Todd Federman

(Photo Credit: Todd Federman)

Name: Todd Federman​

Occupation: Managing Director at North Coast Ventures​

​Q. Todd, you are the Managing Director of North Coast Ventures. What exactly is North Coast Ventures and why does it exist?

North Coast Ventures invests in tech startups, and includes six funds and over 300 individuals. Over the past 13 years, we have deployed over $65M into 60 startups.

We currently invest out of two types of funds - Seed Fund (typically a few people on the team, MVP offering, and very modest revenue) and Acceleration Fund (typically 10+ team members, strong indications of product/market fit, and $1M-$10M in revenue).

Our sweet spot for both funds is B2B SaaS and that can include digital health, healthcare IT, FinTech, MarTech, InsureTech, HRTech, etc.

Q. In addition to being an investor, you co-founded a business. What's unique about your operational journey is that it wasn't in tech, per se. What is the quick story behind starting One With Nature?

One With Nature is a line of natural personal care products - soaps, lotions, body washes, etc.

The concept came out of a business school project. We launched the brand in 2003 and are carried in over 4,000 retail locations today. It was a lot of fun to develop a concept, see the brand come to life, and bring a physical product to store shelves.

As you might imagine, in retrospect, we made some great decisions and bad decisions along the way. We had spells of good luck and back luck.

Building something new is difficult no matter the industry and the One With Nature experience gave me a strong sense of empathy for founders and the blood, sweat and tears that goes into starting a venture.

Q. What was the decision to re-brand North Coast Angel Fund to North Coast Ventures?

The rebranding was part of a larger strategic refresh that also included narrowing our investment focus. After ten years, we felt like we outgrew our original name in several ways.

For context on angels, there are over 300 angel organizations nationally. Most are structured as groups, vs funds. That means, the members make their own decisions on a deal-by-deal basis.

Our group organized around a fund concept that all of our members invest in directly. Most of the groups have a volunteer leader. North Coast now has five full time employees and an infrastructure to leverage the contributions of our individual investors.

Lastly, after setting up the Acceleration Fund which invests larger amounts later in a startups’ journey, it felt like dropping the term angel better reflected who we were and the direction we are going.

Q. It feels like there are new venture funds popping up nationally and across the Midwest, but we see few announcements about new VC funds in Cleveland. Why?

I wish this was not the case, but you are right. Pound for pound, Cleveland has fewer VCs and less VC capital than many cities its size. And, it is a real disadvantage for startups in the region, especially at the Seed and Series A stages.

Raising a VC fund is difficult - even harder than raising capital for a startup. At the risk of stating the obvious, to raise a $50M fund, the managers have to attract individuals or institutions to commit $50M.

Cleveland remains conservative financially, and investors are more likely to have experience and comfort in more traditional industries. This dynamic is changing, albeit not as quickly as we’d like.

Success stories like Overdrive, OnShift, Onix, Cardinal Commerce, and Within3 are getting through. We’re seeing more successful people in technology roles (from places like Hyland, Progressive, and OEConnection) invest.

And we’ve seen more people that have led and exited successful startups commit to investing in the next generation of entrepreneurs. This is encouraging, but the region needs more VC capital if we are to realize the full potential of our startup ecosystem.

Q: What's your favorite financial history fact or story?

Two years ago, on the way back from my wife’s college reunion, we stopped in Portland Maine and wandered into the Portland Observatory - a 200+ year old tower that looks like an old lighthouse.

At the time, Lemuel Moody, a ship captain knew from when he was teenager working onboard ships, that people didn't know when or what ships were coming into Portland harbor.

He thought this was a problem so he decided to build a tall tower to see out across the harbor.

He created a distinct flag for each shipping company and vessel that they would fly when in the area, but hours away.

Shipping companies paid him to communicate the status to their customers on land so that they could be ready to receive the cargo.

It was an early example of a subscription based information service and way ahead of its time.