company’s decision to scale back growth plans to focus on quickly achieving profitability if it appeared that was the company’s only option, said Lynn-Ann Gries, president and chief investment officer with JumpStart Ventures, the investment arm of the nonprofit economic development group. JumpStart’s main goal, though, is to turn startups into highgrowth companies. “The money we give them is to prove something,” she said. Investors typically only back a company if they are excited about its growth potential, said Clay Rankin, managing member of North Coast Angel Fund. Realizing that potential often requires spending money, which means delaying profitability, Mr. Rankin said. “You can’t get to that level of revenue generation unless you invest a certain amount of money,” he said. ■