Dundee, Lewis & Clark VCs aim to raise Kansas City’s risk capital tide

Kansas City boasts a hearty roster of attractive early-stage investment opportunities.

Beth Engel

And that’s why two Midwestern venture capital firms with fresh funds are making the Kansas City area a key part of their investment strategies.

Both Omaha-based Dundee Venture Capital and St. Louis-based Lewis & Clark Ventures are eyeing Kansas City-area startups for deals varying in value from $250,000 to $7 million. The two firms cited the area’s vibrant entrepreneurial community as reasons why they’re making Kansas City integral to their 2016 investment plans.

Lewis & Clark recently closed a $104 million fund that will be allocated across the Midwest — including Kansas City — into finance, healthcare, agriculture and bioscience firms. Dundee VC is more than halfway finished raising capital for a new $30 million fund that it plans to in part earmark for Kansas City firms, said Beth Engel, a partner at Dundee VC.

[pullquote]“New funds coming in is really good news for Kansas City because it’s not about competition, it’s about collaboration. … A rising tide lifts all ships.” – Beth Engel[/pullquote]

“Kansas City is an essential and critical part of our strategy,” Engel said. “We consider Interstate 29 to be a commute — not a barrier. We love the businesses we’ve already invested in in Kansas City. … There are things that happen here that make companies want to stay and grow.”

Engel, whose firm typically offers seed funding from $250,000 to $500,000, said that Dundee VC is considering opening a Kansas City office to help support local deal flow. Dundee already has invested in a host of area firms, including Divvy HQ, ABPathfinder, MySideWalk, Leap.it and Briefcase.

Once completed with raising its $30 million fund, Dundee plans to make about four investments per year for five years.

While Kansas City’s challenges with early-stage funding access is a common problem in the Midwest, Engel said the deficiencies ultimately make the area more attractive for her business. Without robust competition, Dundee has the proverbial pick of the litter for its favorite area startups, though it almost always co-invests with a variety of partners, Engel said.  

“It’s filling a vacuum,” she said. “If you have money to deploy and there’s a market that you can deploy it in that’s certainly helpful. I think new funds coming in is really good news for Kansas City because it’s not about competition, it’s about collaboration. … A rising tide lifts all ships.”

Lewis & Clark’s $104 million fund — which scored a $25 million commitment from Express Scripts — will focus on Series A and B round investments from $3 to $7 million. The firm expects to invest in three to fives companies per year for the next four years for a total of 12 to 15 firms in the fund’s portfolio.

Brian Hopcraft, managing director of Lewis & Clark, said that his firm is currently eyeing several companies in the area.

“We’re very excited about Kansas City companies,” Hopcraft said. “There’s a lot of innovation in Kansas City, and we’ve gotten to know some really great entrepreneurs. We’re also big fans of the great work Joni Cobb and her team do at Pipeline. We’ve taken a look at a number of Kansas City companies thus far and expect that to continue based on the activity in the early-stage ecosystem.”

Hopcraft recognized Kansas City’s difficulties in access to early-stage risk capital is a pervasive problem across the Midwest. He said Lewis & Clark hopes to help address that need with its new fund.

“Few cities would say they have enough capital to fuel all the deserving companies coming from their ecosystem,” he said. “A core thesis for our fund is that there are plenty of great companies in our own backyard, and these companies often can’t find the capital they need to grow. That’s a great opportunity for Lewis & Clark, of course, but it will take a lot more capital than we can ever provide. We’re encouraged that others are seeing that same opportunity — Dundee Ventures in Omaha and Flyover in Kansas City are two examples — which will help provide a rising tide for our region.”

Hopcraft said that startups interested in pitching to Lewis & Clark should connect with it through its website. Engel said those hoping to reach Dundee VC should have a mutual friend set up an introduction.