Area organizations collaborated on bi-state economic development proposal to raise and run new, charitable source of early-stage capital
FOR IMMEDIATE RELEASE
FAIRWAY, Kan. – (October 2, 2017) – The Enterprise Center in Johnson County (ECJC) announced today that it has secured the Economic Development Administration’s (EDA) Seed Fund Support grant with the cooperation of a bi-state consortium of entrepreneurial and civic leaders. The group, which includes representatives of the ECJC, the Economic Development Corporation of Kansas City, KCSourceLink, the OneKCforWomen Alliance, the Kauffman Foundation, the Greater Kansas City Chamber of Commerce and area investors, will use administrative funds provided by the grant to staff and raise a $5 million pre-seed fund.
“The seed capital crunch is one of the pervasive resource gaps limiting Kansas City’s entrepreneurial growth,” said Melissa Roberts, Vice President of Communications and Outreach at the Enterprise Center. “In launching this pre-seed fund and closing that gap, we are taking an important step towards our civic goal of becoming the most entrepreneurial city in America. The fact that this project has been undertaken by groups from both sides of the state line goes to show that our regional goals of spurring economic development, driving job creation and improving business dynamism are better served by building bridges than by border wars.”
A lack of pre-seed funding (defined as a round size of between $50,000 and $300,000) was identified as a key entrepreneurial resource gap by KCSourceLink’s 2015 WeCreate capital report. The new fund will seek to bridge that gap by taking a lead position in investments of up to $150,000, contingent on the procurement of 1:1 matching funds from co-investment partners. The program will also require that entrepreneurs receiving investments participate in educational and mentoring programs provided by the ECJC. The fund is expected to begin deploying capital in the first half of 2018.
The Region Innovation Strategies (RIS) Seed Fund Support grant is allocated annually by the EDA, a division of the U.S. Department of Commerce. Another branch of the Regional Innovation Strategies program, the i6 innovation grant, helped create Kansas City’s Digital Sandbox program in 2014. The ECJC proposal was one of the 41 RIS awardees selected this year from amongst 217 applicants nationwide. Funding from the $150,000 federal grant will be earmarked to cover administrative expenses, and will not be used to capitalize the fund.
“The Trump Administration is committed to strengthening U.S. production and exports, which are essential to our nation’s economic growth,” said Secretary of Commerce Wilbur Ross. “These projects will enable entrepreneurs in communities across the United states to start new businesses, manufacture innovative products, and export them throughout the world – increasing America’s global competitiveness.”
The ECJC will seek to raise $5 million to capitalize the fund over the coming months; the fund’s founding donor may receive naming rights and a seat on the investment committee in exchange for their early support. The fund’s charitable structure ensures that all donors will receive a charitable tax deduction for their donations to the fund. Rather than disbursing exit proceeds to investors, proceeds will be used to re-capitalize the fund, creating an evergreen source of pre-seed capital for the region. In addition to the short-term benefit of receiving a charitable tax deduction, prospective investors will see a long-term charitable and economic impact through improved dealflow, better educated early-stage entrepreneurs and a more vibrant economy in the metro area as a result of the fund’s activity.
About the Enterprise Center in Johnson County
The Enterprise Center in Johnson County is a non-profit organization, supported by funds from Johnson County, philanthropic partners and private donors that helps connect entrepreneurs to the resources they need to grow and scale early-stage businesses. In addition to offering affordable, flexible co-working space, the ECJC also offers a mentoring program, educational programs and connections to early-stage capital through the Mid-America Angels investment network. The ECJC estimates the regional economic impact of ECJC-assisted companies as $3.2 billion over the past ten years. For more information, visit www.ecjc.com.