The Benefits And Disadvantages To Launching A Startup In Kansas City
The Kansas City metro area has become home to numerous tech startups over the last few years, in part because of Google Fiber, but also because low rental prices and large cutting-edge tech companies that call the city home.
Out of his single floor office space in Kansas City's startup village on 45th and Stateline, in Kansas City, Kan., Toby Rush gives a demo of the mobile phone application he’s developing, and it is like something out of a spy movie.
His application, EyeVerify, reads the veins in the whites of eyes as a sort of security code.
Rush is the CEO and founder of EyeVerify, by next year, he says his patent-pending technology will be used for things like mobile banking and phone security.
EyeVerify has just won an international startup competition that could include as much $1 million in funding. That’s exciting news for the local tech entrepreneurs who are hoping EyeVerify will be like Groupon was for Chicago and put Kansas City on the tech map.
Rush is proud to be based here.
“We like it here and we think we can execute well and scale well here," he says. "But venture capitalists from the coast don’t always see it that way. I’ve had a lot of VCs say, 'Would you be willing to move to Boston? Would you be willing to move San Francisco?' And that just doesn’t make sense for our company right now, Kansas City offers certain advantages, like low overhead and, more recently, Google Fiber."
Rush says it’s also less cut-throat then places like Silicon Valley.
"To be in that kind of environment where people want to work collaboratively together where there are just genuinely good people that just makes it fun," he says.
Adam Arredondo agrees.
"I think you layer that tendency for startup communities to be collaborative, to begin with, on top of the hospitality and the community mindedness of the Midwest and Kansas City and I think it’s pretty magical," says Arredondo.
Arredondo is a co-founder of the KC Startup Village, which is in the first neighborhood in Kansas City Kan., that received Google Fiber. Currently, there are 13 houses that serve as office space for 25 startups.
According to a study by the Kauffman Foundation, Kansas City ranked No. 3 of major U.S. cities for tech startup growth between 1990 and 2010. But Arredondo says there are some drawbacks to being in the Midwest.
"The Midwest is conservative, it’s more traditional, so investment tends to be that way, as opposed to the coasts that make much riskier bets," says Arredondo.
Arredondo says investors in Kansas City are used to putting their money into a 401 (k), the stock market and more established businesses.
At another startup in the KC Startup Village where Mike Demarais is using a 3D printer is making an iPhone case. A 3D printer is like a hot glue gun attached to a robotic arm. It can create almost anything you design on a computer.
"So this will take about 25 minutes to print and you can see that it’s just laying down very small lines of plastic," says Demarais as the machine moves back and forth.
Demarais is a tall, lanky 21-year-old from Boston, Mass., who dropped out of college a year ago to move to Kansas City. At first, he lived in the “home for hackers,” a program that offers tech entrepreneurs three months of free rent.
From there, Demarais created Handprint, a web app that makes it easy for people to design everyday items on a 3D printer. Demarais also had his team members moved here from Boston.
They say they’re adjusting to life in Kansas City.
"Just like the simple things," he says, "like lack of public transportation here is funny for us. But we’ve gotten used to it, we got a car — a big minivan — one big minivan with Massachusetts license plates, that’s how everyone knows where we are."
Demarais says investors, who tend to be a bit older, aren’t always up to date with new technology like 3D printers.
"One guy didn’t believe that the were real. He thought that they were joking, he was like, 'yeah well there’s some cults in California who believe in this stuff too, why should I believe that they’re real?'" says Demarais. "It was a bad meeting."
For Handprint, being in Kansas City means more local visibility and less competition but it doesn’t have as many angel investors as a city like Boston. That can make it difficult to raise funds locally.
"It’s just that KC startup ecosystem is pretty new and there haven’t been that many exits, exits are when you sell your company for big money," says Demarais.
Tech entrepreneurs say that those big exits, or more visibly successful startups, are what Kansas City needs to build a national reputation, and hopefully gain the confidence of local investors.