Addressing a market gap, $25M seed fund arrives in Kansas City

Nearly a year after identifying an early-stage funding need in the area, a $25 million seed fund will open a Kansas City office that aims to boost local startups.

With a Wednesday night intro at Polsinelli, the Royal Street Investment & Innovation Center will soon move into the Kansas City metro for its second fund. Founded in 2012, Royal Street already has invested in one local company — government tech firm PayIt — but has a broad footprint, making deals in the Mountain West, Midwest and West Coast.

Royal Street managing partner Jeffrey Stowell and Kansas City office manager Laura Brady both were on hand during the announcement that the fund would be entering Kansas City.

“We’re excited about the opportunity in this ecosystem,” Stowell said. “We’ve learned a lot of things and we want to bring those things here — not out of thinking ‘We know more than you’ but rather to say ‘There’s some stuff going on out here.’ The opportunity is almost limitless.”

Headquartered in Salt Lake City, Royal Street does not plan to deploy all its fund in Kansas City. Its portfolio firms are located in such locales as Salt Lake City, Boulder, Austin, San Francisco and other cities on the West Coast.

Royal Street writes checks between $100,000 and $500,000, Stowell said, with the anticipation that it would likely be adding follow on capital in subsequent rounds.

Stowell recognized that there’s a wealth of opportunities for more mature ventures to find larger amounts of financing in Kansas City, including via firms like Five Elms Capital, Flyover Capital and Open Air Equity Partners. Kansas City’s seed funding options, however, are lacking, he said.

“We want to be a part of helping build companies at that stage,” said Stowell, who was raised in Augusta, Kan. “We think there’s huge untapped early-stage value here and we want to be apart of that. … There’s a lot of room to be a part of our family and we want to figure out what’s right for the company and what it needs to do next.”

A Kansas City native, Brady said that in the next year Royal Street plans to complete about two or three deals. The company already has three investments in 2016 and has 20 companies in its portfolio total.  

“The community here is very important to me,” said Brady, a former investment banker. “There’s a lot of press about building the startup community here. I think Google Fiber laid a foundation for that. There’s clearly a need for a seed fund, an early-stage fund for investments and this is a great opportunity to partner with Royal Street and take what they’ve done in Utah and do it in Kansas City. It’s important to me to make a positive impact on the community.”

Brady said that PayIt was the fund’s first Kansas City deal. Royal Street doesn’t have a particular focus when it comes to investments, but it was intrigued by PayIt’s platform to better connect citizens’ financial needs with the government.

“It’s interesting technology for government payment,” Brady said. “We feel like there’s a huge opportunity in that space and a lot of value from the consumer side. It makes it easier so the consumer doesn’t pull their hair out.”

Stowell said if you’re an entrepreneur interested in connecting with Royal Street to not cold email or message him a pitch. It’s best to find a connection to him or Brady to make an introduction. He added that those pitching to the firm can expect a quick decision with candid feedback, which sometimes includes recommendations on next best steps if they’re turned down.