Oros Apparel co-founder Michael Markesbery comes across like a prototypical Silicon Valley Millennial start-up CEO. He’s 25 with a stubbly shave, prone to wearing an occasional hoodie with headphones, and just nailed down his first $1.2 million Series A investment round. He talks in typical Palo Alto speak, casually throwing around phrases like “early stage prototype” and “value proposition”. So you know he’s spent days rehearsing his pitch.
But Markesbery doesn’t live in the Bay Area. He’s Cincinnati born and raised. And his NASA-inspired performance apparel start-up is a case study in why Ohio is fast becoming the best state in America to launch a start-up.
25-year old Oros co-founder and CEO Michael Markesbery. Courtesy of Oros Apparel
The New Ohio Economy
Markesbery’s personal road to entrepreneurship is characteristically meandering. But it’s particularly symbolic of the Buckeye State’s emerging, home grown start-up culture.
While Markesbery was a sophomore at Miami University outside of Cincinnati studying pre-med, he spent a summer backpacking through Europe, running with the bulls in Spain, and climbing one of the tallest peaks in the Swiss Alps, where he almost froze in a bulky old down jacket.
Page 1 / 7 Continue
Comment on this story
Markesbery testing Oros’ gear on location. Courtesy of Oros Apparel
Though not a mountaineer by any stretch (“Ohio doesn’t have a lot of mountains”), Markesbery’s mind already worked like a scientist’s, trying to solve problems.
“After that trip,” Markesbery recalls, “I kept thinking to myself that there’s got to be a way to cut the layers, cut the bulk, and still stay warm. I couldn’t stop thinking about it.”
That fall Markesbery applied for a NASA scholarship where he was introduced to a material called aerogel that had been used to insulate the Mars Rover and the Space Shuttle. It took him less than three seconds to connect the dots.
“Aerogel is the lowest thermally conductive solid material on the planet,” Markesbery remembers of that moment, “Which means that per unit thickness it’s the best insulation in the world. So good that NASA was using it in space where it’s two degrees above absolute zero. So I remember thinking ‘You guys have this amazing insulation that you’re using in one of the best torture tests in the universe—space. But it hasn’t yet been commercialized in apparel.’ I immediately thought back to feeling like the Michelin Man on top of that mountain in the Swiss Alps and knew that there was a way to make this work.”
The ‘Gas’ planet Mars. Courtesy of Shutterstock Oros’ 2016 lightweight women’s jacket. Courtesy of Oros Apparel Oros’ 2016 lightweight men’s jacket. Courtesy of Oros Apparel
The reality was that Markesbery and his eventual Oros co-founder Rithvik Venna knew nothing about making anything work in terms of starting a business. That’s where Ohio’s emerging start-up ecosystem started to lend Markesbery a hand.
“We were science geeks who met in organic chemistry class planning on going to med school,” Markesbery tells me. “We had never thought about running a business in our lives. We had no idea what we were doing. But we knew we were onto something so we started asking ourselves how do we create a product, how do we sell it, where do we make it, where do we find the money, and most importantly who do we need to be talking to?”
During their fall senior year semester Markesbery and Venna stayed up until 2:00 am reading business books in the library. They wrote letters and emails, found local mentors, joined Miami University’s institute for entrepreneurship, and formed an advisory board consisting of seasoned and influential university business alumni, including some of the people involved in the largest recent fitness apparel IPOs.
At the same time, Markesbery and Venna dumped the $10,000 from Markesbery’s scholarship and whatever savings they collectively had into aerogel research. What they quickly discovered was that the legacy form of aerogel used by NASA was rigid and could shatter, making it impossibly unsuitable for outdoor clothing.
“At that point,” Markesbery recalls, “We had to start asking ourselves how do take this incredible inflexible amazing insulator that’s brittle and put it into a flexible form that you can use in apparel while still maintaining the insulating qualities. That’s when Oros became our passion. Because we knew we could change the entire game.”
By spring of their senior year, completely drained of cash, Markesbery and Venna had come up with a form of aerogel that was flexible and had produced their first prototype jacket. It wasn’t runway ready, recalls Markesbery, but it was Kickstarter ready.
Two months before graduation, Markesbery and Venna raised $125,000 in the first 36 hours of their crowd funding campaign, totaling $320,000 over the next 30 days, one of the largest outdoor apparel Kickstarter rounds in history. “We didn’t go to class the next day,” Markesbery remembers of the day their campaign ended. “We took the day of to figure out the rest of our lives.”
Today thanks in part to Ohio’s hands-on start-up culture, Oros now has 11 employees, $1.2 million in seed capital from Columbus-based , and 250% year over year revenue growth since 2015, with that number expected to increase through 2020. At any time over the past two years since graduation, Markesbery and Venna could have packed up and moved their company to Portland, San Francisco, Los Angeles, or New York, where most apparel and fashtech start-ups are based.
“Not a chance,” says Markesbery when I ask him why not. “I might be biased. But Ohio is the best place to launch a start-up in America.”
The city of Columbus skyline. Courtesy of Brand Columbus
Ohio Never Left
The maturing entrepreneurial ecosystem in Ohio that nurtured Oros through its seed round doesn’t surprise anyone in the start-up and venture capital worlds of Cincinnati, Columbus, or Cleveland.
