A new, privately-managed innovation fund could replace a popular startup investment program that was dramatically slashed for 2018 amid Missouri’s budget crunch.
The potential strategy change comes as a suggestion from the Hawthorn Foundation’s report to Missouri Gov. Eric Greitens, following the months-long work of an innovation task force charged with assessing the current state of innovation in Missouri.
“The governor wanted some ideas out there that may be controversial, but that would stimulate some thought,” said Drew Erdmann, chief operating officer of the State of Missouri.
Creating a Missouri innovation fund is in line with Greitens’ call for bold action that aids the state as a whole, not just a particular ecosystem, Erdmann said.
“One of the core elements of it would be that it would be a professionally-managed fund, not run by government … just as any other competitive fund would be to achieve the kind of outcomes we’re talking about: successful investment in startups and innovators,” he said.
An innovation fund run privately would require a different approach to investment, Erdmann said, with the governor’s office working with the legislative branch to get long-term bonds in place that would support the establishment of a fund open to large and small private investors.
“It would allow that fund to scale up to something on the order of tens of millions or even hundreds of millions of dollars to invest in Missouri startups and innovators,” he said.
Erdmann confirmed to Startland that adoption of the proposal would mean the end of the state’s IDEA Fund — a program of the Missouri Technology Corporation (MTC) that has invested more than $1.8 million in Kansas City-area startup-support organizations, like LaunchKC and Digital Sandbox KC, as well as individual startups (some of which wouldn’t be in business without the state funds).
“The MTC fund has been a significant contributor to our ecosystem that includes many of our city’s leading startups, and the vitality of that ecosystem is one of the reasons Kansas City has become a civic tech leader among U.S. cities,” said Bob Bennett, chief innovation officer for the City of Kansas City, Missouri.
“With this week being Techweek – a national validation of our place among technology-friendly cities – the MTC fund shows itself to be an investment in our community with an immediate RoI,” he added. “Our hotel rooms are full, and venture capitalists are looking to double down on bets made by the fund in our state’s entrepreneurs today.”
Breaking out of the middle
Moving to a privately-run fund would simply be the evolution of the Missouri Technology Corporation, Erdmann said
“(The MTC) was created in the early 1990s. It has evolved through time,” he said. “When we look at the current assessment of what the state needs, it’s natural that folks convey what should be the next chapter of the Missouri Technology Corporation.”
The concept of a new innovation fund for Missouri could be created and administered within the existing MTC structure, he said.
“There is an opportunity for the state to take bold action and move forward. We have some great assets to build upon, and incredible momentum in many places across the state,” Erdmann said. “But the headline message is that we’re still middle of the pack.”
While Missouri state officials stopped short of directly and specifically criticizing the current MTC programming, a top policymaker said the pivot from the governor’s office is part of a broad approach to economic development.
“If you’re going to do different, if you’re going to achieve this bold vision, we have to take a look at the way we’re doing things in a different way,” said Rob Dixon, Missouri Department of Economic Development acting director.
New funding reality for 2018
Legislators and Greitens made clear their plans for a new path earlier this year when MTC’s budget was cut substantially from nearly $23 million in 2017 to $3.4 million in spending authority for 2018.
Regardless of whether the new innovation fund becomes reality, the landscape already has been altered for the coming year with less money for investments with Kansas City entrepreneurs.
“The governor has a tough job trying to balance the state’s budget, growing the economy and thinking about innovation as a driver of the Missouri economy,” said Drew Solomon, Economic Development Corporation of Kansas City senior vice president of business and job development.
Solomon, whose office oversees the MTC-supported LaunchKC competition that will dole out $500,000 in grants Friday as part of Techweek KC, said he believes the governor is sincere in his desire to grow innovation and economic development in the state.
“If Missouri wants to be a leader — in the top 10 for tech and innovation — we have to find ways to stimulate that activity, attract and retain talent,” he said. “We have to spend the time and investment to make that happen.”
And while Solomon is a strong believer in MTC’s existing programming as a powerful force to jumpstart entrepreneurs, he said he’s open to changes that would help move Kansas City in the right direction.
Greitens’ office is taking a customer service-oriented examination of everything government does in Missouri, Dixon said, and economic development is no different.
“We have to take a look at what we do, how we do it and why we do it, to make sure that it’s still in alignment with, specifically the economy and the needs of the business community, but generally speaking, with the needs of our customers and our citizens across the state.”