Editor’s note: The following is part of Startland News’ ongoing coverage of the impact of Coronavirus (COVID-19) on Kansas City’s entrepreneur community, as well as how innovation is helping to drive a new normal in the ecosystem. Click here to follow related stories as they develop.
Despite a global pandemic, Wichita-based Accelerate Venture Partners closed nearly as many deals in March as it did in all of 2019 — throwing its support behind two of the Kansas City area’s rising startups.
“It’s not just, ‘We’re still alive.’ There’s actually an acceleration [of deal flow,]” explained Mary Beth Jarvis, investor and executive director of the NXTSTAGE Pilot Accelerator — which operates as part of Wichita’s NXTUS entrepreneur support organization.
Click here to read more about NXTUS and its recent rebrand.
In recent weeks, Accelerate Venture Partners (AVP) has made a total of $755,000 in angel investments — despite fears of an unstable economy, the organization told Startland News.
Kansas City-based Transportant received $340,000 — which oversubscribed its recently closed $2 million Series A funding round; KC’s Innovaprep landed $210,000; and Oklahoma-grown tech firm, Ten-Nine Technologies secured $205,000 — part of a $5 million Series A funding round that closed Thursday.
Click here to read about Transportant’s COVID-19 pivot.
Click here to read about the potential for Innovaprep’s biosurveillance tech in a pandemic.
The angel investing group made four investments in 2019 and included deals that backed Kansas City-based startups Bellwethr and Spinal Simplicity, noted Josh Oeding, founder and managing member of Accelerate Venture Partners.
“I think it’s a real testament to the strength of the group that we have built. There’s still a belief that great companies can be built in crazy economic times,” he said.
No time to stop investing
Providing young companies with a path forward has never been more important, Jarvis added.
“We’ve got to emphasize innovation — not just with our words, but with our resources. And we’ve got to recognize the power of growing young companies — not just tending to industry sectors that we’re already used to caretaking,” she said of why it’s crucial for investors to stay active amid the Coronavirus (COVID-19) pandemic.
“We’ve managed to not only keep doing what we’re doing at an increased pace — which is sort of cool — but we also try to provide a service,” Jarvis said of the platform AVP offers angel investors.
Click here to get involved with Accelerate Venture Partners.
“We want more people to think of themselves as able to be engaged in this. … We’ve brought brand new people to the table trying to add value and propel the growth of young companies. People who two years ago didn’t think they could be angel investors.”
AVP has added more than 50 actively investing members to its network since its launch in 2018, Oeding said.
“We’ve had a little north of 125 potential investors or investors come to at least one of our monthly meetings. … It’s not just [about] Wichita, it’s the whole region and we think that mobilizing capital and connecting capital with great partners throughout the region is the way that we’re all collectively going to grow our economies and fuel startups,” he said, noting AVP has provided a significant platform for new angel investors to get involved with solid, worthwhile deals.
“[As we recover] I think that you could see some institutional capital slow down a bit and I think you could also see some angels get a little more conservative,” Oeding said.
“Those are real challenges for the growth of these kinds of companies in the Midwest,” he added. “That’s why we feel so good and so strong about the fact that we were able to get those three deals done. I think it shows that the member base and the investor base in our AVP syndicate helps great companies get started in down economic times.”
Falling back on the pipeline
While deal flow in the COVID-19 era might seem to have slowed, Jarvis said she’s observed activity in recent weeks that could suggest fears of a slowed economy are beginning to wane among investment circles.
“The first three weeks there was a lot of taking stock. We were literally reaching out to all of our portfolio companies and the other founders that we support and provide mentoring to,” she said, adding the AVP team was assessing such things as burn rate and whether companies had the means to survive another six months.
“The theme that was most clear to me — from their perspective and ours — was it was not the time to be making cold calls or starting new relationships,” Jarvis continued. “But if you had already found a connection or created some trust or gotten someone interested in you — that was gold.”
Such an approach has led to renewed conversations between AVP, fellow investors in their network and founders in recent weeks, Oeding noted.
“We saw a lot of investors in support mode, figuring out how to get their startups at a minimum of 12 months of runway — ideally 18 to 24 months of runway,” he said. “We saw lots of little bridge rounds. We saw deals like Innovaprep, Transportant, and Ten-Nine. They were deals that were kind of in the pipeline and were close to the commitment stage and those [ultimately] got funded.”
Exploring new deals with open eyes, candor
Hopeful for a quick economic rebound, AVP could begin to approach deals with a new lens in a world that works to recover from COVID-19, Jarvis added.
“[The companies we’re looking at] aren’t just the ones we already knew well and trusted and could feel good about. [Who we approach] is starting to loosen up … from the investor side,” she said, noting again the importance of helping young companies stabilize and ultimately thrive in a new economy.
Customers are approaching startups in much the same way, Jarvis said, using the success of Transportant as an example.
“They have gotten on the radar screen of folks in districts who just, frankly, have time on their hands right now to focus on their future and innovation,” she said.
Click here to read more about the recent success of Transportant which has included such pivots as turning buses into WiFi hotspots and mobile cafeterias.
As AVP navigates its future, the organization believes an even more candid approach to deal flow could prove to rule the investment landscape, Jarvis said.
“We are asking the burn rate questions even more directly or with a different eye than we did a few months ago,” she said. “You’ve got to make sure that the people you’re across the table from have the right approach to business sustainability.”
Dozens of new questions will also arise for investors when a post-pandemic world emerges, Jarvis added.
“We have to be doubly sure they’re still going to be around in this tougher environment with all the setbacks of the last seven weeks and [we have to] see if there’s a post-COVID pivot or angle that they’re likely to be able to capitalize on,” she said of what future deal vetting standards could look like.
“[With] young scalable companies being able to thrive in our region, we get an even bigger bullhorn to advocate for [entrepreneurship] right now. We can turn to past recoveries and say, ‘We can’t do it exactly the same way,’ if we want different results.”