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A Midwest Hub for Early-Stage Funding?

Vol. 26 Issue 4

Post Categories: KC Futures

Kansas City has gained a reputation for entrepreneurship, but could it also become a Midwest hub to link aspiring business owners and investors seeking projects to fund?

According to KCSourceLink, the answer is “maybe.” Small business has been thriving locally, and there has been a notable increase in the amount of identified funds available to startups here, according to KCSourceLink’s Kate Hodel.

Assessing Capital Needs

KCSourceLink’s initial assessment showed network access to capital was weak, said Hodel. “Entrepreneurs said there was no money, and investors said there were no big deals,” she said. KCSourceLink looked at the factors involved, eventually producing a 72-page report that showed the gaps, what the pool of capital looked like, who was getting investments and at what stage. Published in 2015 as a spin off to KCSourceLink’s annual We Create KC report, We Create Capital provided a deep dive into Kansas City’s capital continuum and mapped actions the community could take to increase grants, loans and equity to Kansas City entrepreneurs.

The fourth We Create KC report tracks progress toward a community goal of Kansas City becoming the country’s most entrepreneurial city. As part of the metrics it tracks, the latest report, released March 24, provides an update on capital, showing marked improvement in the pool of capital available for early-stage entrepreneurs since 2013.

Hodel said when KCSourceLink first started tracking investment in 2013, they could only identify about $193 million available to early-stage companies. The pools grew to $752 million in 2016, an increase of 290 percent.

Healthy Climate

The increase in investments and other factors point to a healthy climate for Kansas City becoming known as the Midwest hub for financing small business startups.

Financing comes in different forms, including loans, grants and equity. These include both KC-based and outside funds and financial institutions. Grant programs include Digital Sandbox KC, LaunchKC and federal Small Business Innovation Research grants. Some of the angel groups are Mid-America Angels, Women’s Capital Connection and Northland Angel Investor Network.

KC-based funds include Flyover Capital, Firebrand Ventures and KCRise Fund. Firms from outside Kansas City investing here are Lewis & Clark Venture Capital of St. Louis, Omaha-based Dundee Venture Capital and Drive Capital out of Columbus, Ohio. Royal Street Ventures, a Utah firm, also has an office in Kansas City.

Digital Sandbox KC, for example, has invested in PlanIT Impact and HCI Energy. LaunchKC has awarded grant dollars to SuperDispatch and FEWDM. Ansera Analytics and HylaPharm have received SBIR funding.

Mid-America Angels has helped fund Job Shakers, and Northland Angel Investment Network has invested in Mycroft.

One of the KC-based funds, Flyover Capital, has provided startup money for ClaimKit, and the KCRise Fund has worked with SpiderOak and PEQ. Royal Street Ventures, the Utah firm, has invested in PayIt.

Perfectly Positioned

Earning recognition as the Midwest Hub for funding entrepreneurship would help put Kansas City and the “flyover” region on the map, said Maria Meyers, founder of SourceLink and the executive director of the Innovation Center at the University of Missouri–Kansas City.

Kansas City is in a good position in the Midwest, within driving distances of St. Louis, Wichita, Des Moines, Omaha and other cities. Such a symbolic designation could put Kansas City on the map for a large region, letting entreprenuers knowthat “Kansas City is a good place to find funding,” said Meyers.

Being known as a hub for entrepreneurship and as a place where there are funding opportunities could attract more talent from the region and around the country to Kansas City. Creating a density of talent in the area is important to fuel startups and encourage their growth.

What’s the next step? As the report indicates, organizations are already rallying around the common goal to improve access to capital for entrepreneurs. Kansas City also already hosts numerous conferences, like the InvestMidwest Capital Forum and the Animal Health Investment Forum, to connect entrepreneurs with investors. KCSourceLink has also launched KCInvestED to help further educate area investors.

“It will take time, collaboration, commitment, but most importantly action,” adds Meyers. “Networking capital and identifying what’s available is just the first step. Our next step is to match entrepreneurs with the right investors and opportunities to increase deal flow.”