KCSourceLink just released its sixth annual state of entrepreneurship report, which reveals that 50 percent of 2018’s top venture capital-funded companies in Kansas City got their start with early-stage investment programs that emerged after 2012.
KCSourceLink, a local entrepreneurial network, has published its “We Create KC” report for the last five years, which covers six imperatives identified as key areas of development in the region’s entrepreneurship and economic growth.
According to this year’s report, Kansas City startups generated 80,000 net new jobs from 2013 to 2017, accounting for 58 percent of all new jobs in the region.
Furthermore, of Kansas City’s entrepreneurs, 74 percent (145,940) operate as microenterprises on a scale of six employees or fewer.
Maria Meyers, founder of KCSourceLink and executive director of the connected University of Missouri–Kansas City Innovation Center, said the high percentage of VC-funded companies illustrates how important early-stage investment programs are to the local ecosystem.
“If our companies are to survive the ‘valley of death,’ the community needs to support these early-stage funders and help them continue to create a pipeline for entrepreneurial growth and investment,” Meyers said in a release.
Investing in ideas that shape the future
In this year’s “We Create KC,” KCSourceLink maps the capital continuum from business inception through maturity. It’s during the early stages of the capital continuum, before startups gain traction and earn revenue, that they hit what venture capitalists call the “valley of death.”
Here, during the proof-of-concept and rollout phases of firm development, financing is usually scarce, and startups are at their most vulnerable to cash flow requirements.
In 2012, studies suggested that Kansas City lacked the capital and resources needed to help startups survive the valley of death. Published in June 2015, We Create Capital 2015 provided a clearer picture of the funding landscape for emerging and growth businesses in the Kansas City region and an action plan to address the gaps.
Since then, individuals and organizations across the Kansas City region have rallied to improve access to capital for area entrepreneurs and fill this gap in financing and investment. Digital Sandbox KC, LeanLab, LaunchKC, the Fountain Innovation Fund and various accelerators have all entered that space in recent years to help educate entrepreneurs and pressurize the pipeline for growth and later investment.
In 2018, 24 of the 48 top VC-funded companies compiled by Startland News had received support from one of Kansas City’s early-stage investment programs, including Life Equals and Mycroft AI, both of which closed deals of more than $2 million in January 2019; Transportant and RiskGenius, which each completed deals of more than $500,000 in December 2018; and LendingStandard, which closed a fundraising round of $2 million in October 2018.
Andy Kallenbach, CEO and founder of LendingStandard, said that the funding activity in Kansas City has helped small tech businesses grow.
“Groups like Digital Sandbox KC, Launch KC and Mid-America Angels are doing more investing in early-stage startups,” he said. “That helps Kansas City build more big wins and good exits and helps experienced entrepreneurs create new ventures and invest in other startups.
“We need that cycle of wins, experience and exits to continue to make progress for better funding in Kansas City.”
Building future entrepreneurship
KCSourceLink reports that besides financial assistance, there are two other solid ways the community can support startups: creating a bridge between opportunities and resources, and engaging corporations in the startup ecosystem.
“Entrepreneurs need resources and connections,” said Jenny Miller, network builder for KCSourceLink. “Anyone can be a bridge to opportunities and resources by knowing the resources and opening their social networks.”
KCSourceLink will also launch a training program in early summer 2019 that will focus on early-stage board development for both founders and prospective board members.
“We know that the right connections matter to entrepreneurs and that entrepreneurs matter to Kansas City’s economic growth,” Meyers said. “Having the right resource at your back is critical for the survival and growth of Kansas City startups and small businesses.”