Leveraging Regional Assets: Presence of Mentors

While the scope of our research was aimed mainly at the direct correlation between the success of entrepreneurs and the location of the Kansas City area, a detail emerged from interviews we conducted with successful entrepreneurs. I’m talking about the utilization of mentors. An extremely high number, approximately 75% of the entrepreneurs we interviewed, had some form of mentorship as they founded their companies.

Some of these mentor relationships were formally structured, such as those through the Helzberg Entrepreneurial Mentorship Program (HEMP) or Pipeline, while others evolved naturally. In some cases, an entrepreneurs previous employer became their mentor. While many had some sort of mentor, those who didn’t had previous experience working at a large successful firms.

The following quotes describe the relationships and advice the entrepreneurs received:
“I’ve never had a single formal, heavily invested mentor-mentee relationship. There are a handful of owners/executives that are highly accomplished that are a phone call away to answer questions and offer guidance and encouragement or inspiration or connections, to help any way they can.” (IT Firm C)

“The Helzberg program helped us a lot, because that was in 2003 and 2006. I would even go out on a limb to say we might not be around if we didn’t have that to lean on in the 2005 timeframe when we made some real bad management decisions and lost the money. Because I was able to pick up the phone, personally call Barnett and say ‘I’m in trouble, I don’t know how much trouble I’m in.’” (Business Services Firm M)

Leveraging Regional Assets: Implications and Discussion

We’re now going to revisit other parts of the study and look into implications for 3 major audiences: entrepreneurs, entrepreneurship supporters, and policymakers.

Capital

Many of the entrepreneurs in the Kansas City area started small but in time were able to take on great growth. Although some businesses will take the route of venture capitalist, this study showed that few actually chose that route. Most entrepreneurs from the study started with capital they had or gathered from family and friends. What we found is that a lack of investment dollars is not key to growing a business in this region.

Entrepreneurs should not be discouraged by the region’s shortage of significant investments from venture capital firms. They should consider paths to start small, with funds from various sources, and scale up effectively by attracting clients.

Policymakers and entrepreneurship supporters should channel their energy into connecting nascent entrepreneurs with experienced entrepreneurs, not on creating venture funds or seeking outside investors.

Talent

Each of the companies we looked into seemed to have great employees showing that the Kansas City region is not short of talent. High levels of education and a strong Midwestern work ethic are on display across the board. Some companies leverage this strength, achieving high levels of retention and offering high-quality customer service. Both serve as competitive advantages. Although Kansas City is far from prestigious engineering universities like Stanford and MIT, it’s the training programs that these companies have that create great talent.

Entrepreneurs should not expect all programmers and other employees to be prepared to contribute to the company immediately. Instead, they should consider investing in long-term training programs for young, aspiring talent in the area.

The region’s best resources are a hard-working and loyal pool of labor, a small and supportive business community, and a low cost of living in a family-friendly environment. As a result, companies should integrate the whole set of recruitment, retention, training of employees, along with the company culture to support it, with this strength of the Kansas City region.

Leveraging Regional Assets: Findings

The companies interviewed ranged from small, hyper-growing firms with extremely high productivity to large, yet still rapidly growing companies. If you can look at the chart below, on average these firms had $22.8 million in revenue. Not bad for 22 companies in the Kansas City area. The chart further shows that on average these companies employ about 112 people. The real important fact here is that on average, these companies manage a 39% annual revenue growth rate.

arnobio table 1

From a geographical standpoint, about 56% of the entrepreneurs we interviewed were either A) Kansas City natives (10) or B) come from Kansas or Missouri (4).  The interesting facet of these statistics is the eight whom we interviewed that were from outside of the Kansas City region.  Seven of those eight were from within the United States and the eighth was international.  Take a look at the chart below.

arnobio table 2

 

The companies interviewed had many different avenues of which they went about securing funding for their businesses.  The most popular way was however, self funding.  Thirteen of the twenty-two companies each used their own savings or from past entrepreneurial successes.  Six companies secured their funding through family and friends while angels, venture capitalist, bank, and government loans each had two companies go that route.

arnobio table3

Check in soon for further information on this interesting study.

 

Leveraging Regional Assets: Methodology

Following up with the last post on Leveraging Regional Assets, I’m going to share with you the methodology behind how we went about acquiring these findings.

What we did was interviewed twenty-two Inc. 500|5000 firms in the Kansas City area. How we went about selecting these twenty-two was based on a history of success. Each of these firms demonstrated success by obtaining high revenue growth over a three-year period.

We began to narrow our search for these twenty-two by starting with a broad spectrum and whittling it down until we had our firms. We started with the 144 total candidates from the Kansas City area that had been listed on Inc. lists between 2007 and 2012. Keep in mind some of these firms appeared on the lists multiple times due to the six year span. We then targeted firms that operate in three sectors, information technology, biotechnology, and business services. At this stage, we were down to forty-two firms. From this point, things got a bit tricky. We contacted all forty-two but eighteen either did not respond, were no longer in business, were bought by another firm, or outright declined. In addition, two companies had actually changed locations and no longer fit our demographic. Over a period of time that ranged from June of 2012 to November 2012 we were able to conduct interviews with twenty-two of the forty-two firms. The fact that we were able to interview just over half of the candidates that fit our demographic should give us pretty accurate answers for the whole field.

Check back soon for my next post on what we found from the twenty-two firms we interviewed.

Leveraging Regional Assets

Leveraging Regional Assets

Often times, specific regions align with great or not so great assets. For example, many people live on the east and west coast due to the large cities like New York, Philadelphia, Los Angeles, and San Francisco. Here people find many job opportunities that can take their career to the next level. So what is it that a midwestern city like Kansas City have to offer?

I have found that Kansas City has many successful entrepreneurs that are successful that are often overlooked in economic development studies. Many of the Kansas City area firms have appeared on Inc. magazine’s list of fastest growing companies. We interviewed the founders of some of these firms in the information technology, biotechnology,

Some Key Take Aways From Our Interviews Include:

– Firm Growth Not Linked to Lack of Venture Capital or Angel Investment
After speaking with many founders, only a small percentage reported receiving an investment. Their growth had more to do with self financing or help from close family and friends.

– Kansas City Firms Enjoy a Substantial Pool of Talent in the Region
These growing firms often have a long-term employee development strategy to hire young people and train them to be first-class professionals, including technical experts. A great asset to being located in the midwest is the cheap cost of living. Entrepreneurs find that the regions low cost of living and work ethic of the people of the midwest to be a major strength.

For more on Leveraging Regional Assets, stay tuned for my next post.