KC Rising, a collaborative strategy to beef up the regional economy, is rolling out new initiatives that bode well for entrepreneurs.
“If you look at Kansas City today and other startup communities, there are things we need to improve, such as connecting companies to each other, startups to big companies, big companies to disruptive ideas and problem-solving companies,” said Kevin McGinnis, former CEO of Sprint subsidiary Pinsight Media and former managing executive of the Sprint Accelerator. “It’s going to require collaboration.”
KC Rising was launched in 2014 when the local business community recognized that Kansas City had not emerged from the Great Recession as quickly as some peer cities. The goal was to raise Kansas City’s standing in regional gross domestic product, quality jobs and median household income.
The effort has garnered widespread support from groups such as the Kansas City Area Development Council, Mid-America Regional Council, Civic Council of Greater Kansas City, the Greater Kansas City Chamber of Commerce and KCSourceLink, which helps startups and established small businesses find the right business resources.
BUILDING ON STRENGTHS
In February, a metrics review by KC Rising reported some good news and not-so-good news about the region’s progress. For example:
- The Kansas City region ranks among the top 10 for employment in engineering and architecture (seventh among peers) as well
as life sciences (eighth among peers).
- Series “A” and angel investment (23rd) and total equity capital (24th) present an area where the region needs to improve to
support early-stage company growth.
- Net migration of adults with a bachelor’s degree (30th out of 31 cities) was cited as a “red flag,” with a one-year dip in the number of educated adults leaving the KC region versus moving here.
In an effort to jumpstart the areas where Kansas City needs improvement and build on areas of strength, KC Rising is moving forward with three new initiatives:
- Invest in Kansas City’s startup community // This includes investing funds, investing time and investing part of one’s business by becoming a customer of a startup.
- Provide experiential learning opportunities // The goal is to connect the region’s students to business and trade professionals and provide on-the-job experiences that will prepare high school and college students for future employment.
- Get involved in launching new industry brands // KC Global Design, a group working to establish Kansas City’s reputation as a global center for architecture, engineering and technology, rolled out its new brand identity May 1. In addition, the Kansas City Area Life Sciences Institute is rebranding as BioNexus KC—part of its effort to foster advancements in both human and animal medicine.
MAKING THE RIGHT CONNECTIONS
Small businesses may not spend a lot of time studying the economic metrics of Kansas City and its peer metros, but they stand to benefit from efforts to make Kansas City more competitive, including the goal of growing startups here.
“What local companies can do is work with us in making a connection between entrepreneurs and investors,” said John Murphy, KC Rising co-chair. “Many times, what I have found in working with entrepreneurs is a lot of them have tremendous ideas. But what they need is help, for example, in putting together a business plan, putting together the information that will compel an investor to invest money.”
One of KC Rising’s initiatives in this area is the KCRise Fund, a sidecar fund that co-invests with institutional venture capital investors in early stage Kansas City-area companies with high-growth potential.
“We want to recognize local startup opportunities and invest in them,” Murphy said. “The first KCRise Fund when it closed had about $19 million, and it invested in 12 Kansas City-area startups. We’re trying to make sure that those local startups, as they become more and more successful, stay here in Kansas City.”
Another program that grew out of KC Rising is KCInvestEd, which connects local investors with resources, events and tools to learn more about investing in early-stage companies.
“Our Kansas City investor network was not very connected,” said Kate Hodel, the special projects person at KCSourceLink who oversees KCInvestEd. “If you go to other communities like Silicon Valley or Boston, if you try to pitch a deal to get equity investment and it’s not the right place, they might refer you to four or five other places.”
KCInvestEd puts on lunches and dinners where small groups of investors and entrepreneurs gather to talk about entrepreneurship and early-stage market investment activity in Kansas City.
“We’ve had almost 200 folks come through the events since April 2016,” Hodel said. “One of the things we measure is that connectivity, so we survey everyone. And about 88 percent of the folks who have been to one of our events report that they’ve connected with someone new.”
