In 2012, Kansas City made the bold proclamation it wanted to become the most entrepreneurial city in America.
To track its progress, entrepreneurial resource hub KCSourceLink launched We Create KC, a series of reports that track metrics associated with the health of the area’s entrepreneurial ecosystem. From access to capital to jobs created, the report looks at progress toward supporting entrepreneurs and business growth in the region.
“Our first goal is always to help make our entrepreneurs stronger by connecting them to the right resources they need to start and grow,” KCSourceLink founder Maria Meyers said in a release. “To do that effectively and efficiently, we measure the vitality and sustainability of our entrepreneurial ecosystem and work collaboratively with our full network to fill gaps and strengthen our entrepreneurial infrastructure.”
The latest We Create KC report was published Friday. Let’s dive into the report.
KCSourceLink grows its impact
With a network of more than 240 business-building organizations in the Kansas City area, KCSourceLink has a tremendous impact on local entrepreneurship.
And in 2016 alone, the resource hub made 92,000 connections via a hotline, email and its website, helping grow entrepreneurs’ ventures throughout the region.
In addition, the organization’s Whiteboard2Boardroom program continued to grow. The program aims to accelerate the commercialization process for student-made innovation — which may have otherwise lived in academia forever.
The program helped create 100 jobs and facilitated the creation of 29 new startups. Those companies have raised nearly $16 million in follow-on funding, helping to fuel job growth and the regional economy.
Deal flow slows as funding interest in KC startups grows
KCSourceLink reported that the available capital to KC’s early-stage ventures has nearly quadrupled since 2013 when including local funds and outside venture capital firms that “have indicated significant interest.”
“I believe that this kind of growth indicates that we are beginning to create the environment in which entrepreneurs can start and grow and thrive and succeed,” project director at KCSourceLink Kate Hodel said. “Many different people in the community stepped up to try and plug that gap.”
In 2016, the combined value of early-stage funds available to KC entrepreneurs reached an estimated $752 million, up from $193 million in 2013, according to the report.
That $752 million, however, includes five outside funds — St. Louis-based Lewis & Clark Ventures, Columbus-based Drive Capital, Des Moines-based Prairie Crest Capital, Chicago-based Service Provider Capital and Omaha-based Dundee Venture Capital — whose combined value is roughly $550 million. Furthermore, Drive Capital — a $300 million fund —, Lewis & Clark — a $120 million fund — and Prairie Crest — a $100 million fund — have yet to invest in a Kansas City company, according to their online portfolios.
It’s certainly good news that more investors are interested in Kansas City, but based on other figures in the report, it’s not resulting in more area startup investment deals.
Thanks to programs like Digital Sandbox KC and Launch KC, the number of investment deals under $100,000 in 2016 — 53 — increased about 23 percent since 2013. But the number of deals valued at more than $100,000 was down when comparing 2013 to 2016 — from 69 to 61 deals, respectively.
Hodel said that while deal flow is down, she believes that the interest in Kansas City startups from outside funds will result in more local funding deals for a variety of reasons. She said that not only are startups now better pitching their firms but also Kansas City is developing a more sophisticated understanding of how venture capital works. She added that startups are also doing a better job at asking the right people and organizations for funding.
“There have been a number of organizations in Kansas City that are working to get more outside funds interested in Kansas City firms,” Hodel said. “I’m confident we will see that turn into more investment deals ranging from $1 million to $3 million.”
Startups create a lot of jobs in KC
Over the last four years, an average of 4,400 KC startups hire their first employee each year, according to the report. 4,679 Kansas City firms hired their first employees in 2015, with the largest portion being those in services, education and administration-related industries. KCSourceLink defined these startups as first-time employers with fewer than 20 employees.
“Startup entrepreneurs are a job-creating powerhouse,” Meyers said. “While attracting companies is a key part of any economic development plan, we can’t overlook the proven contributions our entrepreneurs make to our economy, year after year. That’s why KCSourceLink exists: to help make that path to entrepreneurship clearer and easier.”
To read the full report, click here.