Missouri startup support funding gutted amid COVID; Advocates hope reversing course could fuel recovery

It’s official: the 2021 budget for a popular public-private partnership that once infused millions into the Missouri tech and startup communities has been wholly defunded by the state as Gov. Mike Parson grapples with COVID-19’s continued economic fallout.

But supporters of the Missouri Technology Corporation (MTC) hope Parson’s move — withholding all of the program’s $1 million budget allocation as part of $450 million reduction in expenditures from the 2021 state budget — is only a temporary setback. 

“The budget restrictions that included MTC are directly related to decreased state revenue due to the global COVID-19 pandemic,” said the Missouri Department of Economic Development, which oversees MTC, in a statement to Startland News and Missouri Business Alert.

“MTC will work with DED and the Governor’s Office to identify as many near-term opportunities that will allow MTC to infuse capital into the ecosystem, such as CARES (Coronavirus Aid, Relief and Economic Security) Act Funding or the Federal SSBCI (State Small Business Credit Initiative) program, while working to establish a stronger annual budget allocation once the state rebounds from the current economic issues and tax revenue levels return,” the agency’s statement continued.

Mike Parson, Missouri governor; Discovery Design Truck & Manufacturing, St. Peters; Photo courtesy of the Missouri Governor’s Office

Missouri’s new budget went into effect July 1 — a day Parson spent touring Missouri businesses like Discovery Design Truck & Manufacturing in St. Peters and Positronic Industries in Springfield.

A substantial portion of the funds withheld from MTC and nearly 105 other line items in the 2021 budget were redirected to Medicaid and other entitlement programs, said Missouri Sen. Dan Hegeman, R-Crosby, who served as chair of the Senate Appropriations Committee and also sits on MTC’s board of directors.

“While MTC has certainly been a priority for me, other folks have different priorities and tough decisions have to be made in the budget process,” said Hegeman, who outside the Statehouse works as a spokesman for Evergy in Kansas City.

Click here to read more about the Missouri Legislature’s May 8 budget allocation for MTC, which ultimately was struck by the governor.

Ground-level impact

Withholding even a year’s budget from MTC will have a dramatic limiting effect on the state’s entrepreneurship ecosystem — specifically startups and innovation centers, said Ben Johnson, president of NEXT Missouri, an advocacy coalition that lobbies for increased MTC funding.

MTC supports startups through direct co-investments and a matching grant program (including through efforts like LaunchKC and Digital Sandbox KC), as well as providing funding to nine innovation centers — such as those at the University of Missouri in Kansas City and Columbia, as well as Innovation Stockyard in St. Joseph.

Among the most impactful job creation efforts from MTC: the IDEA Fund program, which supports new innovation-based, high-growth companies, Johnson said.

“The private markets don’t often invest at that early riskiest stage and so MTC’s IDEA Funds money helps catalyze that private investment to help companies start and grow,” he said.

Investing in the IDEA Funds program has allowed MTC to build and maintain a cash reserve, the Department of Economic Development said in its statement. MTC is expected to use the reserve to supplement state funding for the time being.

“MTC will continue to support startups and innovation centers across the state to the best of its ability in these unprecedented times,” the agency said. 

MTC funding also largely supports the Missouri Building Entrepreneurial Capacity (MOBEC) Program, which provides funding to nonprofits, universities and other organizations that offer entrepreneurial support programs.

Without its state funding, Johnson said, MTC will have a more difficult time backing such efforts.

“The reduction in funds certainly hurts the ability for MTC to catalyze private investment or to support organizations that are building on entrepreneurial businesses,” he said.

‘A great friend’

This summer’s hit to MTC funding predates the COVID-19 pandemic, Johnson said.

In 2016, MTC received $17 million from the state. The following year, it’s funding was reduced to $13 million. Johnson described MTC funding as a “continued decline.”

“The state had been making pretty significant investments — up to $20 million a year — and really created a significant amount of entrepreneurial momentum across the state,” he said. “Over the last three or four years, that’s been chipped away, now down to the million-dollar level.”

Sarah Hill, Healium

Sarah Hill, founder of Columbia-based Healium, witnessed firsthand how MTC funding makes a difference in the lives of entrepreneurs, she said.

“Missouri Technology Corporation has been an incredible partner for us,” said Hill, whose company was named one of Startland News’ Kansas City Startups to Watch in 2020. “If it wasn’t for their funding, our business would not be alive today … MTC allowed us to have credibility as a young company, and when you’re trying to raise money, that’s incredibly important.”

Click here to check out the Missouri Technology Corporation’s funding portfolio.

And MTC doesn’t only help business owners –– but the state’s economy as a whole, she added.

“The state of Missouri has a great friend in MTC, but it’s not just a friend of entrepreneurs, because that funding directly impacts the state’s bottom line in the form of jobs,” Hill said. “We were able to get over that valley of death; We were able to hire more employees; We were able to secure additional IP and secure additional revenue, which ultimately benefits the state of Missouri.”

Hegeman remains optimistic that once the pandemic is over, the state will again boost MTC.

“MTC is a great resource for startup companies, so anytime we can increase funding for it, it is a positive for those businesses,” he said. “Startups are very important for the state economy and we need to show that Missouri is a leader for job creators and innovation.”

Eighty percent of net new job growth comes from new businesses, Johnson said, noting his belief that investing in entrepreneurship will be critical to COVID-19 recovery.

“We think about not just responding to the pandemic and economic crisis that we’re in now, but really think about recovery,” he said. “It’s going to be new businesses that really drive that recovery and get us back to a buzzing economic engine in the state.”

This story was produced through a collaboration between Missouri Business Alert and Startland News.