Mid-Mo. startups relocating in search of capital

COLUMBIA, Mo. (AP) — Columbia’s thriving entrepreneur community has gotten its fair share of recent buzz.

The Kauffman Foundation’s 1 Million Cups program, a weekly meeting among local startups the entrepreneurship foundation has helped foster in cities throughout the Midwest, launched a chapter in Columbia this month. Meanwhile, the successful startup Veterans United recently surpassed 1,000 employees, Beyond Meat has made national news, and online video company Newsy is partnering with some of the highest-traffic websites.

Leaders in higher education, business and government all seem to be looking to entrepreneurship to power the local economy. Exciting ideas that emerge from the University of Missouri are given fertile ground in the Life Science Business Incubator at Monsanto Place. The private sector, through Centennial Investors, provides angel funding for fledgling companies. Columbia College has placed a big emphasis on entrepreneurship curriculum, and the city’s economic development arm has provided cohabitation space for startups looking to get on their feet.

“I’ve never seen a community row together the way this community has in the last 18 months on entrepreneurship,” said Brent Beshore, the owner of Adventur.es, which invests in online and media startups.

But amid all the excitement surrounding the startup and technology scene, there is an amplifying chorus that warns funding opportunities might not be keeping up with innovation. That, some worry, might be stymieing the economic development payback — i.e. job creation — that comes as startups scale into large, profitable enterprises.

“Access to capital, and the lack thereof, is our biggest impediment to retaining these companies in Columbia, Mo.,” said David Keller, The Bank of Missouri’s local market president and the chairman of the Missouri Innovation Center’s board, which oversees MU’s incubator.

The infrastructure Columbia has in place is helping a lot of early-stage companies get on their feet. Investors from elsewhere are taking notice, and companies that are based here now but can’t find that next round of funding are looking to other cities.

“Until we do something about it, these companies are outgrowing our capacity to finance their development,” said Jake Halliday, CEO of the Missouri Innovation Center.

Immunophotonics, a company working on a laser treatment for cancer that received $500,000 from Centennial Investors, is moving from the life science incubator to St. Louis, Halliday said.

A photo-acoustic cancer diagnosis technology startup called Viator Technologies, which was based in the incubator, recently moved to Pittsburgh. John Viator, head of the company and a former MU professor, said his primary reason for moving was the opportunity to create a biomedical engineering department at Duquesne University. But to commercialize biomedical technology like his, finding funding in Mid-Missouri might not have been possible, he said. Even while he was here, the investors he found were on the East and West coasts.

“At the time, when I was in Missouri, they understood that the best place for my startup was near my university lab,” Viator said.

As his company has grown, that has changed. “We’ve had conversations with people in New York that are more receptive that we’re in Pennsylvania rather than the Midwest.”

At least in the biomedical world, which requires vast amounts of capital and years of time for research, clinical trials and regulatory approval, the outpouring of ideas from MU has ample support to take root locally. MU’s incubation and research infrastructure, along with grant and investment programs from the state and university for early-stage capital, helps firms get started. But investors willing to put in the seven-figure sums that those companies need to commercialize do not really exist in Mid-Missouri, said Bruce Walker, the former dean of MU’s business school and president of Centennial Investors.

“Some of the” venture capital “firms want a startup to relocate to their area, and if that occurs, it can be very harmful to Mid-Missouri because we lose the economic development benefits of startup companies,” Walker said. “We’re investors with another goal as well, and that’s economic development.”

Traditionally, the money in Columbia has come from real estate, Keller said. Educating investors in the community about Internet or biotech firms so they feel confident investing in them takes time, he said.

“It only takes one Eternogen or Immunophotonics or Newsy to hit a home run, pay off the investors and excite them about investing and attracting more investment capital,” Keller said.

Peter Meng, the founder of online classified service AdFreeq, which was founded in Columbia, points to cities such as Boulder, Colo. They might be slightly smaller than Columbia but have a number of venture capital firms offering infusions of funding into the millions of dollars. Meng has had trouble finding capital beyond $500,000 in Mid-Missouri, but he said it’s not because of a lack of money.

“There’s plenty of cash here,” he said in a June interview. “We just need a commitment.”

Even for companies that have found cash from elsewhere, there’s reason to be in Columbia. Beyond Meat, which makes a soy-based chicken substitute uncannily close to the real thing, is the oft-cited example. Although one of its investors is storied venture capital firm Kleiner Perkins Caufield and Byers, and its headquarters is in California, it chose to keep its first production facility here, near the MU researchers who developed the technology.

Other companies have been built here from the ground up. Veterans United has grown by hundreds of employees during the past couple of years. Carfax, founded here, still maintains its information technology base in the city even though its headquarters has long since moved to Virginia. Even now-defunct firms that once were roaring, such as software company Datastorm, made a lot of money for their founders, and they still live here and invest.

“This is an entrepreneurial community,” Regional Economic Development Inc. Director Mike Brooks said. “We have serial entrepreneurs. We have entrepreneurs investing in other entrepreneurs’ startups.”

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Information from: Columbia Daily Tribune, http://www.columbiatribune.com

AP MISSOURI PANORAMA

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