Zego exit, investment wins reflect critical need for startups to look outside KC, co-founder says

Homegrown is great, Adam Blake said, but at some point scaling companies must explore the world of resources and dollars available outside the metro.

Adam Blake, Zego

“Kansas City has a lot to offer — plenty of talent, great place to live and quality of life, helpful mentors, etc. — but I would say it’s a requirement for startups to expand beyond KC,” the Zego co-founder said. “While the venture scene in KC is on the right track, it’s still not in the same league as places like the Bay Area, New York and Los Angeles.”

Blake’s recent experience — raising $2.5 million for Zego, followed by securing a $500,000 bridge round — was just the beginning. The smart home technology firm announced an exit earlier this week: in the form of an acquisition by PayLease, a San Diego-based leader in the property management industry. Terms of the deal were not immediately disclosed.

Click here to read more about the Zego acquisition.

“I think we did a good job showing outside investors there are venture-backable companies in KC,” Blake said. “We had a handful that invested in Kansas City for the first time.”

Paylease began as a potential coastal partner for Zego, but eventually transformed into a buyer.

“This transaction is another example of how quickly a globally competitive tech business can be built in Kansas City,” said Ed Frindt, principal at KCRise Fund, one of Zego’s early Kansas City-based investors. “Having a Vista-backed, industry-leading company like PayLease see the value of Zego’s platform further raises KC’s profile as a place where ambitious founders like Adam and [Zego co-founder] Clay [Coffman] can scale rapidly.”

It was the second exit in about a month for a KCRise Fund portfolio company to a coastal buyer, Frindt said, referencing the late-March $100 million investment in PayIt by New York-based Insight partners.

Click here to read more about the PayIt deal.

Investments from outside Kansas City are nothing new. Of the 50 firms on Startland’s 2018 list of Top Venture Capital-Backed Companies, about 70 percent of the more than $436 million in capital investments came from beyond the metro.

Click here to see the Top VC-Backed Companies list.

“Those who already have a higher percentage of capital from outside of Kansas City probably are the more mature companies on the list,” said Darcy Howe, founder and managing director of the KCRise Fund in a Startland analysis of the 2018 list. “They’re able to get their initial funding in town, build something sustainable from that initial funding and have enough pattern recognition to institutional investors that it overcomes the idea of ‘Where are they located?’”