03/18/2011 03:28 pm ET | Updated May 25, 2011

Interns: A Startup's New Best Friend

Tony Giordano is the typical biotech entrepreneur. As CEO of TheraVasc, he juggles fundraising with traveling the road to FDA approval, which can often times be long and costly, and doing it all with a lean workforce. But he's found an incredibly effective model to balance capital needs with the restructuring of a workforce: Interns.

In fact, it was an intern who helped Tony submit his latest Investigational New Drug (IND) application to the FDA to study the safety and biological activity of a TheraVasc drug. It might seem obvious or even slightly trivial, but interns offer startups a hardworking, forward-thinking labor pool at a heck of a price.

As president of a venture development organization that supports startups, it's not only a workforce model but an overall approach, meaning bootstrap as much as possible to keep things lean while proving out your most basic concepts. And I'm not alone. The topic is being discussed nationwide and lots of online communities, like YouTern, have launched in the past year to link interns with the right startups for them.

Internships are a core element of the Innovation Fund, a Cleveland-area fund launched by Lorain County Community College (LCCC) that recently joined the Startup America initiative to take its model national with Innovation Fund America. As with most funds, entrepreneurs and the community tend to focus on the cash the Innovation Fund provides. It awards modest grants at two levels - $25,000 and $100,000 - to fledgling startups trying to maneuver through the "Valley of Death" (the time between having an idea and proving its market potential when companies are typically too early for angels and definitely too early for most for-profit VCs). Tony's company won a $100,000 award from the Innovation Fund in 2009 and used the funding, along with that funding's required one-to-one match, to begin studies on its first drug.

This unique and groundbreaking fund has three important tenets: 1) as funds are paid back, they are then re-invested in another startup; 2) the company needs to work with a business mentor at the Innovation Fund's related incubator; and 3) every company that receives an award from the Innovation Fund commits to providing at least one local college student with a work-based learning experience.

In a recent discussion with Dr. Roy Church, President of LCCC, I found out that the internships have been an unforeseen benefit to the entrepreneurs. "Most of the entrepreneurs who come through our process meet this condition thinking, 'Oh boy, one more requirement.' But as they begin to experience the talent these students bring, they realize it's possibly the most helpful component of the Innovation Fund model because they're getting talent they can't afford." And of course, the students who get to, as Roy says, "walk shoulder to shoulder with an entrepreneur through the startup process," receive an education you just can't get in the classroom. So far, the Innovation Fund has invested $4.3 million in 60 companies that have sponsored 130 internships. When it comes to slowing the region's "brain drain," this program shows evidence of creating change. The companies have created 100 full-time jobs that, in some cases, have been filled by interns.

The Innovation Fund's give-back model is based on the community-focused mission of LCCC. Like all community colleges, it's tasked with meeting the region's unique needs, whatever they might be. Roy noted that in 1980, 43 percent of those employed in Lorain County held jobs in manufacturing. Today, that number is 14 percent. Lorain County, like the rest of the country, needed to create new industries and new jobs. Knowing entrepreneurial companies are the drivers of our nation's job growth, LCCC dove into a regional assessment to find out what the region lacked in terms of supporting entrepreneurs. The survey identified a need for very early technical support and LCCC launched its incubator, GLIDE, offering business assistance and space in 2001. In working so closely with entrepreneurs, LCCC soon identified another need: access to very early-stage capital. So LCCC's leaders came together and decided to use its foundation, along with additional money they'd raise, to make the earliest pre-seed investments in the region.

"We knew that if we were going to do that, we'd have to get the support of the IRS," Roy said. In order to raise additional funds for the foundation to be used to make investments, LCCC would have to ensure the philanthropic community that they would get a tax deduction for their contributions. That's how the Innovation Fund's purpose, not to make money, but to launch startups and provide educational benefits to students, was born. Ultimately, this work is done to offer the local community the benefits of growing new businesses that create jobs. In 2006, LCCC received a Private Letter Ruling (a narrow ruling around a particular request) giving it the OK from the IRS and launched the Innovation Fund in 2007.

It's that tri-fold, nonprofit mission that sets the Innovation Fund apart from any other pre-seed fund in the country. And it's probably what piqued the interest of President Obama and his cabinet members as Startup America canvassed the country for examples of innovative entrepreneurial activity that are transforming the economy. At last month's Winning the Future Forum on Small Business in Cleveland, Roy sat in the access to capital forum and explained the Innovation Fund's setup to the President and Secretary of Treasury Timothy Geithner. "Of course, Secretary Geithner was exactly the right person to be talking to. When I explained what the Innovation Fund was all about and how it worked, the President asked Secretary Geithner what he could do to make it applicable in other regions."

As Roy works with Secretary Geithner to broaden the Private Letter Ruling to other regions, he's preparing to share with any community interested everything that's gone into making the Innovation Fund successful. As Roy points out, every community has some kind of philanthropy - however big or small - and every community has private companies that care about growing their local economy. Innovation Fund America can give community colleges across the nation the tools they need to pull those resources together to turn innovative ideas into companies that create jobs. "Our whole purpose is to create jobs. You can't do that from the White House. You have to do it from communities across the country," Roy said.