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Best Practices

The Making of America’s Most Entrepreneurial City

Published May 10, 2017

 

Making an Entrepreneurial City

Obviously I’m talking about Silicon Valley. Or Boston. Maybe even Austin?

Wrong on all counts.

I’m talking about Kansas City, that bistate (Kansas City straddles Missouri and Kansas), want-to-be entrepreneurial mecca, in the smack dab middle of the country, a place others have called flyover country or one of the “unlikely places” for entrepreneurship.

But back in 2011, Kansas City decided it was going to be something different than “flyover country” or “an unlikely place for entrepreneurship.” It decided it was going to be America’s most entrepreneurial city. The regional community rallied behind that grand vision, articulated by the Greater Kansas City Chamber of Commerce, and set out on path to figure how to build entrepreneurship, measure it and tell that story to the world.

Becoming the first Google Fiber city helped. Having KC entrepreneur Toby Rush win the first international “Get in the Ring” competition helped. Having a strong entrepreneurial legacy with the likes of Hallmark, Sprint, Garmin and Cerner doesn’t hurt either. And being affordable certainly played its part.

However, Kansas City had been building toward this goal for years. With the help of SourceLink, it had organized its resources, mapped its assets (literally on a map and figuratively with the Resource Rail™), created a network of accessible and visible entrepreneurial resources, and it knew where its strengths were and what areas it needed to improve.

And so with that bold goal, a connected network, an entrepreneurial vision and tools to assess needs and measure progress, KCSourceLink and its network for 240+ business-building organizations (of which the KC chamber is one) got to work. In 2014, KCSourceLink published the first We Create KC report, benchmarking six imperatives that would chart Kansas City’s entrepreneurial progress and impact.

#WeCreateKC

We Create KC is a title, an anthem and a marketing campaign. The “We” includes everyone in the entrepreneurial ecosystem: entrepreneurs and entrepreneurial service organizations; community and civic leaders; government, universities and foundations.

The report proper, produced under an award from the U.S. Department of Commerce, Economic Development Administration and with support from the Ewing Marion Kauffman Foundation, is organized around six imperatives that were researched and identified as key areas of development in the region’s quest to nurture entrepreneurship and economic growth.

The six areas are:

  • Maximize entrepreneurial support resources
  • Dramatically increase available startup and growth capital
  • Create a strong entrepreneurial pipeline of ideas
  • Tell the story
  • Build entrepreneurial talent
  • Engage the broader corporate community

The report also looks at the quadrants of entrepreneurship, recognizing that not all entrepreneurs are alike. In 14 years of working in the entrepreneurial community, KCSourceLink has developed a framework for categorizing entrepreneurs as Microenterprise, Main Street, Innovation-Led and Second Stage. Resources to support business growth tend to cluster around these areas, and all are critical to a thriving, vibrant economy.

Years 1–4 of We Create KC are available at www.wecreatekc.com. Year 4 charts how KC has maximized support resources, increased identified capital available to early-stage entrepreneurs by 290 percent, created a pipeline of ideas and built entrepreneurial talent and jobs.

Progress of an Entrepreneurial Community

Highlights in this report on KC's entrepreneurial ecosystem include:

CAPITAL: KC funding organizations collectively reported a 290% increase in available capital for early-stage entrepreneurs.

KCSourceLink tracks the pools of investment capital available to early-stage companies in Kansas City. In 2014, KCSourceLink published a companion report to its state of KC entrepreneurship report: We Create Capital reported on Kansas City’s capital continuum and charted actions the community could take to significantly increase capital available to early-stage entrepreneurs. It worked, capital available increased by 290 percent.

In 2016, the combined value of early-stage funds available to KC entrepreneurs was reported at $752 million, up from $193 million reported in 2013.

Funds include grant programs, angel groups, KC-based funds and firms based outside Kansas City that have indicated significant interest in investing in KC-area companies.

STARTS: On average, 4,400 KC startups hire their first employee each year.

According to the Kauffman Foundation, new and young firms are the primary source of job creation in the U.S. economy. Access to data from the Quarterly Census of Employment and Wages (QCEW) provides an opportunity to look at when firms hire their first employees in Kansas City and to which industries—goods producing, health care, innovation-led, retail trade and services/education/administration—they belong.