Hodel said 36 such events have drawn 92 entrepreneurs, 44 investors, 44 potential investors and 15 community leaders—and resulted in $51 million in investments.
Not every startup is suited for equity investment, said Maria Meyers, founder of SourceLink and KCSourceLink, and executive director of the University of Missouri-Kansas City Innovation Center.
“Generally, people will look toward an equity investment when they’re trying to develop a product,” Meyers said. “But if you’re starting a lawn-mowing company or a restaurant, you’re looking for capital to buy the restaurant equipment or the capital to buy the lawnmower.”
Meyers said such businesses typically seek funding thorough bank loans, microloans from individuals or organizations, and “bootstrapping,” funding the business through product and service sales.
Hodel said businesses can invest in startups by becoming customers. “That’s every bit as important as raising capital.”
For many startups, one of the most crucial steps toward success is working with other companies. But how can startups get on the radar of more established companies? Hodel recommend entrepreneurs take advantage of the city’s many networking opportunities.
And while capital is crucial, it’s just as important for established companies to invest in startups through mentoring, McGinnis said: “We’re talking about board members that can help guide this next generation of entrepreneurs and help them learn the lessons of those who have gone before them.”
BUILDING THE WORKER PIPELINE
The net migration of higher-educated adults out of Kansas City is a worrisome trend. KC Rising is addressing strategies to build up the metro’s worker pipeline. With more qualified applicants available, local businesses can tap that resource to grow.
One way is getting the word out. For example, Murphy said KC Global Design is visiting major universities in the region and talking about job opportunities in the Kansas City area.
“When you’re trying to attract talent to the Kansas City area, that talent will not come unless there are multiple opportunities in their discipline,” Murphy said. “When KC Global Design goes to K-State or KU or MU and talks about the opportunities, they’re talking about the opportunities that are available in the ecosystem and not just at a particular company. That’s going to be very important to attract and keep talent down the road.”
Meyers said educational systems from K-12 on up need to support entrepreneurship and create the critical thinkers needed to start companies or work for entrepreneurial firms.
“One way people can get involved is to work with the higher education groups in town and find an intern for the summer,” Meyers said. “There’s a win-win there. You get some work done, and you get to educate people about the life of a small business. It’s very important to create the talent flow.”
Hodel cited the entrepreneurial seeds being planted by the Your Piece of the Pie program created by the FDIC, Federal Reserve Bank of Kansas City, KCSourceLink, Mid-Continent Public Library and the UMKC Office of Financial Literacy.
The program teaches fourth- through sixth-graders entrepreneurial skills such as confidence, creative thinking, relationship-building and leadership, as well as entrepreneurial vocabulary and how entrepreneurs can benefit the economy.
But still more is required to keep a steady flow of talent in the pipeline.
“If somebody likes their job, but at 5:30 every Friday night they leave that job and they don’t have an enjoyable weekend, ultimately they’re not going to stay in Kansas City,” Murphy said. “With programs like TeamKC and MyKC for interns, we are making sure that college students recognize not only the job opportunities that are available, but what’s available for them in the non-job arena in the Kansas City area in terms of cultural amenities.”
Meyers expressed the same viewpoint.
“Talent comes to places where they like to live. It’s really important for Kansas City to be a great place to live and have a great transportation system and a great cultural environment. If we want good creative talent here, we need to continue supporting our arts community.”
SMALL BUSINESSES INTEGRAL TO COMMUNITY
KC Rising’s efforts to help early-stage companies stand to benefit the overall Kansas City economy and community, Meyers said.
“Kansas City startups are creating an average of 16,376 new jobs every year. It’s very important to the economy in Kansas City to help create new businesses.”
In addition, Meyers said, “businesses create the character of our city. They make our cities vibrant. The owners of businesses are the ones that are philanthropic with their time and money.”