SPN report: KC underperformed on venture deals by $100M in 2018, despite cool jobs and connectivity

Google Fiber infrastructure and cool tech jobs alone aren’t enough to power a vibrant startup ecosystem rich with venture-backed investments, according to a new report that takes a critical look at Kansas City’s place within the Midwest economy.

“The [Kansas City] community boasts the fastest broadband speed and is competitive in most of the other categories. However, this city appears to struggle with respect to producing large, high growth companies,” reads the 2018 State of the Silicon Prairie Report, researched and authored by Omaha-based Chapman and Company and published by the Silicon Prairie News.

The report touts powerhouse firms C2FO and ShotTracker as KC’s top startups.

Click here to read the full State of the Silicon Prairie Report, which ranked Kansas City No. 7 among 48 Midwest communities.

While peer city St. Louis — No. 4 on the list — overperformed in 2018 with $545 million in venture capital deployed (an overperformance of nearly $300 million), according to Chapman and Company, Kansas City only produced $96 million in venture capital in 2018 (an underperformance of nearly $100 million).

It’s a signal Kansas City “needs to grow outside of its borders and serve broader customer groups,” the report said.

Other recommendations offered by Chapman and Company:

• Find more entrepreneurs that have big ideas. Help them find early customers and the funding to build large and successful wealth engines.
• Focus on building relationships with funders and customers in other markets in the Midwest – Chicago, Minneapolis, St. Louis, and Milwaukee being four key cities in this regard.
• Beating Wichita and Omaha in rankings should not be enough — these communities represent 25 percent to 40 percent of the KC metro area population. Be a great big city in the Midwest.

Chapman and Company placed Kansas City last among four “Tier 1” Midwestern cities with a population of more than 2 million people.

The City of Fountains’ poor venture performance formed the basis for one of the report’s biggest takeaways, according to the authors.

“Kansas City, in particular, was a surprise with the relative scarcity of dollars invested in the ecosystem in 2018,” Chapman and Company wrote, referencing the contrast to previous forecasts and results. “It is therefore not the case that investments and company creation are not occurring in Silicon Prairie cities. Rather, these mid-sized communities are underperforming against the expected value that their comparatively greater populations would suggest.”

Kansas City’s No.7 ranking in the report was determined based on the following metrics, listed along with KC’s corresponding A-F grade:

• Small business activity — SBA loans from the region (both the number and amount) (B)
• Cool jobs — STEM graduates and jobs (A)
• Structure — Corporate broadband offerings (available from the federal government), incubators, accelerators, universities, and university research dollars (B)
• Innovation — SBIR/STTR grants and award size, and number of patents of the region’s five largest patent holders (B)
• Venture investment — Pitchbook venture dollars and number of investments (D)
• Community Spirit — Determined by a survey deployed in November and December 2018 (C)
• Connectivity — Entrepreneurial meetups as listed on common websites (A)

Do you agree or disagree with the SPN report? Want to share your opinion with Startland readers? Email us your thoughts: news@startlandnews.com