Beyond borders: Federal grant equips KC to build regional $5M seed fund

Pushing aside the Kansas-Missouri “border war,” a bi-state effort has earned a federal grant that will help create a $5 million fund for startups, which could begin investing as early as 2018.

The Enterprise Center in Johnson County announced Monday it secured a $150,000 Economic Development Administration Seed Fund Support grant. The grant — which is the realization of more than three years of research, coordination and writing — will be allocated to staffing and administrative expenses to raise the $5 million seed fund.

A bi-state consortium — comprised of the ECJC, the Economic Development Corporation of Kansas City, KCSourceLink, the OneKCforWomen Alliance, the Ewing Marion Kauffman Foundation, the Greater Kansas City Chamber of Commerce and area investors — led the grant effort. The area proposal was one of the 41 awardees selected in 2017 from more than 217 applicants nationwide.

The grant helps address a shortcoming in Kansas City’s entrepreneurial ecosystem, said Melissa Roberts, vice president of communications and outreach at the ECJC.

“The seed capital crunch is one of the pervasive resource gaps limiting Kansas City’s entrepreneurial growth,” Roberts said in a release. “In launching this pre-seed fund and closing that gap, we are taking an important step towards our civic goal of becoming the most entrepreneurial city in America. The fact that this project has been undertaken by groups from both sides of the state line goes to show that our regional goals of spurring economic development, driving job creation and improving business dynamism are better served by building bridges than by border wars.”

Once active, the fund will make investments of up to $150,000 in companies raising pre-seed and seed rounds of $50,000 to $350,000. But to tap the fund, firms must secure a 1:1 match from another investor, grant or lender. The grant will not be used to capitalize the fund.

Roberts told Startland News that in addition to Kansas City entrepreneurs, the fund will help startups throughout Kansas, Missouri, Nebraska, Arkansas, Oklahoma and Iowa.

The grant funding is a part of the Economic Development Administration’s Regional Innovation Strategies Program, which helped launch the Digital Sandbox KC in 2013.

The fund will take on a charitable fund structure similar to Biogenerator in St. Louis and the Jumpstart Evergreen Fund in Cleveland, Robert said. That will allow investors to donate to the fund and in turn receive a charitable tax deduction. If companies in the fund successfully exit, the returns will re-enter the fund and be disbursed to new companies, she added.

Thanks to the fund, prospective investors will see an economic impact through improved investment opportunities, better-educated, early-stage entrepreneurs and a more vibrant economy, according to the ECJC.

Roberts lauded the cooperation that led to landing the grant, which exemplifies the area’s ability to look past the economic “border war” between the governments in Kansas and Missouri.

“This was a very rare example of a bi-state economic development effort that has been collaborative, rather than competitive, and we’re all the better for it,” she said. “We should all hold this up as an example of what economic development could look like if we could rise above the border war.”

The ECJC hopes the fund will begin to deploy capital in early 2018 and will be fully capitalized by the end of 2019.

Before the challenging work of building the fund begins, Roberts reflected with thanks to the group that helped make the grant possible.

“It’s humbling to have the opportunity to work closely with such a dedicated group of community leaders as was involved in this effort,” she said. “This announcement is only the first step in a long process, but everyone involved is ready to get to work. It’s thrilling to have the opportunity to make such an important strategic impact on our startup community, and that mission of increasing the potential for startup success here in Kansas City is what’s kept us motivated for the past three years.”