Networking the New Economy
New groups form to accelerate entrepreneurial activity in KC

By Linda Cruse

In February, more than 85 people gathered at a Country Club Plaza pub for a happy hour celebration.

They met at O’Dowd’s Little Dublin Pub, but not just for imbibing and social interaction. The attendees were members of an informal networking group targeting the bi-state technology and life sciences entrepreneurial community.

The price of admission was simply a business card. There was no agenda, no speaker or program.

Called KC Entrepreneur “Happy Hour,” the group was formed by KCCatalyst, the Kansas Technology Enterprise Corporation (KTEC) and the Kansas City Area Development Council.

KC Entrepreneur is one of three new networking opportunities that gives businesspeople an opportunity to meet and mingle, all with the goal of integrating the life sciences and technical entrepreneurial communities. The other two groups are ITKC and Beefeaters CEO Network.

The new networks will benefit the entire city, said Homer Erekson, dean of the Henry W. Bloch School of Business at UMKC.

“There’s no question that if life sciences thrives, so does the entire community,” he said. “The growth creates opportunities for existing businesses, it benefits educational institutions and it makes Kansas City a more exciting, energetic and creative place to be.”

New Economy Status
In 1999, the Kansas City Area Development Council and the Civic Council of Greater Kansas City proposed the idea of growing the local economy by making Kansas City a nationally recognized life sciences center.

More than 100 area scientists and business leaders spent a year assessing local strengths and capabilities and recommending action. In 1999, the Kansas City Area Life Sciences Institute (KCALSI) was formed. The group has been charged with making the vision become a reality.

Statistics show that Kansas City is on its way to achieving some of its goals. A University of Minnesota study conducted in 2001 revealed that Kansas City is first in the central United States in high-tech specialization. (The central U.S. is defined as the area east of Denver through Ohio, and north of Texas to Canada.)

In addition, Kansas City is third in the central United States in terms of total high-tech jobs and third in high-tech jobs as an overall percentage of its workforce.

Further, a 2001 study by the Metropolitan New Economy Index, Progressive Policy Institute, revealed that Kansas City is first in the central U.S. and second nationally in
Internet backbone capacity. The same study reported that Kansas City is first in the central U.S. in the percentage of its adult population being on-line.

That’s good news, because high-growth companies often create the jobs and revenue that lead to recovery in times of economic recession, said David Frankland, president and CEO of KCCatalyst, a nonprofit organization that works to accelerate the emergence and growth of life sciences and technology-based companies in the bi-state region.

“Small, fast-growth companies created nearly 3.8 million jobs during the last recession in 1989 to 1993,” he said. “Large companies created roughly 3.3. million jobs in the same period. In other words, these fast-growing companies outpaced large firms in job growth by nearly 500,000 jobs.”

Leading the Way
Frankland believes business networks are one key to the success of the new economy.

“Business and public leaders should not overlook the importance of entrepreneurial networks in our bi-state region, especially when it comes to fueling high-growth entrepreneuership,” he said. “The fact is, entrepreneurial growth companies historically lead the way to economic recovery, and in turbulent times, better weather the storm.”

Indeed, uncertain economic times often provide opportunities for entrepreneurs, said Ken Berlack, KCCatalyst’s director of marketing communications. “An uncertain economy is often the best time for an entrepreneur to launch a new company,” he said. “They can do it outside of normal economic conditions because the base of their company is often an innovation that isn’t tied to the ups and downs of the economy.”

When corporations lay off engineers and technology experts with backgrounds in technical research, they often opt to start new companies, he said. “They see it as their turn to be successful out on their own,” he said. “That’s the culture we’re targeting: the new economy.”

A strong new economy will draw venture capitalists interested in investing in Kansas City’s business community, added Erekson.

“First come the ideas, then the move to market, then the need for funding,” he said. “By having an integrated delivery system supporting small business growth, venture capitalists will be more apt to invest in our businesses.”

