Kansas City Tech Startups See Promise As Funders Look To The 'Rise Of The Rest'

Mar 29, 2017

Mike Farmer, whose company won $100,000 as part of Steve Case's Rise of the Rest effort, is now an 'entrepreneur in residence' at Techstars Kansas City. Here he mentors two young business owners at the Sprint Accelerator on March 23.
Credit Peggy Lowe / KCUR 89.3

Mike Farmer’s high-tech startup, Leap.It, caught the attention of AOL founder Steve Case in October 2014 because Farmer’s company was built in the first house hooked up with Google Fiber.

Case loved the irony of the David of Kansas City taking on the Goliath of Google.

“You’re undermining Google right here in the Start-Up Village in Kansas City,” Case said at the time. “On Google Fiber! That’s pretty cheeky!”

Farmer doesn’t remember the cheeky line, but the Google angle is “an interesting story line,” he said.

The story won Farmer $100,000 during Case’s stop in Kansas City during the Rise of the Rest, Case’s 26-city tour of cites between the two coasts. It’s Case’s attempt to help promising companies in the middle of the country with the attention and financial backing they sorely need.

This week (March 30-31), Case hopes to extend what he learned on that cross-country bus tour to lawmakers, academics and investors in his Rise of the Rest summit in Washington, D.C.

A new cycle?

Case predicts that a 2017 trend will be venture capitalists looking to mid-sized cities like Omaha, Minneapolis and Kansas City. 

“Our most entrepreneurial graduates followed that money, creating a financial ecosystem in which the best innovators and investors congregated in just a few places,” Case said in a LinkedIn article at the end of 2016. “But that cycle is starting to change.”

Case cites two reasons. Innovation will be driving more work toward sectors like health care and agriculture. And, those angry Trump voters last November pointed to the lack of opportunity in places outside the coasts.

“The election was a wake-up call,” Case said. “It brought to light the lack of opportunity in places often disregarded by the tech and business communities.”

Case seems to be putting his own money on the map. His venture capital firm, Revolution LLC, has hired J.D. Vance, author of the bestselling “Hillbilly Elegy” and a Silicon Valley venture capitalist. Vance is moving to Columbus, Ohio.

Startups on the coast suck up 80 percent of venture capital, leaving companies in the rest of the country either lacking the money or being forced to move to, say, Silicon Valley.

“We ran into this all the time,” said Farmer, the Leap.It founder.  “Very interesting venture capitalists that were coastal, that issue No. 1 was, ‘you gotta move.’”

The cash Farmer won from Rise of the Rest (in what he calls the “11th hour” of his company) didn't save the startup -- Leap.It closed up in January. Seems most users wouldn’t have all that fiber power from Google, so his engine couldn’t catch on. 

Mid-size urban

One of the current trends is “a new map of entrepreneurship in the United States,” said Arnobio Morelix is a researcher with Kansas City's Kauffman Foundation, which recently released its 2017 “State of Entrepreneurship” report.

There’s been a rise in new companies in mid-size urban areas, places like Nashville, Columbus, Ohio, and Provo, Utah, Morelix said. Trouble is, high-tech is not the majority of new creations.

“It’s not even the majority of growth of entrepreneurial activity,” he said. “When you look, for example, at IT and software, it’s about a third of the high-growth companies are in those fields.”

Lesa Mitchell, managing director of Techstars Kansas City, works with two budding entrepreneurs at Taste of Techstars, a mentoring project, at the Sprint Accelerator on March 23. She is attending Steve Case’s Rise of the Rest summit in Washington, D.C. on March 30-31.
Credit Peggy Lowe / KCUR 89.3

Getting entrepreneurs together is critical, said Lesa Mitchell, managing director of Techstars Kansas City, a technology incubator that connects and mentors companies. 

“Frankly, we’re using, whether it be Techstars or other mechanisms at the level of a city, to drive entrepreneurs into collisions with each other that they otherwise wouldn’t make because they’re spread out over sprawl of mid-America,” she said.

Mitchell will be at the Rise of the Rest summit in Washington this week. She’ll be looking to connect to other cities that have financial-, security- and sports-related businesses like Kansas City does, she said.

Meanwhile, Farmer said he doesn’t have any regrets, even though some people told him if it had been in Silicon Valley, Leap.It would have made it.

“It’s nice to think of that, from the company side, but within our core group of people, that was really tough for us to think about moving,” he said. “Some guys had six kids in school.”

Kids in school, lower cost of living, quality of life -- all those reasons some people want to stay here in the middle and hope the money comes to them.

Peggy Lowe is investigations editor at KCUR and Harvest Public Media in Kansas City. She can be found on Twitter at @peggyllowe