The Road to Silicon Valley is often paved with disappointment.
While tech clusters have sprouted in a number of cities beyond northern California in the past decade, many communities have failed in the notoriously tricky task of developing a entrepreneurial cluster.
Wichita is the latest city to try.
On Jan. 5, local businessmen Gary Oborny and Scott Schwindaman, who lead the Entrepreneurship Task Force, will unveil details on their ambitious plan to revive entrepreneurism in the Wichita region.
It starts with alliances with 32 local organizations – from Youth Entrepreneurs of Kansas to Wichita State University to the Hispanic Chamber of Commerce – to support today’s entrepreneurs and teach future ones.
It also includes a nonprofit incubator/accelerator downtown, private seed funding for early stage companies and a larger private fund for second-stage companies.
Oborny and Schwindaman said they have already found investors for $10.6 million for two companies, as yet unnamed, but both are high tech. The new CEO of the incubator/accelerator will be introduced next month.
In addition, for entrepreneurs, there will be startup events, networking get-togethers, mentoring and information-sharing meet-ups. Local leaders are close to announcing an agreement with Kansas City’s Kauffman Foundation to use its 1 Million Cups program, a weekly gathering that invites early stage entrepreneurs to talk about what they’re doing and how to solve problems.
In 1977, 15.4 percent of all Wichita-area companies were startups. By 2014, just 5.9 percent were.
The new companies don’t have to develop computer technology or smartphone apps. They could be in advanced manufacturing, medical devices, logistics, even restaurants. But Oborny is clear these companies must be able to expand rapidly.
There certainly are skeptics. The Kauffman Foundation, which studies entrepreneurship, has examined a multitude of community-led efforts to create a tech cluster and found consistent failure when those efforts were led from the outside, by governments, universities, the business community or investors.
Key leaders of successful tech clusters have written about what works and what doesn’t. Most of the work of building a tech cluster must come from within, from the entrepreneurs themselves.
Oborny understands all of this. He said they’re not building a ham-fisted, top-down effort but something flexible and collaborative, with a deep understanding of the needs of entrepreneurs.
What the task force and its allies are building is the skeleton of a complete entrepreneurial ecosystem, waiting for the flesh to grow up around it and bring it to life.
It’s a compelling vision: Silicon Prairie. But will it happen?
State of Wichita entrepreneurism
It’s no secret that Wichita isn’t an entrepreneurial hotbed, despite the lingering myth.
In 1977, there were 1,372 companies younger than a year old in the Wichita metro area, or 15.4 percent of all companies, according to the U.S. Census Bureau’s Business Dynamics Statistics. In 2014, there were 632, or just 5.9 percent.
The decline may be part of a similar trend nationwide that has many experts puzzled.
But Bob Litan, an attorney in Wichita and former vice president of the Kauffman Foundation, said that while that may be true, the fact is that Wichita had fewer startups than the national average decades ago and fewer than the national average today.
“We may have had great entrepreneurs, but we’ve never been a great entrepreneurial city,” he said.
Being an entrepreneur has been called the loneliest job in America, and that’s certainly true in Wichita, say locals.
Rob Carlo, who lives in Wichita, is close to launching Snipbo.com, a social commerce platform that he describes as somewhere between Facebook and Pinterest, mixed with eBay and Amazon.
He sad he has been working on it for about three years out of his house. He stays here because this is where he wants to raise his family.
But he’s finding it difficult to launch the platform because he needs venture funding for the final testing, legal consulting and marketing. He’s having trouble finding it here. It also has been difficult to find enough advice and other resources.
He said he has tried local gatherings of techies where he can network or ask advice, but for one reason or another, they haven’t worked out.
It’s been difficult. There have been a lot of promising things, but nothing seems to gel.
Rob Carlo, Snipbo.com developer
“It’s been difficult,” he said. “There have been a lot of promising things, but nothing seems to gel.”
The wrong solution
Yas Motoyama has seen a lot of wishful thinking.
The director of research and policy at the Kauffman Foundation, he said there have been 1,400 incubators opened across the country since the 1970s, almost all of them owned and run by a government/university/institution.
An incubator is designed to boost entrepreneurs by cutting expenses and giving them a sense of community with other entrepreneurs. So the city opens one to help boost business creation.
He also has seen many government or public/private venture funds. The No. 1 complaint of entrepreneurs is that they don’t have enough money, he said. Outside of a select few locales, there isn’t much private venture capital, and banks shy away from fragile startups with no physical assets.