While scientists and inventors generate innovative ideas, they often don’t have the expertise to commercialize those ideas,” Erekson added. “That’s where UMKC’s Entrepreneurial Growth Resource Center, KCCatalyst and the 13 other resource organizations located at 4747 Troost come in,” he said. “They play a strong role in translating ideas into commercial profitability.”

Nerve Centers
Networks are proven catalysts for regional economic growth. A study by the National Commission on Entrepreneurship (NCOE) noted that regions with solid entrepreneurial networks tend to have strong track records in regard to new business starts. Frankland agreed, describing entrepreneurial business networks as the “nerve centers of a thriving entrepreneurial economy.”

Berlack noted that it’s vital for high-growth companies to have an outlet for sharing their experiences on a peer-to-peer basis.

“While other small businesses are getting their needs met, technology and life sciences businesses often fall below the radar screen,” he said. “When you’re launching a high-growth company, you need an environment that’s conducive to growth. Networking opportunities with peers is a key part of that environment.”

Without key networks that provide high-growth companies access to a network of peers, mentors, strategic business partners and service providers who are versed in their specialized, high-growth needs, high-growth companies might leave Kansas City.

“We realized that we needed to create strong and vital business networks for this select group of entrepreneurs in order to keep them in our city and attract new businesses,” he said.

Targeted Solutions
To that end, late last year KCCatalyst formed ITKC, another networking group. ITKC’s mission is to help build a strong information technology community in Kansas City.
By connecting members of Kansas City’s information technology community through a variety of programs and services, Kansas City’s regional economic growth and innovation is strengthened.

Included among the group’s quarterly programs are networking events for IT professionals, managers and executives, IT technical and business seminars, best practices round tables and discussions, site tours and a directory of IT service and training providers.

KCCatalyst has also joined with the Greater Kansas City Chamber of Commerce to sponsor a network of executives in the information technology and life sciences industries. Called Beefeaters CEO Network, Berlack described the network as both formal and informal.

“It’s very fluid,” he said. “The goal is to allow executives in those industries to meet their peers to exchange ideas and celebrate the building of an entrepreneurial community in Kansas City.”

The program brings together new economy entrepreneurs, prominent venture capitalists and special guests for networking, relationship building and idea swapping.

Another networking opportunity targeting the new economy is the Invest Midwest Forum, he said. Scheduled for May 21-22 in Kansas City, high growth entrepreneurs are judged on their business plans in the hope of gaining equity capital.

“Out of the top 20 firms selected last year, eight ended up receiving venture capital,” said Berlack. “A lot of high-level networking takes place at this event, which is now in its fourth year.”

While information technology and life sciences professionals are key targets for creating a cohesive new economy, participants cross disciplines and include engineers, programmers, marketers, human resource, financial and sales professionals, managers, administrators and executives.

The services provided through business networks are designed to benefit the full continuum of companies within the new economy, Berlack said, from small, young entrepreneurial organizations to large, well-established firms.
    
A Leap Forward
A considerable financial investment is necessary to achieve Kansas City’s goal of becoming a nationally recognized life sciences center, said Erekson.

“We need to take a leap forward—not just small steps—to achieve that goal,” he said. “We’ll need continued large investments to succeed.”

Milestones in that area occurred with the April 2001 opening of the world-class Stowers Institute for Medical Research, which was funded by a $1.6 billion endowment from American Century founders James and Virginia Stowers.

Another high point was a $1 million Challenge Grant from local community leader Dick Cray, which was awarded to KCALSI to fund proteomics research. Proteomics is the study of the proteins produced by various types of cells in the body.

Also necessary, Erekson said, is a strengthening of key Kansas City university programs. “We need strong science and engineering programs to achieve national status,” he said.

Berlack said networking groups’ future goals are to provide a wide range of programs designed to serve, educate and link the new economy. Programs focusing on information security, Web services, bioinformatics, higher education and the virtual classroom, insourcing versus outsourcing and smart card technology are being planned.

But even more networks are necessary, Frankland said. “What’s needed is more networks to start and grow in our region,” he said. “Through this important activity, we can further catalyze our region’s growing technology and life sciences-focused economy.”

Linda Cruse is Managing Editor of Kansas City Small Business Monthly.