This document summarizes innovation and entrepreneurship in the Kansas City region. It describes several local companies working on technologies like cancer treatments and mobile security. It also discusses assets that support innovation like universities, incubators, and organizations like the Kauffman Foundation. However, it notes that the region still lacks sufficient venture capital investment and could benefit from stronger state support in Missouri to help innovative startups attract funding and grow.

1. This is just a glimpse of what innovation looks like in Kansas City at this time:
• TVAX Biomedical is working on breakthrough technologies for treatment of brain and kidney
cancers, and has received FDA authorization for its first round of final human trials. The Lenexa-
based firm hasn’t developed a cure—yet—but CEO Gary Wood has reason to believe a major
victory in the war on cancer is within reach.
• Toby Rush’s fledgling EyeVerify, also in Lenexa, is breaking new ground in mobile-device
security using eye-vein biometrics, a technology that surpasses passwords, key fobs, access cards
—even iris and fingerprint scans.
• The Center for Animal Health Innovation, based in Olathe, is taking a new approach to the
concept of commercializing animal-health research, generating inquiries from domestic and
foreign companies alike about doing business in the region’s animal-health corridor. An early
success: Aligning with a K-State researcher to commercialize a novel natural antibiotic to treat
mastitis in dairy cattle—a condition that inflicts an estimated $2 billion in losses on that industry
every year.
• Bruce Steinberg, in the final stages of negotiating his first grocery shelf space for what he
believes will be a disruptive force in a field as well-established as ketchup production. His Fine
Vines Artisanal Ketchup varieties are being produced in Independence to bring product
differentiation to a $500 million consumer category sorely lacking it.
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2. • Even the way we teach innovation itself is being reshaped. Last fall, the Journal of Product
Innovation Management recognized program changes at the Bloch School of Management’s
Institute for Innovation and Entrepreneurship, ranking it No. 1 worldwide for innovation
management research. On many fronts, Kansas City is carrying on the entrepreneurial traditions
that spawned companies like Hallmark, H&R Block, Sprint, Cerner and Garmin. While much of
the emerging roster is dominated by higher-tech interests or life-sciences companies, some of the
most successful local innovators in recent years have been people with the vision to apply new
processes to longstanding business models.
Bonnie Kelly and Teresa Walsh, who pursued the jewelry-party sales strategy that grew into
Silpada and turned $25 in household grocery money into a $650 million sale to Avon in 2010.
And BATS Global Markets, launched in 2005, has used advances in algorithm-driven trading to
become the third-largest stock exchange in the world, already approaching the billion-dollar
revenue threshold.
“One of the key elements of Kansas City’s innovation infrastructure is the proximity of so many
great universities—from KU to MU to Nebraska—that turn out great talent,” says Joe Ratterman,
CEO at BATS. His company has drawn extensively on the technology, engineering, and
entrepreneurial talent coming out of those schools, he said: “Companies can only be successful
and continue to innovate by building teams of smart, dynamic individuals and, with the rich
educational foundation of the Kansas City-area, this has been an integral part of BATS’ success.”
Executives from companies engaged in new innovative efforts says that this area also is blessed
with assets like the Kauffman Foundation and its research and promotion of entrepreneurship, a
vibrant network of experienced entrepreneurs who share their expertise, grant-making
organizations like the Kansas Bioscience Authority, and research efforts at regional universities
and medical centers.
The flip side, innovators note, is that the advantage Kansas City holds in logistics and
distribution—its central location—continues to be a disadvantage in one very key aspect of start-
up company success: Attracting the kinds of venture capital and angel investment that is far more
readily available in coastal population centers like San Francisco and Boston.
“Most people view the fact we’ve raised $10 million from angel investors locally as an
extraordinary thing, which it is,” says Gary Wood, CEO at TVAX Biomedical. “But the money is
on the coasts.” Historically, he said, venture funds want easier access to their projects, Wood
said, and “it’s hard to do that from a distance. They want to be able to call up a CEO for lunch
and not have to fly half-way across country to do that.”
Jeff Boily, CEO of the Center for Animal Health Innovation, said that in those coastal
communities, “you can throw a stone and hit 50 investment opportunities without leaving your
office. It is more difficult to raise capital here, but as we continue to promote the tremendous
assets we have here, we’re hoping that more of the people with that kind of money investment
capital will stop, take a look at Kansas City, and say ‘maybe we should be investing here.’
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3. 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.”
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4. 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.”
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5. 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
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6. 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.”
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