Leaders here like to say entrepreneurship is one of Wichita’s best-known traits.
We’re the founding home of Pizza Hut. Of Rent-a-Center. Learjet, Beechcraft, Cessna. Koch Industries – businesses that created tens of thousands of jobs.
But Jeremy Patterson thinks that trait is mostly old history.
Patterson has overseen or collaborated in 30 start-up enterprises as the director of Wichita State University’s Human Physiology laboratory. Wichita trains great entrepreneurs at WSU – who leave town after graduation, he said.
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“The local ecosystem for entrepreneurship here in Wichita is a disaster, a joke,” Patterson said. “Students have to go to Oklahoma or Kansas City or some other place when they want to get something done.”
He wishes the business climate could be more welcoming to young people and new ideas. There are plenty of young inventors in Wichita who could help jump-start Wichita’s economy, but they get nowhere off campus, he said.
James Chung, a Harvard-trained data analyst, came back to his hometown this past week and revealed the results of a seven-month study of Wichita’s economy. He said Wichita is in a three-decades-long decline in jobs and income.
Part of the problem, he said, is that there’s almost no venture capital investment coming to Wichita – money to start up high risk, but potentially high profit, businesses.
A death spiral
Chung told business leaders last week that Wichita’s economy was edging toward a death spiral if the community and business leaders don’t diversify the economy and encourage local entrepreneurship.
What we’d look like if that happens, he said, will be an aging population spending less disposable income and taking in more public assistance.
Young people, already leaving, would leave in higher numbers.
“I’ve heard other cities, particularly Des Moines, say ‘We fight above our weight class,’” Chung said. “Wichita used to have that kind of swagger, but by most measures it’s fighting below its weight class now.”
He said places like Oklahoma City, Omaha, Cedar Rapids and other cities are stealing our talent. This surprised him. He remembers a different Wichita, from his youth here in the 1970s and 1980s.
“Wichita has a rich history of entrepreneurship – it’s in our DNA, although that gene seems to be dormant right now,” Chung said. “By all measures Wichita is producing ventures, high-growth companies at a far lower rate than any city our size. If you ask people, they say, “That defines Wichita,” but it’s not happening right now.”
The current decline can be halted, but only with a new community and business climate, he said. And it’s going to take venture capitalists backing new business ideas, even though those ventures have a high failure rate.
Chung founded Reach Advisors, a global firm that does deep-data research for Fortune 500 companies and other organizations internationally as they make investment decisions.
Two things surprised him, he said:
▪ Little or no venture capital getting invested here, though we are the 51st largest city in the country. “Based on population size, roughly $10 to $20 million should be flowing to Wichita annually,” Chung said.
▪ A Knight Foundation/Gallup study in 2010 reported that “young talent” in Wichita is perceived by the community as “the least welcome group” in town, comparable with gays and lesbians.
Less risk in Midwest
Chase Curtiss is one of Patterson’s favorite ironic Wichita success stories.
Curtiss as a graduate student developed an invention with Patterson’s help at WSU.
But he moved to Tulsa to launch his business.
Sway Medical Technologies, founded by Curtiss in 2011, created an app-based concussion management system now used in more than 400 high schools and colleges nationally, Curtiss said.
Curtiss, now 31, works now on other inventions, flying regularly from Tulsa into Silicon Valley or New York or Chicago to build his entrepreneurial projects.
Curtiss’s story is a classic American success tale, Patterson said: A kid in his mid-20s creating a business from scratch and then inventing new products beyond it.
But any Wichita inventor or innovator wanting to start a business?
“Most of them need to move elsewhere, to communities more supportive of this kind of culture,” Patterson said. “There’s nothing like that here in Wichita, period. I don’t think people grasp that here.”
Curtiss speaks with no resentment of the town where he created Sway.
“It’s not just Wichita,” he said. “Tulsa is not much different, Tulsa was a little more supportive, Tulsa is trying harder.
“But there’s a real risk in investing in start-ups. Most venture capitalists who do it right do it big ... Silicon Valley, or the East Coast is full of investors like that, and they will throw money up, not at just one start-up but maybe 10 of them, knowing all the while that eight will fail and the other two might do really well.
“In the middle of the country, you don’t see that willingness to risk as much.”
Lack of support frustrating
Any list of younger-generation entrepreneurs in Wichita would include the names Seth Etter, Kenton Hansen and Jason Opat.
A lot of young people who could turn Wichita’s economy around would say from first-hand experience that Chung’s research is right, said Laura Bernstorf. She’s the current chair of the Young Professionals of Wichita.
