Guest Post: Advice For Midwest Entrepreneurs Part Deux

Pete Thomas authored a great guest post last week . . . Check out part I. Here's the latest installment:

Midwest Entrepreneurs, Jedediah Smith & Shooting Star

Ever heard of a guy named Jedediah Smith? He was a famous trapper, hunter, and trailblazer who got his start in St. Louis and is credited with exploring much of the American West. Wikipedia points out that after Jedediah got rich in those faraway places, he came back:

In 1830, Smith retired from the fur trading business and on October 11, returned to St. Louis with a profitable bounty.

How about the 80s band Shooting Star? Its founding duo met at Shawnee Mission South High School in Kansas City, they got their big break in London and became the first American band signed to Virgin records. Here’s an awesome video. Like Jedediah, Shooting Star made it big away from home then came back. Wikipedia knows about them, too:

20 Years and counting...Van McLain, Dennis Laffoon, and Steve Thomas also perform in the Overland Park, KS area as a trio - The Star Blues Band.

So what can Jedediah Smith and Shooting Star teach an angst-ridden Midwest entrepreneur?


We’ll see in just a moment but first, a look back at Part I.

Way back in Part I

In the last post we argued that our region’s access to venture capital is hobbled by the classic chicken and egg dilemma and advised local entrepreneurs who think they’ll eventually need access to venture capital to view their options as Get traction, Get connected, or Get lost. We claimed Get lost is the best advice for individual entrepreneurs but Get traction is the best advice for regional stakeholders and we suggested that the way to escape the causality dilemma is to find ways to “crank out” lots of successful startups in Kansas City, Des Moines and Omaha. As it turns out, the data we used to make our case had some shortcomings and people rightfully objected. We’ll address those objections before we get back to the fur trapper and the rock band.

The three objections

The first objection is that our initial charts unnecessarily split Kansas City across the state line. We did that to highlight the ostensible impact that KTEC tax credits had on the Kansas side but since we failed to mention that in the first place, the separation looked arbitrary.

A second objection contends Boulder is a bad comparator because it’s nothing like our region’s cities - fair enough.

The third objection relates to our overbroad look at the data. We intended to focus on internet companies and their attendant potential for disruption so we should have singled out what MoneyTree refers to as Internet Related Technology. For the other sectors that they track in their summary figures, e.g., Biotechnology, Semiconductors, and Networking & Equipment, large venture capital investments are frequently needed just to get started or expand in those markets, so considering summary data on the whole distorts the picture.

A Response

New charts can address the three objections. We’ll combine KCK and KCMO into just KC, add in more sample cities to compare, and constrain the data to only consider internet-related venture capital. The picture really doesn’t change, all we managed to do is allow Austin, Denver and Research Triangle to dog pile along with Boulder atop the fact that our region suffers a relative deficit of venture capital deployment:

















Perhaps data from the last quarter of 2011 and the first two of 2012 will paint a different picture but for now, the amount of dollars deployed in our region just doesn’t come close to competing.

About that fur trapper, about that rock band...

Our opening anecdotes depict locals who ventured out on their own by going where they stood the best chances of winning big and who then came back to the places they left. We’ll close out this piece with a few potentially relevant extrapolations of this same concept. This is nothing earth-shattering but our region could structure programs to...

#Incent people like Jon Crawford and Scott Raymond to come back to the region with what they’ve learned and start new companies here.

#Incent people like Naithan Jones and Bo Fishback (and their current investors) to bring their companies and their jobs back to the area.

#Incent people like Jon, Scott, Naithan, and Bo, after they win big, to start locally-focused angel funds and/or work to establish venture capitalists’ interest in the region.

In Part III we’ll take a look at some of the structural problems our region has that, if they could be improved, might better incent people to start internet companies in this region and keep them here. We may not be able to fabricate mountains, beaches, or even urban density, but there might be other ways to make the region an appealing part of the country to build innovative companies and invite venture capitalists to invest in them. In the meantime if you’d like a closer look in the charts from this post, slightly-interactive versions are available on Google Spreadsheet.
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