$16.4M third fund for Royal Street; KC needs at least one $100M exit each year, leader says

A $16.4 million third fund will see Kansas City-rooted Royal Street Ventures claim even more stake in area startups and establish itself as a leader in locally-sourced venture capital, said Laura Brady. 

“We have invested in six companies in Kansas City — including two already in Fund III,” Brady, Royal Street’s managing director, noted of the growing local presence for the fund — which also holds footing in Park City, Utah. 

“I think this makes us one of, if not the top, active institutional fund in the area that leads financing rounds, performs in-depth investment due diligence, and actively partners with founders to help them achieve exponential growth,” she added. 

Laura Brady, Royal Street Ventures, at KC Tech Council’s 2019 CEO Retreat

Slightly larger than its second fund, Royal Street’s newly closed third pot is optimally sized to generate out-sized returns for investors, explained Brady. 

“We believe the optimal fund size for a seed or early stage investment fund operating in capital starved markets such as KC is less than $30 million,” she said, adding that funds in such a range can invest an amount of capital commensurate with the risk of early stage companies. 

Boasting a stacked portfolio of such Kansas City-built startups as PayIt, BacklotCars and Bellwethr, Royal Street and its team — which is co-led by Brady and Jeff Stowell with support from venture partners Maggie Kenefake and Stephanie Song — seeks to be broad in its deals. 

It’s a means for diversifying risk in early stage investing, Brady noted. 

“First and foremost, we invest in entrepreneurs that have experience with the problem they are solving and, most likely, have [already] run a business,” she added. “We value the problem solved over the industry sector and we want to back entrepreneurs who plan to build capital efficient businesses outside of the coasts.”

Click here to see Royal Street’s full portfolio. 

Deals made using the third fund are expected to follow the same guidelines.

With a solid start to the new decade, Royal Street’s latest fund bodes well for venture capital deal flow in Kansas City, Brady said. But if the metro wants to evolve in the 2020s, its ecosystem needs at least one $100 million exit every year. 

“We [also] need to see at least two and preferably five companies exiting north of $500 million. Third, we need to see at least two initial public offerings,” Brady declared. 

Such activity could greatly elevate the region’s startup ecosystem and attract new deal flow — with which Royal Street is eager to participate, she said. 

“If we achieve that in the next decade, that would put us about where a market like Salt Lake City is today,” Brady added.