How The State Line Has Shaped Growth In The Kansas City Startup Village
Two years ago, metro-area entrepreneurs started buying houses in the first Kansas City, Kan., neighborhood to get Google Fiber.
They wanted to take advantage of the ultra-fast Internet as they launched new ventures in what quickly became known as the Kansas City Startup Village.
The plan was to create a community of entrepreneurs on either side of State Line Road. But because the two states have different economic incentives for new businesses, many entrepreneurs gravitated toward the Kansas side of the Startup Village.
“We have had some companies say, 'Hey we want to come to the village, but we’re only interested in properties on the Kansas side for those reasons,'” says Matthew Marcus, who owns one of the original Startup Village houses, "whether it's angel tax credits or whatnot."
In two years, Marcus says the village has grown from three properties to about 15. Two-thirds of them are on the Kansas side.
View Kansas City Startup Village in a larger map.
Why one company only looked on the Missouri side of the Startup Village
Moblico CEO Pierre Barbeau knew he wanted to move his business to the Kansas City Startup Village. He liked the idea of working near other entrepreneurs. But the type of space he was looking for just wasn’t available near the heart of the village at 45th Avenue and State Line Road.
“We wanted more of an office-like setting, as opposed to a home we could rent,” says Barbeau.
Many of the entrepreneurs who’ve moved to the Rosedale and Volker neighborhoods in midtown Kansas City literally call the Startup Village home. They live and work here out of home offices outfitted with Google Fiber and the latest technology.
But Barbeau’s 4-year-old company is a little more established, having grown out of an incubator at software developer DST Systems Inc.
“So we looked a little bit beyond the core area of the Startup Village and found 39th Street," he says. "We were really attracted to (it) in part because of all the dining and entertainment opportunities for our clients. (It would) be easy for us to take them out.”
There's another reason why 39th Street was attractive to Moblico: It's on the Missouri side of the Startup Village. And Barbeau needed to keep his company in Missouri because the company had won $250,000 in state incentives.
“Last year we were one of very few Kansas City ... companies who were awarded a matching fund by the Missouri Technology Corporation,” says Barbeau.
How angel tax credits are encouraging new startups to incorporate in Kansas
But the quarter of a million dollars Missouri has invested in Moblico pales in comparison to the more than $2 million in tax incentives Kansas has offered to investors in companies on its side of the Startup Village.
“It makes what’s a hard process just a little bit easier,” says Chris Harris, manager of the angel investor program for the Kansas Department of Commerce, says of the tax credit.
Here’s how it works: A Kansas taxpayer wants to invest in a Kansas startup. The angel program gives them a 50 percent tax credit for every dollar they invest. So a $2,000 investment nets a $1,000 tax credit. The state of Kansas can give out $6 million in angel tax credits each year.
Since 2012, Kansas-based Startup Village companies have captured about 12 percent of the angel dollars available to invest statewide.
“What they’re doing is really impressive," says Harris. "I think it has been a huge benefit to the region.”
Why Missouri's incentive program tends to help more established startups
Missouri doesn’t have angel tax credits, but there is money available for startups out of the same fund Moblico tapped into.
But because the Missouri Technology Corporation awards actual money and not just tax credits for investors, it’s more competitive. Moblico is the only Startup Village company to get it. And while Barbeau’s thankful for the state match, he says it’s a hard sell to get Kansas investors to put money into his Missouri business because it won’t earn them a tax credit.
"It was the right choice to be on the Missouri side,” he says.
For its part, the Missouri Technology Corporation is trying to increase the number of startups it helps by investing in incubator and innovation center programs. The idea is those initiatives will produce strong candidates for grants in the future.