The Risk Capital Continuum
Challenge 5: There is a lack of connectivity among the various
components of Missouri’s innovation and entrepreneurship ecosystem, both literally (e.g., broadband) as well as figuratively (e.g., perceived competition and siloed efforts).
Over the last 10 years, while Missouri has made major strides in entrepreneurship/innovation, there is still a sense that the state is still not reaching its full potential due to a range of disconnects and other environmental factors that impede further growth.
Available and affordable high-speed internet is recognized as the greatest business infrastruc-ture need across Missouri, and its lack is the greatest threat to Missouri’s innovation climate.
The economic competitiveness of Missouri’s com-munities depends on the widespread availability and accessibility of broadband for every business and household in the state. To encourage inno-vation and entrepreneurship, modern technology
infrastructure that can handle cloud, data processing, and other capabilities is needed.
Given the importance of innovation and entrepreneurship to economic development in the 21st century, there is also a disconnect between internal and external perceptions in the state regarding innovation and entrepreneurship. There is a desire among many in the state’s ecosystem to elevate innovation and entrepreneurship as a priority within policy circles, the Department of Economic Devel-opment, and the governor’s cabinet. Consistent funding is perceived as a primary challenge for these re-sources, as the defunding of MTC in FY18 sent a message throughout the ecosystem that the State was not going to prioritize investments in innovation and entrepreneurship. This has left founders, programs, and initiatives questioning whether the support and resources they need will be available. There is also a lack of a robust marketing efforts to better tell the story of innovation and entrepreneurship in Missouri.
This disconnect impacts Missouri’s ability to communicate the story behind its successes.
According to the Federal Communications Commission, more than 147,000 households or almost 400,000 Missourians do not have access to high-speed Internet (25mpbs/3mbps).
The majority of those citizens reside in rural communities. In August 2021, Governor Mike Parson announced plans to deploy more than
$400 million in American Rescue Plan Act (ARPA) funds to increase broadband internet access, adoption, and assistance statewide.
The House Interim Committee on Broadband Development issued its report on January 5, 2022, which included recommendations for how the administration should allocate the ARPA funding.
Inter- and intra-regional competitiveness is hindering the ability to realize “One Missouri.” Initiatives are needed to encourage greater levels of collaboration across Missouri. Many regions of the state exist in silos, and communication is poor between capital sources and service providers in different regions of the state. This has led many companies to look to coastal cities to raise capital and has caused accelera-tor programs and venture funds to look out of state for their next companies.
Within regions, coordinating existing resources and working together across silos are further challenges.
The geographic boundaries used to define some parts of the state for economic development purpos-es may rpurpos-esult in a fragmented distribution of rpurpos-esourcpurpos-es. For example, within rural Missouri, the large geographic boundaries that define service areas can make it challenging for entrepreneurs to access services as a result of geographic distance. In the state’s two largest urban settings, while efforts have been taken in recent years to address long-standing inter-regional divisions, challenges remain.
These challenges are most prevalent in the Kansas City metro region, where the entrepreneurial eco-system continues to be divided as a result of political boundaries. When the ecoeco-system is analyzed in its entirety, it is discovered that Kansas City metro’s net employment gains from new firm formation is relatively split across the 2010-2020 period, demonstrating the integrated nature of the economic footprint of the region’s ecosystem across state lines (Figure 17). This even divide across state lines of economic entrepreneurial activity within a single metropolitan statistical area (MSA) is unique to the Kansas City Region, with no other MSA in the U.S. facing a similarly geographically divided ecosystem.
For an entrepreneur in the Kansas City metro region, accessing risk capital, support services, and talent knows no geographic boundary, and a fully functioning innovation and entrepreneurial ecosystem must be treated as a holistic effort.
Figure 17: Net-Job Change from New Firms for Kansas City, MSA, 2010-2020 Cumulative
Total Private Traded Industries Non-Traded Industries
58%
42%
49%
51%
55%
45%
Missouri Kansas Source: TEConomy analysis of U.S. Census Bureau Quarterly Workforce Indicators.
Overcoming all these connectivity barriers is essential to achieving “One Missouri” where the sum is greater than its parts.
Summary
For Missouri to be able to develop a robust and thriving innovation/entrepreneurial ecosystem in which trad-ed sector startups can grow and scale, it must be able to overcome the following five identifitrad-ed challenges:
• Inability to meet the investment capital demands of its growing entrepreneurial base.
• Inaccessibility of entrepreneurial support services and physical infrastructure among underrepre-sented minorities and those living in rural areas.
• Untapped potential at Missouri’s research institutions that is limiting ideation and entrepreneur-ship.
• Not enough Missourians participating in innovative and entrepreneurial endeavors, thereby making access to talent difficult for many startups and growing firms.
• Lack of connectivity among Missouri’s ecosystem components, both literally (e.g., broadband) as well as figuratively (e.g., perceived competition and siloed efforts).
The five challenges identified must be addressed through intentional, strategic efforts to realize a more successful and vibrant economy. The strategies and actions that are outlined in the next section attempt to address both the real and perceived barriers to entrepreneurial development and lay-out a roadmap for Missouri that, if pursued, can create opportunities for its most innovative entrepreneurs.