In Kansas City, 4,679 startups, defined as first-time employers with fewer than 20 employees, hired their first employees, with an average of 4,400 startups hiring each year from 2009 to 2015. These entrepreneurs represent all types of entrepreneurs: innovation-led, microenterprise and Main Street.

The number of first-time employers has been consistent across industries, with “services, education, administration” ranking highest. “Innovation-led” accounts for about 12.5 percent of the startups in 2015.

“Startup entrepreneurs are a job-creating powerhouse,” said Meyers. “While attraction and retention are key parts 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.”

INNOVATION PIPELINE: Whiteboard2Boardroom provides a snapshot and commercialization process for next-gen, homegrown technologies. 

Moving innovations from universities and research labs into the marketplace is a difficult process. Whiteboard2Boardroom (W2B) has been working hard to improve the innovation pipeline. Launched in 2009 with four partners, that number now includes 20+ corporate partners and research institutions across the bistate region.

Through its website and TechAlert matching program, W2B has identified and curated more than 200 projects that are ready for entrepreneurial leadership and licensing. With innovation ranging from agricultural technology to human health innovations, W2B gives us a clear snapshot of the types of next-gen technologies ready to be developed in our own backyard.

KC ENTREPRENEUR SNAPSHOT: What do KC entrepreneurs look like?

KCSourceLink surveys entrepreneurs who reach out for assistance and reports on their demographics and challenges to get a better understanding of who our entrepreneurs are and what kind of assistance they seek. Highlights from the KCSourceLink annual survey are included in the report with further data points shared on its website. Additional data points are available upon request.

Why does entrepreneurship matter?

It’s needed: Young firms (0-5 years) create jobs with net employment growth of 8.6 percent. Older and larger firms shed more jobs than they create. (Sources: U.S. Census Bureau  Business Dynamics Statistics; Ewing Marion Kauffman Foundation)

It works: Economic gardening tracks its roots back to Little, Colorado when a focus on “growing your own” businesses in your region resulted in 71 percent increase in employment while providing no incentives or tax breaks to recruit or attract outside business to the city.

Entrepreneurs and the jobs they create are a vital and critical ingredient for a growing economy, providing to shared economic prosperity, opportunity and empowerment.

What progress has KC made?

We Create Year 1 (2013)

In its first year, We Create KC benchmarked the six imperatives. Along with Resource Partner highlights and entrepreneurial success stories, We Create Year 1 includes:

  • the quadrants of entrepreneurship and the numbers of Microenterprise, Innovation-Led, Main Street and Second-Stage entrepreneurs that start and grow businesses in Kansas City
  • KC Company Watch List of companies that received two rounds of funding, a list that We Create KC continues to update each year
  • the chart of the supply and demand of tech jobs and talent
  • number of equity funded companies by stage and location
  • map of Inc. 5000 growth companies

We Create Year 2 (2014)

In its second year, We Create KC continued to track entrepreneurial connectivity, talent, capital and funded companies, adding the following to its data set:

  • map of entrepreneurial density that tracks where in our region new companies (those that have hired their first employee) are formed
  • the impact of the KC Regional Microloan Program, which loaned $3 million across 262 loans, resulting in 800 jobs
  • map of equity funded companies by stage, location and number of deals
  • a snapshot of Kansas City entrepreneurs by business sector, stage and revenues
  • a chart of connections between Kansas City’s entrepreneurial organizations, a first step toward mapping the ecosystem and its collaborations

We Create Year 3 (2015)

In its third year, We Create KC introduced the Resource Rail℠, a map of Kansas City’s business-building resources that serve all four types of entrepreneurs, from inception to exit. In addition to its annual watch list of startups, We Create KC shared:

  • an infographic depicting “who are our entrepreneurs” by entrepreneurial type, revenue, age, funding streams, and location
  • a microloan report sharing the impact of such loans to women, minorities and types of industries
  • the growth of grant, equity and angel funding since the We Create Capital report was published the summer of 2015
  • the innovation pipeline: the types of homegrown innovations moving toward commercialization and the organizations that help accelerate those ideas

What progress was made in 2016?

