The years after a headline-grabbing acquisition can mean a “jump ball” for the ecosystem where the startup was grown, said Jeff Hornsby, acknowledging the various outcomes ahead when a hometown company gets new owners.
Possibilities range from massive community reinvestment to staffing reductions and all-out relocation, though such moves aren’t mutually exclusive.
“They may say at the beginning that, ‘We are going to stay in Kansas City; we are going to invest in Kansas City and grow our business.’ But at some point, they have to look at efficiencies and what makes sense,” said Hornsby, who serves as the director of the Regnier Institute for Entrepreneurship and Innovation, as well as the department chair for Entrepreneurship and Management at University of Missouri-Kansas City.
Kansas City-built Rx Savings Solutions recently announced plans for its $875 million exit to the McKesson Corporation, and the next steps for the healthcare startup are not publicly known. For now, one can only speculate, Hornsby noted.
“We can look at other models on a bigger scale — like what happened when T-Mobile bought Sprint,” he said. “There’s still a small operation out in Overland Park, but most of the company is in Seattle where T-Mobile is headquartered. [Several] people were relocated or given packages and let go. … We invest and want these companies to succeed so they can hire hundreds, if not thousands, of people, which keeps the city vibrant. A city is only as good as its ability to employ people.”
Rx Saving Solutions
Founded in 2012, Rx Savings Solutions contracts with health plans and self-funded employers in an effort to maximize the effectiveness of benefits to lower the cost of prescriptions.
Click here to read more about Rx Savings Solutions historic $875M exit.
Regardless of what ultimately happens with the leadership and employees of a company that exits or is acquired, the best outcome is reinvestment into a next generation of startups that will continue to employ Kansas City talent, Hornsby explained.
“The neat thing is that a lot of these [founders and their leadership teams] then turn around and become investors themselves,” Hornsby said. “The Cerner folks are big examples of that. When Cerner went public, one of the founders Neal Patterson became notorious for how much he worked with other entrepreneurs and tried to foster success for other ventures in Kansas City. … That’s the neat thing about Kansas City — a lot of these folks when they have success like that, do give back not just with their money, but with their time as well.”
Exits small and large also help bring credibility and attention to the region, Hornsby added.
With more eyes on Kansas City after Rx Saving Solutions’ exit news, additional opportunities should be on the horizon, echoed Darcy Howe, the founder and managing director of KCRise Fund — a Kansas City-based venture capital firm.
“Great companies need a certain amount of time to scale,” Howe said, noting that Rx Savings Solutions was founded 10 years ago. “KC is still in early innings. With increased capital in the region and awareness by talented individuals that these career opportunities exist, we should see more successful outcomes like Rx Savings Solutions.”
The founder of Rx Saving Solutions, Michael Rea, shared that he hopes the company’s exit will show other entrepreneurs what’s possible in Kansas City.
“Rx Savings Solutions exemplifies the Kansas City region’s strength in tech and innovation and the value that strength brings to the community,” Rea said. “This is further proof that great things can be built in Kansas.”
Entrepreneurs who seek to solve major issues, rather than receive a major paycheck, are oftentimes the ones who end up most successful, Hornsby said.
“Back when Michael Rea was a staff pharmacist at Walgreens and started working on [Rx Savings Solutions], he wasn’t thinking about selling a company for [nearly] $900 million,” Hornsby said. “He was passionate about a problem and then found other people who were passionate about it too.”
Rea was named Kansas City Entrepreneur of the Year at UMKC’s Henry W. Bloch School of Management annual awards ceremony in 2019 for his leadership and personal story, said Hornsby, who is part of the selection committee.
Click here to read more about Michael Rea’s UMKC Entrepreneur of the Year award.
“He was an obvious choice — given what he started and his tremendous story behind it,” Hornsby said. “He was working at the Walgreens at Troost and 63rd Street and met an elderly lady who was trying to figure out which of her prescriptions she could pay for. The story is captivating, and his passion is captivating.”
Click here to read about the 2022 Entrepreneur of the Year: Justin Davis, the founder of BacklotCars, which exited in 2020 but kept its headquarters in Kansas City.
Rx Savings Solutions’ deal with McKesson is the startup’s most important move to maximize the impact of its mission and accelerate its capabilities, Rea said.
“With this transaction, we aspire to provide a larger customer base with a broader range of solutions that will help our clients and their members save money on prescription drugs,” Rea shared. “Joining forces with McKesson, a company as passionate about improving healthcare as us, will take us into the next chapter of our journey.”