Here are this week’s watercooler conversation-starters on why inland states struggle to find funding, coming issues in federal entrepreneurship policy and the success of innovation districts that are cropping up around the U.S. (and in Kansas City). More in this series here.
Of the $48.3 billion spent in the U.S. on venture capital in 2014, 80 percent of those dollars went to companies in just five states, with California receiving a whopping 56 percent. Although there’s a lot feeding into why that happens, the article distills it down to:
- Most investors are based on the coasts, and they like to work face-to-face with the companies on which they spend money.
- Investors are often biased against inland states, assuming there’s nothing here of interest.
- Coastal investment firms control massive amounts of capital, making them less likely to fund the small rounds with which companies located inland start.
On the brighter side, the article warns us not to give up hope. Thanks to angel investing becoming a mainstream practice and many central states launching their own investment funds, the gap is (very slowly) closing. The high cost of living and rabid competition is also driving many founders away from the coasts, and the money often follows them.
An election year usually means limited action on the federal policy front, but 2016 holds prospective wins — and challenges — for entrepreneurs.The Kauffman foundation highlighted these areas of change:
- The sharing economy will continue to disrupt traditional industries, especially those riddled with inefficiency and high costs like healthcare. Policy will continue to struggle to keep up, so expect more legal and political wars to follow.
- Equity crowdfunding will launch, but it will be slow-going to develop the infrastructure necessary to support the hoped-for reality.
- President Obama will leave on a high note for startup policy as having the first administration that recognized the need for a separate set of policies to help startups. He set this trend via initiatives like Startup America, the JOBS Act, and moving the Small Business Administration to the cabinet-level. He’ll also convene an entrepreneurship ministerial at the Global Entrepreneurship Congress this March.
Over the last decade, innovation districts have hatched all over the globe. These tech-centric developments are different from traditional business districts in that they are almost universally anchored by a major university, hospital, corporation or research institution. They also often house companies of varied industries at different growth stages and have focus to work together to foster new ideas, products and tech.
These carefully-planned, intentional innovation centers are slowly taking the place of isolated corporate campuses. Kansas City is already home to smaller-scale examples of the innovation district model with its Think Big Coworking building and the forthcoming Westport Commons.