In 2013, surveys reported that Kansas City’s entrepreneurial strengths lay in its connected network of resources; emerging areas of entrepreneurial growth were in awareness of KC entrepreneurship both within and beyond our borders, the pipeline of ideas and talent. Reported weaknesses were networked capital and corporation’s engagement in the entrepreneurship ecosystem.

Flash forward to 2016 and we are making progress.

Kansas City: The Making of America’s Most Entrepreneurial City by the numbers 

Resources: KCSourceLink made more than 92,000 connections in 2016 via hotline, email and website to more than 230 resources

Awareness: Kansas City consistently tops the ratings for entrepreneurial growth: in 2016, Kansas City topped these charts, among many others:  #1 City for Business Growth (Wendover-InsightPRM Business Growth Report), #2 Most Improved Metro Areas for Startup Growth (Kauffman Index of Startup Activity), #2 Best City for Women in Tech (Smart Asset), #6 Best City for Creatives (Smart Asset), Top 6 City that Offers Better Value for Growing Startups (Forbes), Top 25 Future Ready Economy (Dell)

Pipeline of Ideas: Whiteboard2Boardroom provides a snapshot of and access to more than 200 next-gen, homegrown technologies, ready for entrepreneurial leadership and commercialization

Capital: KC funding organizations collectively reported a 290% increase in available capital for early-stage entrepreneurs, for a total of $792 million in capital available to early-stage entrepreneurs

Since 2003 when it was founded by the Kauffman Foundation, the University of Missouri–Kansas City and the U.S. Small Business Administration, KCSourceLink has continued to build collaborations that matter, all to move the needle for entrepreneurship in the Kansas City area.

KCSourceLink helps Resource Partners form coalitions and alliances that help pool resources together and make them more visible (like 2016’s KC Coworking Alliance and 2015’s Multicultural Business Coalition) and organizes week-long, metro-wide entrepreneurial events (like Global Entrepreneurship Week, which attracts 12,000+ attendees to 100+ events). It not only matches entrepreneurs and small business owners with the right resource at the right time, KCSourceLink also helps make sure those resources are visible, accessible and relevant to KC entrepreneurs and the challenges they face in starting and growing their businesses.

 

What’s Next for KC's Entrepreneurial Ecosystem?

KCSourceLink will continue to work with its partners to improve access to capital and access to resources and to report on why and how entrepreneurship matters to a thriving and sustainable economy.

The next step is to engage all players in the entrepreneurship ecosystem, including corporations.

In 2013, corporate engagement was seen as an area of opportunity for Kansas City and the needle hasn’t moved much in the past couple of years. Our next step will be to assess corporate involvement in the entrepreneurial ecosystem, figure out which corporations are involved with the startup ecosystem and how they are choosing to engage.  

Many feel that corporate engagement has to come in the form of cash and financial investment in startups. However, we want to look at the ecosystem on a much deeper level— how are corporations mentoring, supporting, incubating ideas and potentially become first customers for our area startups.

We have a feeling there is a lot out there; however, there isn’t an infrastructure built to showcase this aspect of the ecosystem and those that aren’t tapped in on a personal level don’t know how to engage. Stay tuned for findings and to learn how you can help ensure a vibrant ecosystem that includes all players.

About KCSourceLink

KCSourceLink is the connection to Kansas City’s entrepreneurial ecosystem. With a network of 240+ business-building organizations in the 18-county Kansas City region, KCSourceLink helps aspiring and existing business owners find relevant resources. The mission is to help small businesses grow and prosper by providing easy access to needed services. KCSourceLink also looks at gaps in the entrepreneurial ecosystem and works with its partners to address those needs. Entrepreneurs and business owners can access the entire network at www.kcsourcelink.com.

Maria Meyers Executive Director of SourceLinkMaria Meyers is the founder of SourceLink and executive director of the University Missouri-Kansas City Innovation Center. Maria’s approach has always been to first identify gaps, then inspire networks to create new programs, improve existing offerings and recruit outside support to meet the changing needs of the ecosystem.