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May 21 | BY KEVIN COLLISON | The Kansas City Star

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You can start your day with 1 Million Cups, read the latest Silicon Prairie News and then hit the Digital Sandbox to play with your business idea before returning home to Startup Village and feasting on ultra-fast Google Fiber.

 

Do well in the Sandbox? Graduate to SparkLabKC and refine your plan. Then, if an investor such as the Mid-America Angels blesses the endeavor, you’re in the money and its LaunchKC time.

Welcome to the new “entrepreneurial ecosystem” that’s evolved in Kansas City the past couple of years, pushed in large part by the arrival of Google Fiber hyperfast cable service in the Kansas City area. Its goal is to make the area a national haven for young, talented people and their start-up ventures in the technology and Internet field.

 

This new approach to economic development is not industrial strength stuff where hundreds of new auto worker jobs or a major corporate headquarters move is being announced.

 

As opposed to trying to attract existing companies to Kansas City, the emphasis is on making it a place where homegrown entrepreneurs can thrive and talented people elsewhere will want to come and start their businesses.

 

The ultimate payoff, they hope, is the next Cerner, Garmin or Perceptive Software, tech firms that have been big job generators locally in recent years.

 

And those that don’t achieve huge scale also can be successful. On Monday, for instance, came the announcement that Handmark, a Kansas City maker of social media apps, was being acquired by Sprint Nextel for an undisclosed amount.

 

Augie Grasis founded the company 13 years ago, bringing games and then other programs to personal data assistants such as Palm Pilots. It partnered with Sprint when it came up with a mobile app showing news, weather and sports. Handmark in 2011 launched OneLouder to develop social media apps and now has 40 local employees and 10 in Dallas.

 

Backers say helping along the next wave of start-ups is a “paradigm shift” in how Kansas City should pursue economic development in the 21st century.

 

“We’re really seeing an awakening now,” said Maria Meyers, director of the UMKC Innovation Center. “There’s more entrepreneurial activity than we’ve seen ever. You never know which company will move on and be like Cerner and Garmin.”

 

Meyers said last year the University of Missouri-Kansas City Small Business Development Center helped 61 businesses get started that created 450 jobs.

 

But the new ecosystem also has spawned a bewildering menu of more than 180 private and public support groups, many tech-oriented, chasing the same budding entrepreneurs. And that can lead to problems.

 

“There’s been a huge increase in activity supporting entrepreneurs, some of it legitimate and some of it kind of fluff,” said Dave Scott, a longtime area entrepreneur who co-founded Birch Telecom in 1997.

 

“There are a lot of opportunities for people getting together to meet. I don’t have confidence that will lead to more start-ups.”

 

Some national experts say Kansas City is right to take a more homegrown approach to economic development, but suggest a more focused strategy. They recommend capitalizing on Google to boost existing local industries in what’s called the STEM sector, which stands for science, technology, engineering and medicine

 

“My gut feel is that the opportunities are going to be in technology connected to something real,” said Joel Kotkin, a California-based expert on economic trends.

 

“Most social media firms will go out of business, get merged or become oligarchies.… It would seem to me, if you had something embedded in your basic strengths it would be a lot more persuasive.

 

Amy Liu, co-director of the Washington-based Brookings Metropolitan Policy Program, said entrepreneurship is only one-third of what she described as an “innovation ecosystem.” The other fundamentals are developing commercial applications for research and helping existing firms use technology to improve their operation and products.

 

“The Kauffman Foundation is beginning to focus more time on its role in the region, bringing in experts on entrepreneurship and the resources needed for an entrepreneurial culture,” she said. “Entrepreneurship is only one core part of an innovation ecosystem. Will the city pursue a comprehensive approach?”

 

Kauffman Foundation is a player

 

Kansas City has been in the entrepreneur-nurturing business since at least 1991 when the Silicon Prairie Technology Association was started. But since Google announced it was bringing its ultra-fast Web service to town two years ago, there’s been a veritable Gold Rush of initiatives.

 

The undisputed king of the entrepreneurial ecosystem is the Kauffman Foundation.

 

It sponsors a variety of initiatives including the weekly 1 Million Cups gathering where networking entrepreneurs can exchange ideas and be “caffeinated”; Silicon Prairie News, an online publication; and Big Kansas City, Big Omaha and Big Des Moines, a periodic gathering of the regional creative tribes.

 

Tom McDonnell, president of the Kauffman Foundation, acknowledged there was a lot happening right now in Kansas City when it comes to grabbing onto Google, and it’s too soon to measure results.

 

But he sees a great value in encouraging young entrepreneurs to learn from their aspiring peers and those who’ve succeeded in starting companies.

 

McDonnell likes to cite a recent book “Who Owns the Ice House?” and its theme that many successful entrepreneurs learned how to start businesses from relatives or other mentors.

 

“An awful lot of people with start-up companies had the benefit of hearing about business around the dinner table,” he said. “There are lots of well-meaning people who want to start the next Microsoft; they just need help doing so.… Part of it is risk tolerance and uncertainty.

 

The Kauffman initiative 1 Million Cups is an example of entrepreneurs’ sharing ideas and learning from one another’s successes and failures. In its first year, more than 8,000 people attended the Wednesday morning sessions at the foundation, and 1 Million Cup groups now are meeting in six other cities with a goal of 20 by year’s end.