“Ohio never lost its critical assets from the Industrial Age,” says co-founder Mark Kvamme of Columbus-based Drive Capital, who was previously a managing partner at Sequoia in Palo Alto. “Even in the Digital Age business in America has always been about proximity to customers and managing your supply chain. And if you put a pin in the center of Ohio you have 60% of U.S. GDP and 150 of America’s Fortune 500 companies within a day’s drive. Ohio never left. People just stopped paying attention.”
That’s changing now faster than ever. And many of the country’s top venture capital firms on both coasts finally are taking notice. Ohio’s emerging status as one of the hottest places in America to launch a start-up is based on many more factors than strategic geography alone, however. Other states looking to nurture America’s next Silicon Valley might want to start paying attention.
Jeni’s Splendid Ice Cream ship in Columbus. Courtesy of Brand Columbus All hail the Cincinnati Reds. Courtesy of REDI Cincinnati
Life’s Better In Ohio
Manhattan has the nightlife. San Francisco has the lifestyle. But Ohio has both for a fraction of the price. Forbes recently ranked Cleveland as one of “The 25 cities where your paycheck will go the furthest”, and Cincinnati 5th as the most affordable metropolitan area as well as the 9th best city in America for raising a family.
On the culture side, Ohio is home to seven major league sports teams and Columbus has recently been tagged as the third “fashion capital” of the U.S. after NYC and LA. Ohio’s resurgent culinary culture, thanks to a number of local celebrity chefs, also has made the Buckeye State one of America’s leading foodie hotspots.
“The lower cost of living in Ohio is nice to have for sure,” says Rich Langdale, co-founder and managing partner at NCT Ventures, Oros’ lead investor. “But more importantly Ohio has great cities to live with exciting, vibrant, diverse cultures. We also have smart hard working people with a loyal work ethic, which is harder to find on the coasts.”
Says Markesbery, “Cheap rent and cheap groceries equals a happy bank account.”
Columbus has become a hotspot for young Millennials looking to avoid the expensive overhead of living on the coasts. Courtesy of Brand Columbus Columbus’s Short North Arts District. Courtesy of Brand Columbus
The Talent Premium
There are advantages and disadvantages for an apparel company starting up in the Midwest, admits Markesbery. But the pros far outweigh the cons. Compared with places like Portland where Nike and Columbia are headquartered and the Bay Area, which is the proving ground for many athleisure start-ups, Ohio’s biggest advantage is burn rate.
“The best part about Cincinnati and Ohio for start-ups is the cost of labor,” Markesbery explains. “Especially when you’re in the start-up phase, every dollar matters. Our burn rate is literally half of what it would be in the Bay Area based on the cost of talent for a really good product developer or marketing director. So if you raise a $1.2 million Series A in Cincinnati you’d have to raise $2.5 or more out on the coasts.”
Start-ups also don’t run on the best and brightest alone. Real estate rent, equipment loans, attorneys, and accountants all cost money as well and in entrepreneurial hotspots like Manhattan and San Francisco over 50% of a start-up’s operating costs can flame out on overhead—the same costs that run an average of 40% less in Ohio cities like Cincinnati, Columbus, and Cleveland.
The Cleveland Indians stadium. Courtesy of Destination Cleveland
Singles Vs. Home Runs
Silicon Valley can definitely lay claim to more Google, Uber, Apple start-up home runs than any other entrepreneurial epicenter in the world. But the innovations that drive the American (and global) economy come equally from steady singles and doubles off players who don’t date super models. That is the Midwest way.
“Ohio has an entrepreneurial spirit with a long list of entrepreneurial firsts through almost every phase of innovation advancement,” Rich explains about the public, private, and university partnerships that have supported Ohio’s recent surge in homegrown start-ups. “A few years back the State also invested in a program called the Third Frontier, which has supported commercialization and entrepreneurship through a variety of thoughtfully developed resources particularly supporting early stage investment and venture capital in Ohio.”
Continued from page 5
Markesbery and Venna were direct beneficiaries of this slow and steady, hands-on Ohio approach.
“Where else but the Ohio and the Midwest would some venture capitalists take two med school kids who wanted to start an apparel company and take the risk to get behind them, says Markesbery. “VCs here understand the entrepreneurial process, they know how to build companies, they understand logistics and supply chain management. And they get involved.”
Cleveland Symphony Orchestra. Courtesy of Destination Cleveland Rock N’ Roll Hall Of Fame. Courtesy of Destination Cleveland
You’re Not In Farm Country Anymore
That the Midwest and Ohio in particular is a haven for global Fortune 500 companies and headquarters isn’t just a bragging right. It’s a huge regional asset that’s creating a gravitational pull on hundreds of start-ups that would otherwise have launched in San Francisco or New York.
“What makes Ohio a great incubator for early-state startups is its unmatched access to customers and talent,” explains Falon Donahue of VentureOhio. “Ohio is home to 59 Fortune 1000 companies who are beginning to build out their innovation strategies and lean in to support local startup communities. Ohio is also home to over 200 higher education institutions graduating talented engineers, finance professionals and entrepreneurs into the community each year.”
What this means for start-ups like Oros is local access to any talent you’d ever need.
Explains Markesbery, “Because there are more Fortune 500 companies headquartered (in the Midwest) than anywhere else in the world, that means is that there are tons of incredible branding, marketing, and advertising companies here, as well as law firms and accountants who specialize in exactly the type of product development that we’re doing at Oros. Our packaging has won eight different international awards already because we just happen to have one of the best companies in the world doing that right here in Cincinnati.”
This article was sourced from http://intrnews.com