“Even within industry, the brick-and-mortar industries of aviation, there is a little bit of ‘yeah, you are young talent, but why should we send you to training?’” said Bernstorf, 33, an industrial engineer for Airbus.
Young entrepreneurs here are “ostracized” and “treated dismissively” by the older generation who could help them get started with investments, said Hansen, 33. He works for BalancedComp, a Wichita company that builds software for banks and credit unions.
Hansen and some friends became so frustrated with the lack of community and business support in Wichita that they formed the “Labor Party,” an Old Town office community where innovators from many different interests (most of them young people) could office together and talk over coffee. After founding the Labor Party, Hansen collaborated with Etter and other younger innovators to create Startup Wichita, a supportive community, and Startup Weekend, an event.
Both the community and the event draw gifted young Wichitans, many of them software developers, Etter said.
“It’s a crash course in entrepreneurship, and they are encouraged to try to keep the business going after it’s done and set up,” he said. “But ... they don’t get funded. Never a single start-up has been invested in. And in my opinion as a software developer, some of their ideas really do have legs.”
Hansen said entrepreneurship is nearly always risky and nearly always involves embracing seemingly unusual and risky ideas.
Wichita once did that in a big way, he said, but it was eight decades ago when aviation industry was just starting. “It was when El Dorado oil embraced the financing of flying machines.”
No angel investors
The favorite entrepreneurial story always told in Wichita is how Frank and Dan Carney borrowed $500 from their mom and founded Pizza Hut here in 1958.
But Chung, who mowed grass for the Carney family as a boy, put a dark spin on that story last week:
“One of the most depressing things I came across is when I asked someone here: ‘So, who is the big angel investor in Wichita these days?’
“Somebody looked at me and said, ‘Well, uh, the Carneys are sort of beyond that now.’
“And I’m thinking, ‘Oh, my God. That! That’s the most recent big name for angels?”
An economy that grows as slowly as Wichita’s has over the past few decades changes the culture, Chung said. As the adventurous young adults leave in droves, the community grows more conservative and people become more anxious about change.
Older workers start to see their young co-workers as competing for the same job with better skills.
Wichita needs new stories and new investors, Chung said. One reason for the wariness is that Wichita’s great worldwide businesses, aerospace, are what he called “closed” systems, established industries that do a good job doing what they do.
They are little like the more free-wheeling “open” tech companies of Silicon Valley where employees change jobs frequently and network with people who do a much wider variety of work.
Opat’s creations in business have included movie graphics, interactive media kiosks and more. He’s sought advice from all Wichita’s older generation of entrepreneurs, including Bill Warren (movie theaters), Tom Devlin, (creator of Rent-A-Center) and others.
“They’re always nice to me, always willing to talk and help with advice,” Opat said.
“But do they give me money? No.
“Maybe part of that is, they’re true entrepreneurs and want me to learn all this on my own.”
“It takes people willing to risk money to help create something,” Opat said. “You’ve got to have people behind you willing to take those big risks.”
For now, Opat said, the biggest entrepreneurs in Wichita are not business entrepreneurs. It’s John Bardo, WSU’s president, and John Tomblin, one of Bardo’s vice presidents in charge of research and technology transfer.
“I just toured some of the labs Tomblin has developed, where they’ve got giant robot arms and 3-D printers and all sorts of tools entrepreneurs can use,” Opat said. “Bardo is building an innovation campus designed to cultivate innovation. They’re trying hard to create what we need.”
It will take more than WSU though, Curtiss said.
“Give free space to people,” Curtiss said. “You could start with that.”
“And figure out how to take someone like Jeremy Patterson at WSU, who is so great at concepts and ideas, and pair up people like him with someone who understands the commercial side of things, how to take the idea to market.”
Wichita has great assets it could sell worldwide, to bring entrepreneurship and investment here, Hansen said. He likes living here. “We have a pretty big competitive advantage in that our cost of living and our (traffic) congestion are incredibly low,” he said.
Failing will have consequences no one wants, Chung said. More young people leaving. Expenses for public assistance growing. Incomes declining.
“We want to avoid the death spiral that other cities have entered,” Chung said.
“We are at a very important time in Wichita’s trajectory. If we let ourselves enter that death spiral it’s not good.”
Contributing: Dan Voorhis
How cities rank for start-up businesses per 100,000 residents:
No. 59 Oklahoma City
No. 81 Kansas City
No. 116 Des Moines
No. 129 Omaha
No. 227 Wichita
Source: Kauffman Index
The Wichita Community Foundation is financing a two-year study of Wichita’s economy by data analyst James Chung. They invite people to share their ideas to improve Wichita on Twitter at #focusforwardICT.