So a city council, local university or chamber of commerce might create a venture fund, too.
Both kind of make sense, but Motoyama said they just don’t work.
Institutions turn out to be terrible managers of entrepreneurs. They have different goals, typically job creation rather than company creation; move slowly and inflexibly; operate in a rules-based culture; and often pick companies based on location or politics.
And, he said, government and community institutions just aren’t prepared for the high failure rate.
In an analysis of the Kauffman Foundation’s own venture fund, he said, 80 percent of the companies selected for investment showed less than a 3 percent annual return.
“Even the professional venture capitalists can’t really predict it,” he said.
But there is a way – for some
Entrepreneurs and their networks of contacts are the heart and soul of a tech cluster.
An entrepreneur can start a tech company in Silicon Valley or in Wichita. But in Silicon Valley, those entrepreneurs can talk to other tech entrepreneurs, share connections and knowledge, mentor each other and hire skilled developers or coders, who might then break off to start up their own business.
The vigor of that bubbling broth of entrepreneurial sharing is a function of startup density, a critical metric in determining whether a community is a potential tech cluster or just a city with a few tech companies.
Adequate startup density is one of the key precursors needed for an entrepreneurial cluster, according to Steve Blank, a leader in the development of Bend, Ore., as a startup cluster.
The others are easy air transport to other tech clusters, a local technology university and a supportive business community.
Communities that fail to develop as tech clusters don’t have all four, nor the leadership from within the entrepreneur community to take the next steps.
Wichita appears to have two of the four precursors: Wichita State University is cranking out bright, trained students, and entrepreneurial training and support; the business community is just now becoming supportive. Wichita has nine direct flights, but only Denver is a top tech hub.
But entrepreneurial density? In Bend, population about 80,000, Blank wrote in a blog post about his efforts that in addition to four major data centers that include Facebook and Apple, it has 95 startups across multiple technology sectors: 47 software, 26 hardware and 22 medical technology startups.
Portland, 160 miles away, is home to more than 300 startups; between the two markets, nearly 80 new tech-related startups form each year.
In Wichita, not so much.
Kent Johnson is a serial entrepreneur in Wichita. His latest company, Fireshark Gaming, is a room-sized immersive gaming experience that he opened at 11310 E. 21st St. North.
It’s visually stunning. He and his developers have figured out how to integrate 16 projectors so that players act and feel as if they are inside a video game. They control the action with hand-held devices.
He is working to create modular versions for event companies, amusement parks and movie theaters starting next year. His product is unique and the market is big, he said.
He developed it after he sold his last company, Bold Software, in 2012. He was hanging out with his boys at home in rural Andover and began to wonder about how to improve their game-playing experience. It took about two years to go from bug-filled technology mess to slick virtual reality.
Johnson hasn’t relied much on the local tech scene for support, he said, and when he and some of his staff started to tick off other local tech companies, they ran out fairly quickly. Building a tech cluster isn’t easy.
“It’s actually really hard,” said developer Barry Welch, who works with Johnson.
Making more entrepreneurs
Oborny concedes there aren’t a herd of startups here just waiting for an accelerator and venture funding.
But, he said, there is a lot of potential in Wichita. These entrepreneurs just need to see a way forward, along with more welcoming attitude from the community.
He’s an entrepreneur. The people who have been recruited to help and to mentor are entrepreneurs. They can provide real help and real value to struggling entrepreneurs, Oborny said.
The venture funds are called “E2E,” for Entrepreneur to Entrepreneur.
The entrepreneur with a good idea will be steered into mentoring and help with producing a prototype. The entrepreneur with a market-validated product, potential customers and potential revenue may be steered into the incubator or accelerator.
The decisions on who to support and fund will be made for sound business reasons, not for political or social ones, he said.
But that doesn’t mean entrepreneurs who don’t make the cut will get the cold shoulder. Everywhere, people involved in the effort will be talking, connecting and helping those seeking to start businesses. He wants to make the loneliest job less lonely.
He wants to create a culture and environment where young entrepreneurial-minded people want to stay because they can find everything they want and need right here: mentoring, money, advice, skilled coders – and other entrepreneurs.
“That is the culture shift that Wichita is really on the move to make happen,” he said.
Top 10 metro areas for high-tech startup density
Fort Collins-Loveland, Colo.
San Jose-Sunnyvale-Santa Clara, Calif.
Washington, D.C.-Arlington, Va.-Alexandria, Md.
Source: Kauffman Foundation