Group that wants to spur tech startups in Lawrence says the community has a lot to learn
I once wanted to be an “angel investor,” but then I realized how much halos cost — and you had better have really good credit if you plan on writing a check for one. OK, so maybe I am confused about what an angel investor is, but so are a lot of other area residents.
That was the key takeaway from a local tech startup founder who is trying to create an organization that will help Lawrence become a hotspot for promising startups.
“I’ve had dozens of conversations over the last six months, and it is clear how far behind we are,” said local tech entrepreneur Kyle Johnson. “We need to light a fire under some butts, frankly. We need to develop a system for creating some primary jobs.”
If you remember, we reported back in January that Johnson was leading a group of business leaders who want to start a nonprofit organization called Launch Lawrence. The goal of the organization would be to help 10 new technology companies form and that by 2030 those companies would employ 3,000 people in Lawrence.
The group was hoping to raise $250,000 to set up space inside the Castle Tea Room, which would be converted into a workshop and learning center for people who want to become technology entrepreneurs.
Johnson confirmed those plans have been put on hold. He said his conversations led him to understand that Lawrence doesn’t have a very good understanding of how technology startups are formed. A series of free, educational forums is the first project Launch Lawrence should undertake, he said.
“It doesn’t just go above the head of the general community,” Johnson said. “It goes above the head of community leaders or people who could be the investors.”
Some people in the community may take exception to that. The community — i.e., the city, the county, the chamber, KU and some state funds — has come together to create the Bioscience and Technology Business Center on KU’s West Campus. It is designed to be an incubator space that allows startup companies to grow without having to pay market-rate rents for laboratories and offices, while also getting access to professional staff employed by the center. The project has been successful enough that discussions for a Phase 3 expansion are well underway.
That is evidence that the community has some grasp of the startup process. When pressed on that point, Johnson acknowledged the success and pointed out that he’s working closely with the director of the center on creating Launch Lawrence. But Johnson also said a fair number of the startup companies at the center have been recruited from other communities. He also contends that many of the local startups at the center are bioscience companies that have spun out of KU research.
That’s great, but he said the community also should be seeing more startups in the software world. It is a primary way that other communities are creating new wealth and job growth, and often a software startup takes less money and time to find success than a bioscience startup, he said.
Both types of startups, though, are facing a fundamental problem in Lawrence, Johnson said. Potential investors aren’t very well educated about how the startup process works.
For instance, what the heck is an angel investor? In simple terms, it is an investor who often puts money into a company right after the founder and the friends and family of the founder. (This is why if your cousin ever says he is a founder, you should go to a different wing of the family reunion.) Generally, angel investors have at least $10,000 to $250,000 to invest in a company, he said.
It is not that angel investors don’t exist in Lawrence. Johnson said his company, Bixy — which aims to reduce privacy violations and improve how online advertising works — has raised more than $2 million from local sources. But Johnson is convinced such angel investors could be a lot more plentiful in Lawrence and could benefit from being more organized.
In many communities, angel investors organize into a group, which allows them to invest in multiple companies. Spreading out that risk is important because far more startups will fail than succeed. But the ones that do succeed can easily produce giant returns for investors that more than make up for their losses on other companies.
Eventually, Launch Lawrence could facilitate the creation of such an investment fund, Johnson said. But now is not the right time. Instead, he said the group hoped to have at least three “Startup 101” courses available to community leaders, business people, potential investors, potential entrepreneurs and anyone else who wants to attend. Going forward, he hopes the group would be able to host quarterly educational seminars and happy hours to increase the startup vibe in Lawrence.
Johnson is convinced the efforts can pay off. He thinks Lawrence has the wealth necessary to fund startups, especially if you can pull in interested KU alumni. Most importantly, he thinks Lawrence has the educated population that can come up with viable startup ideas.
“We have a lot of knowledge workers,” Johnson said, noting that many live here but work elsewhere. “We just are not putting them to use creating companies.”