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CRAIN’S CLEVELAND BUSINESS
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OCTOBER 21 - 27, 2013
Cash fuels E-Z Electric growth Motor repair shop aims to triple size of staff, add equipment By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com
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A family-owned industrial motor repair business is gearing up to increase its capabilities and its work force with the help of a local investor. Demetrius Ledgyard, president of E-Z Electric Motor Service Inc. in Bedford Heights, has been in the business since he was 11, when he helped out at what was then his father’s shop. The company got its start in the basement of his family’s home in 1965, turning his father’s electrical hobby from the Army into a business with more than a dozen employees. Now, the company is poised to grow with the support of Ken Roller, former owner of Cleveland-based Monarch Electric Service Co., now known as Integrated Power Services. Mr. Roller is investing $750,000 in the company and, as of mid-September, began serving as its vice president. Today, E-Z Electric mainly repairs medium-voltage motors, but planned equipment upgrades that will be made possible in part by Mr. Roller’s investment would allow the company to repair high-voltage motors and megawatt generators, Mr. Ledgyard said. That capability would open up the markets E-Z Electric can serve, from municipalities to electric utilities to operators of wind turbines.
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The company plans to reconfigure its 15,000-square foot plant at 23400 Miles Road, re-equip it and hire 20 to 25 new employees by the end of 2014. E-Z Electric as of early October had 13 employees, up from a low of four employees in 2008 and 2009. Last month, Ohio’s Minority Development Financing Advisory Board voted to approve a $1 million loan for the company. The loan still needs to be finalized by the state, but if it is, E-Z Electric would use it to buy two large cranes, new 14-foot ovens to dry motors and bake varnish, a vacuum pressure system to varnish motors and other equipment. The company plans to expand with or without the loan, Mr. Roller said, but it would help expansion plans. Mr. Ledgyard’s father, George Ledgyard, is excited about the growth plans. He always planned for
his son to take over, and he said he thinks his son has done an excellent job over the years. Demetrius Ledgyard, 59, bought the company from his father and became president in 1995. “I always had a passion for this business. And I had big ideas,â€? Demetrius Ledgyard said. Bernie White, a materials manager for ITW Bedford Wire in Bedford Heights, said the company has been sending its motors to E-Z Electric Motor Service for nearly a decade. The motor repair shop offers fast turnaround, Mr. White said. Bedford Wire processes coiled rod into wire for the automotive, construction and industrial markets, and its machines usually run 24/7. A broken motor means that equipment is down, so the turnaround time is important. “They do a very good job of meeting our requirements,â€? Mr. White said. â–
JumpStart: Fund wouldn’t be alone continued from PAGE 3
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Demetrius Ledgyard, left, president of E-Z Electric Motor Service Inc., stands with his father, George Ledgyard, who started the company in the 1960s.
Pooling more capital for startups is particularly important at a time when early-stage companies here and nationwide are finding it harder to raise money from investors, said Ms. Hoover, who also is chair of the Fund for Our Economic Future, another group that has given grants to JumpStart. Many local industry watchers have told Crain’s they are worried about that trend. “The intent is to help fill a perceived gap� in early-stage venture capital, Ms. Hoover said. Ms. Hoover said she supports the idea of the for-profit fund, adding that the Morgan Foundation has been thinking about financing programs that could provide a return to the foundation. The concept also sounds good to Robert Eckardt, executive vice president at the Cleveland Foundation, which also has provided financing to JumpStart. “On the surface, it seems to be something they should be considering,� Mr. Eckardt said. The foundation hasn’t considered putting money into the proposed fund, but would think about it if JumpStart provided a prospectus describing the opportunity. Few details are available regarding how the JumpStart Next Fund would be structured. JumpStart’s Ms. Fryberger would not comment on the effort. JumpStart has made progress in raising more money for startups: The group since December has been awarded a total of $5 million in loans from the Ohio Third Frontier
HOW IT’S SPENT A look at how JumpStart has used the $70.6 million in capital it raised from 2005 to 2012, according to its report at the close of last year: ■$36.7 million: Assisting startups and providing them with access to resources. ■$23.8 million: Fund invested directly into early state companies. ■$5.7 million: Operations. ■$4.4 million: Working with entrepreneurial ecosystems across the country. View the report at: tinyurl.com/mfcnggs Commission’s Pre-Seed Fund Capitalization Program. The program provides money for both nonprofit and for-profit funds that invest in startups. However, JumpStart will need to raise matching funds to get that money.
First profit, then jobs The idea of a nonprofit economic development group running a forprofit fund isn’t unusual. For one, JumpStart already has the for-profit Emerging Market Fund, a smaller investment vehicle designed to finance minority-led startups and young companies in economically depressed parts of the region. Similar organizations in other parts of Ohio also have for-profit funds. Among them is CincyTech, which assists and invests in young tech startups in the Cincinnati area. CincyTech provided JumpStart information on how the organization runs its for-profit funds, according to the group’s president, Bob Coy.
He said he wasn’t sure whether JumpStart planned to imitate anything about CincyTech, which raises money from institutional investors and individuals. Though CincyTech has never run a nonprofit fund, Mr. Coy said he believes the pressure to make profitable investments for his investors has an impact on the way his organization operates. For instance, CincyTech always invests alongside other investors, providing more money for startups at the outset. The goal is for startups to have a better hand to play when they start negotiating with a second round of investors, which is intended to protect CincyTech and other early investors from dilution, Mr. Coy said. “I’m not sure if nonprofit funds think about that the same way,â€? he said. Nonprofits can run for-profit funds well, as long as they have the right people, structure and incentives in place, said Jonathan Murray, managing partner at Early Stage Partners, a venture capital firm in Cleveland. Mr. Murray is a fan of the idea. For one, he thinks “the profit motive is always a good thing.â€? Plus, he likes that for-profit funds tend to be judged on how much money they make, as opposed to how many jobs they create. “We’ve been measuring the wrong thing for the past 10 years,â€? Mr. Murray said. “We’ve been measuring jobs. You don’t really create long-lasting, sustainable jobs without creating profit.â€? â–