Mycroft CEO: Ditch Amazon bait for better investment — KC startups

Editor’s note: Kansas City-based Mycroft CEO Joshua Montgomery wrote this piece in response to the area effort to attract Amazon’s prospective HQ2. The opinions expressed in this commentary are the author’s alone. [divide]

My first face-to-face meeting with an Amazon employee took place on his day off.

He was at the Sprint Accelerator on the Missouri side of the Kansas-Missouri state line and — because Amazon didn’t want to pay sales tax in Missouri — he couldn’t come to the accelerator on Amazon’s time.

Amazon’s refusal to pay sales tax for more than a decade amounted to a huge government subsidy. Customers paid shipping fees rather than sales tax and it allowed Amazon to increase market share at the expense of local competitors. They only stopped this practice recently when the company got so big that the subsidy no longer mattered.

Now Kansas City, like dozens of other cities around the country, is competing in a race to the bottom. It is a race to bring Amazon’s new headquarters to town. Never mind that the company will require billions of dollars in taxpayer subsidies. Never mind that Amazon has shirked its duty to pay Missouri sales tax for more than a decade. Our community is willing to lay down at Amazon’s feet and beg them to open headquarters here.

We seem to forget that Seattle didn’t become a technology leader by paying Jeff Bezos and Bill Gates to select it for their corporate headquarters. Both of them chose to build their businesses there for other reasons. Bill grew up in Seattle and wanted to go home. Jeff wanted to be near Ingram Book Group’s warehouse and needed access to a pool of reasonably priced technology talent. Both went on to build unicorn companies that now dominate their respective markets.

Both went on to build unicorn companies that now dominate their respective markets.

If Kansas City wants to stand tall on the global stage, we need to work to build our own unicorns. That means supporting local entrepreneurs and providing them with a business climate in which they can succeed. Startups need experienced mentors, low-cost real estate, readily available talent, high-speed broadband and – importantly – early-stage capital.

Kansas City has four of these five characteristics, lacking only early-stage capital. So how do we add the final piece? Well, giving billions of dollars to Amazon probably isn’t the answer.

Instead, why don’t we make these same funds available to local startups? Buffalo, New York, offers startups $500,000 to move there. Seoul, South Korea, runs a program that funds startups willing to relocate. Why not create a similar fund in Kansas City?

Here is my challenge to you, Kansas City. Add language to the Amazon proposal that allocates 25 percent of the subsidies as cash incentives to local startups if (when) Amazon turns us down. Provide our entrepreneurs with capital, office space and training. Watch as your investment grows and transforms Kansas City from a place that recruits out of state businesses into a place like Seattle, Palo Alto, Mountain View or San Jose – places where growth is so rapid that they need to put on the brakes.

Joshua Montgomery is a co-founder at Mycroft, an open-source version of Amazon Echo. Connect with Joshua on Twitter at @oojoshua