What's Working

Among the region’s unheralded assets, says Bruce Steinberg, founder of Leawood-based Fine Foods of America, is the Ennovation Center in Independence. In another example of innovative thinking, the Independence Council for Economic Development partnered with the Independence school district to turn a liability—the emptied-out 400,000 square feet of the former Independence Regional Health Center—into an asset.

By converting the building into a business incubator—with kitchen facilities and labs ranging from a few hundred to 1,400 square feet—they opened the floodgates for would-be entrepreneurs. Steinberg’s was one of roughly 300 inquiries received since the facility opened. In the center’s kitchen space, he developed 11 flavors of ketchup that can be paired with different foods, and hopes to do for ketchup what Grey Poupon and its successors did for the mustard market.

“The center is mostly a food business incubator,” he said. “It has nine biotech labs, and five kitchens, and it’s one of only about 20 food incubators in the country. That enabled me to start production of a shelf-stable, jarred project. Otherwise, I’d be going to co-packers right away,” risking control of his production scheduling and flexibility during critical early-stage development.

Other important assets he tapped into were the Kauffman FastTrac program, which provides assistance
from conception to early-stage growth companies; the Entrepreneur Scholars program at UMKC, originally for students but opened up to public competition in 2011; food-science departments at regional universities; and the networking that all provide.

“There’s a real high value in the mentors and the connections,” said Steinberg, who drew on his own retirement savings to get launched. A native of Long Island who came here during a career in the pharmaceutical industry, he says one of this region’s strengths is “the entrepreneurial knowledge base in Kansas City.”

Toby Rush, who developed a radio-frequency identification system for supply-chain management, then sold Rush Tracking Systems to an investor group, cited some of those same assets in talking about his latest venture, EyeVerify. The company holds the worldwide exclusive patent for the conjunctival vasculature biometric, allowing mobile devices to scan eye-vein patterns in users and verify their identities for secure on-line transactions.

“When you look nationally, the places that are healthiest, doing the best, have a vibrant ecosystem, random interactions that aren’t necessarily planned for but are significant for growth of the overall environment,” he said. The Kauffman Foundation provides such a spark, as did the Pipeline program, launched by the now-defunct Kansas Technology Enterprise Corporation, but now a Kauffman initiative.

“There are a lot of good advisers here, lots of strong boards of directors, including some who have saved my bacon a number of times, so I see that as important,” Rush said. “But entrepreneurs invest in each other more in general, anyway: They know the people behind the organization or the business.”

Michael Song, at the Bloch School, is looking ahead to 2013, when a new community asset is in place: the Henry W. Bloch Hall for Entrepreneurship and Innovation. The university broke ground earlier this year on the building, funded largely with a $32 million gift from its namesake, one of Kansas City’s legendary entrepreneurs. The university says that facility will elevate the Bloch School’s reputation as a global leader in the instruction of future leaders in entrepreneurship, innovation and business management.

By turning out 100 or more entrepreneurs trained in that particular business-development niche, Song said, the institute will have the potential for transforming Kansas City’s economy. Research has shown that each successful entrepreneur creates 512 jobs over the course of a working career. so injecting a new cohort of 100 prospective business owners every year will have a profound impact.

The school would complement other elements of the regional innovation infrastructure, Song said. “Look at how this city is built; it has a legacy of entrepreneurship,” he said, and that ability to generate fresh ideas is one leg of a three-legged stool. “We have a lot of good ideas here.” The second, he said, were assets like the Kauffman Foundation and the Bloch School. “But the third leg of that stool,” he said, “is funding. We have a lot of seed funding in Kansas City.”

The Missing Pieces

Yet even with all of that going for it, Kansas City as a region has some needs. Seed funding is one thing, Song said; venture funding, to take companies to the next level, is where we’re lacking. He, too, cited the coastal aggregation of wealth as a deterrent to progress here.

“I’ve talked with people in Silicon Valley about funding, when I was working in Seattle, and they would say you have to move to Silicon Valley as a precondition,” Song said. “That’s how they do business.” But in the current environment, he now has a counter-argument: “I can tell them ‘Why? We have the Google Fiber initiative.’ That will create a huge potential for us. But venture funds follow the ideas and the people. We just need to capitalize on our strengths.”

Michael Peck, interim CEO of KC Biomedix, said that even though Kansas City continues to push ahead on development of a life-sciences sector, it’s still difficult to launch a medical-device company. His company started in 2007 and began marketing a breakthrough product that helps premature infants develop their capacity for nursing—along with breathing, an absolute prerequisite for neonatal development.

“If you’re in the health space, you can find a lot of ex-Marion people,” he said, referring to the pharmaceutical company founded by Ewing Kauffman. “But it’s hard to find device-focused people. The other thing, and it’s the constant rant of any startup, is you’re always looking for more capital.”

The region has made significant progress, he said, “but we still have a long way to go on that front. There are still not enough institutional investors here for us to go out and raise money. That’s not always a slam dunk, and it’s always a lot of effort.”

Citing the contributions made by the Kansas Bioscience Authority in funding early-stage companies, Peck said the region continues to see a drag from lack of an effective Missouri counterpart.

“I would love to see Missouri get its act together; it would bring a lot of focus to Kansas City,” he said. “From the KBA’s perspective, it would have a heck of a lot of competition on their hands. Missouri could be a sleeping giant if they could figure it out. From KC Biometrix’s perspective, sure—if Missouri enhanced their efforts in certain areas, some medical device-focused efforts, that would be great.”

The Show-Me state’s inability to demonstrate follow-through on funding for the Missouri Science and Innovation Act last year “hurts us quite a bit” as a region, said Boily, of the Center for Animal Health Innovation. “It was a great step that it got propelled as far as it did, but now everybody is fending for themselves. That’s very unfortunate from an entrepreneurial perspective.”

The challenge for Boily and his center, which launched just last year, is one of proportionality. Although Kansas City sits in the middle of a Manhattan-to-Columbia corridor, where companies accounting for 60 percent of the world’s animal-health business have operations, human health far outweighs his sector in interest from funders.

“The amount of research and development on animal research is about 1/40’th of what goes into human health,” Boily said. “So the amount of angel or early-stage venture firms that do spend any time looking at animal health in particular is very small.”

One of the things the center is doing to alter that dynamic, he said, was with its innovation awards, bringing in C-level executives, venture capitalists and angel investors from the coasts to serve as judges, and exposing them to the region’s strengths. Another is providing grants that can help commercialize research being done at K-State and Mizzou, such as the $250,000 awarded for the K-State mastitis project.

“That project is still early,” he said. “We have to find out if it will work on a commercial scale. It’s a great idea, and an example of the great work being done in laboratories here, but those are projects that could be game-changers on a very large scale for this area.”

Those on the commercial side of innovation generally agree that another element holding the region back is an underdeveloped relationship between business and universities. Academic research centers, they say, have long been too inflexible on issues of intellectual property, but they acknowledge that both UMKC and the MU system have been working to change that.

Ratterman, at BATS, agrees that we need to fully engage business and civic leaders to support entrepreneurship and innovation, calling it critical to the region’s success—not just because they can help get companies up and running, but because helping native entrepreneurs succeed can ensure that more successful start-ups remain here.

“We have business leaders who are committed to the Kansas City region as much as they are to their businesses,” he said. “For BATS, our roots are firmly planted in the Kansas City area and our associates enjoy the quality of life the area affords.” But even though the company’s customers and business is primarily focused in financial market centers around the world like New York and London, Ratterman said, “we can’t imagine having our headquarters any other place.”