 

Many of the fledgling entrepreneurs never get off the ground, or they create one or two jobs in the beginning while working out of their apartment or parent’s home, with the hope of having dozens of employees a year or two down the road. Among those names: EyeVerify, Klink Mobile, Phone2Action, Keyzio and MENUse.

 

If it seems a bit esoteric, listen to this pep speech given by Tom Ruhe, vice president of entrepreneurship at the Kauffman Foundation, when 1 Million Cups celebrated its first anniversary last month.

 

“I think community is becoming a form of currency in our economy,” Ruhe told more than 300 people, most of them 20- and 30-somethings, in the Kauffman conference center. “There’s value, currency and impact that comes out of this community.”

 

The chamber sees potential

 

Though it may sound like New Age mysticism meets Western capitalism, the idea has the backing of the biggest business group in the community.

 

“We’re trying to create an entrepreneurial movement in Kansas City, that Kansas City is the place to be if you want to be an entrepreneur,” said Peter deSilva, the president of UMB Bank who is leading the Greater Kansas City Chamber of Commerce’s goal to make Kansas City “America’s most entrepreneurial city.”

 

“I hesitate to use the word initiative; it sounds as if there’s a beginning and an end,” deSilva said. “This is an organic and evolving thing.”

 

It does take some adjustment in expectations.

 

For example, when the Digital Sandbox program was rolled out in February, the endeavor to match up promising tech-savvy entrepreneurs with helpful professionals was heralded by a thunderous audio-visual production at the new Imax theater at Union Station and a bevy of heavyweight politicians including Missouri Gov. Jay Nixon and U.S. Rep. Emanuel Cleaver.

 

When all the hoopla was over, young Hunter Browning was introduced. His idea? A smartphone app called Fannect that allows people to rank the most passionate college and professional sports fans in the nation.

 

AdvanceKC, an initiative started by the Kansas City Economic Development Corp., has gone out of its way to trumpet the arrival of a couple of tech ventures to a new incubator space at Union Station — SightDeckKC and Cinetech.

 

Their combined employment as of last month? A half-dozen people.

 

That’s not unusual in the start-up tech world, said Chris Kuehl, an economist at Armada Corporate Intelligence in Lawrence.

 

“It feels like an 18-month gestational period for a mouse,” he said.

 

But Kuehl noted that from such small beginnings, big things grew in parts of the country now considered anchors of the new economy.

 

“If you look at the history of Silicon Valley and Boston, the mindset was throwing as much as you could at the wall and seeing what stuck,” he said. “In terms of the economy, start-ups are the big hirers. If you’re talking about 10 to 15 people and 30 start-ups, that’s quite a few.”

 

There are challenges to the fledgling ecosystem.

 

“There’s more to it than fast access to the Internet,” Kuehl said. “There are other ingredients too. There’s a heavy concentration of academic talent with Stanford in Silicon Valley and all the Boston universities.

 

“You also need a lot of money — banks, venture funds, equity funds — not that we’re without it, but there are over 1,000 funds in Silicon Valley. We don’t have that here.”

 

Entrepreneurial poster child

 

Jessica Bishop knows finding money isn’t easy in Kansas City. She acknowledged being the “poster child” for the new entrepreneurial ecosystem that has sprung up here.

 

The story of her effort to launch Klink Mobile was one of several in the spotlight at the first anniversary gathering of 1 Million Cups. It’s a method to allow people living in remote places, say Afghanistan, to access and transfer money with their mobile phone.

 

“My life is fiercely crazy,” the 30-year-old Kansas City native said. “What we’re doing for money transfer is what email did for the post, making it cheap, fast and effective.”

 

These days, Bishop works out of her apartment and has a dozen people working for the venture as contractors. Four of them live in Kansas City, but she hopes to have 20 working here a year from now.

 

Although she appreciates the many organizations that have sprung up to help entrepreneurs, she believes the city’s biggest asset is its affordability.

 

“We could not have built this in another city because of the cost of living,” she said. “Getting exposure and the ability to get press here is easier, too, than other places like San Francisco.”

 

But almost all the money she’s raised for Klink Mobile has come from outside the area.

 

“I would like to see more action,” she said. “Talk is cheap. People are talking about making the ecosystem better. At some point, we need to take action and get more of the investment community involved.”

 

DeSilva has heard that criticism and said it’s something the chamber and others are working on improving.

 

“I believe we have a better funding network than we’re getting credit for, but it’s not connected well,” he said. “My research suggests we don’t suffer from a shortage of dollars, but communication between people with money and people who need them.”

 

The bank executive said raising up to a half-million dollars for promising start-up ventures was not a problem, with three angel investor groups’ having stepped up locally. Those players are Mid-America Angels, Women’s Capital Connection and Angel Capital Group.

 

“If you need $3 million to $5 million of capital, that’s a problem,” he said. “We need to put together various investors to create a pool.”

 

Scott co-founded Birch Telecom long before the arrival of the current cottage industry that’s grown up around encouraging tech start-ups. Birch eventually attracted several hundred million dollars in venture capital and employed more than 1,000 people before Scott left in 2004.

 

Scott, who now runs Avid Communications, is skeptical about the mushrooming number of organizations supporting entrepreneurs and believes Kansas City’s greatest strength when it comes to start-ups is its affordability and close business world.

 

“I was told you’re two calls away from people with resources in this city,” he said. “They’ll meet with you and have coffee, and that’s a huge advantage over other places.”

 

To reach Kevin Collison, call 816-234-4289 or send email to kcollison@kcstar.com. Follow him on Twitter @kckansascity.

 




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