ICYMI: Investors & Entrepreneurs on Investing in Kansas City

On May 17, the Kansas City Chamber of Commerce held a panel featuring local investors and entrepreneurs on the topic of investing in Kansas City. Here are some highlights from their discussion:

Raising money for the first time

A good investor is betting on the team and the ideas, not just the quick return. Midwest investors tend to be more focused on the overall business plan and operations because many of the  local investors come from a business background.   

In the Kansas City market, it is relatively easy for raises that are below $500,000.  It’s the next round that becomes more difficult.

The panelists agreed that the longer you’re involved in the community, the more connected and aware startups become ingrained into the funding ecosystem.  If you are well‐networked in the region, it’s easier, and if you’ve had an exit it’s certainly easier.  However, if you are new to the area and it’s a startup’s first raise, it can be very difficult.  

Opinion: The really great deals right now in the region are coming from companies who are working on their  second or third company. They are more comfortable and more scalable.

Raising money in Kansas City versus the coasts

The lack of syndicated capital in Kansas City can make it more difficult to get connected to funders and organizations/ individuals making investments.  

In Kansas City, there are not a lot of technology funds, so it’s easier to look on the coasts. In Kansas City, investors tend to be more focused on the revenue side with a faster return and the coasts tend to  (at least for apps) be interested in the number of users looking at the long‐term investment.

In the Kansas City market, investors are very concerned about when the return on investment will come. In contrast, the coastal venture capitalists don’t discuss the exit in early conversations.  

In Kansas City, it can be easy to be too focused on valuations. Valuations should be based on the size of  the market and determined by domain experts in the space. Having a quality valuation helps to de‐risk the investment.  It’s far more important to evaluate the business based on the number of stages of capital that will be needed, and at each stage how much of the company will have to be yielded.

The future of investing in Kansas City

Kansas City is still maturing in its capital lifecycle. “It’s a 50‐year vision” and we should recognize where we are in our journey. The region is starting to see more and more venture groups forming and that’s a great sign for the area.

Here are a few ideas that interested parties can take on immediately:

• Leverage relationships for quality startup companies (to serve as experts, mentors, or investors).
• Create an introduction to other leaders in industry around the country.
• Find a system for identifying local angels in the Kansas City community.
• Kansas City should be investing in the proven deals that are in the region.
• Executives/ investors /corporations should be transparent about their desire to engage in the investment or  startup ecosystem.  
• The business community can help provide business practices to an early‐stage company and open their business door to an early stage customer.  
• Provide feedback to an entrepreneurs about why they didn’t receive funding.
• Continue to encourage infusion of capital into the existing and newly created funds.  

The panel: Laura Steward, Founder of Video Fizz; Toby Rush, CEO of EyeVerify; Michael Rae, CEO of RX Savings Solutions; Paul Morris, President & COO, Bardavon Health Innovations.

Sponsors: Ewing Marion Kauffman Foundation, H&R Block, JE Dunn Construction, Sprint, CBIZ/MHM, Shook Hardy & Bacon, The  University of Kansas, UMB, Google Fiber, Garmin, Husch Blackwell, Enterprise Bank & Trust.  

For more information on what Kansas City investors want, view our recent survey results.  

Photo Courtesy: Pixabay (JakeWilliamHeckey)