Since its launch in February 2013, Digital Sandbox KC has doled out $1.2 million to 65 projects, contributing to the growth of companies that have created 339 jobs and raised more than $28 million in follow-on funding, according to a report released earlier this month by the Digital Sandbox.
A proof-of-concept center, the Digital Sandbox was established to help early-stage entrepreneurs turn their ideas into minimum viable products and bring them to market or attract the funding needed to do so.
The program has been supported by two i6 Challenge grants from the U.S. Department of Commerce, as well as contributions partners including the Missouri Technology Corp., the Ewing Marion Kauffman Foundation and the University of Missouri-Kansas City’s Bloch School of Management.
Missouri Business Alert spoke with Jeff Shackelford, executive director of Digital Sandbox KC, about the program’s progress and goals, as well as the state of funding for early-stage companies in Kansas City.
The interview has been edited for length and clarity.
Missouri Business Alert: What qualities does the Digital Sandbox look for in early-stage entrepreneurs?
Jeff Shackelford: We are hoping to find those that can grow into significant companies and employ a lot of folks in the Kansas City area. We’re an economic development engine, if you will. We want to help early-stage entrepreneurs get in business and create jobs in the metropolitan area.
The ideas need to have some significant information technology component. It doesn’t have to be strictly IT-related, but there needs to be a digital component to it — any data storage, data protection, encryption, mobile applications, web-based platforms, software platforms, digital networking and so on.
And what competitive advantage or marketplace advantage does the management team have? Is this an idea, a business concept, in a space they’ve worked in for a number of years so they know that space really well?
MBA: Explain the idea of “proof of concept.” What does it mean, and why does it matter?
JS: When we say proof of concept, typically what we mean is you’ve got a business idea, you’ve spent some time researching it, but you haven’t really moved significantly forward. You’ve tried to find out if there is a market for it, but you haven’t really figured out how to reach the market. You’ve got the concept, but you may not have built any early version, a beta version, of anything.
The maximum project funding for any one company that we can provide is $25,000. So is there something we can do under that limit in a relatively short timeframe, three to six months, that would move them significantly forward towards commercialization?
MBA: What else beyond financial resources does the Digital Sandbox provide for entrepreneurs?
JS: We have funded over 30 folks to go through Kauffman’s FastTrac tech venture program.
We work with the corporate partners in town.
The purpose behind the Sandbox was really twofold: How do we improve the quality and quantity of very early-stage entrepreneurs, and how do we engage the terrific corporate community we have in Kansas City with that community? Because they want to engage, but they don’t always know how. The corporations have a vast amount of resources that are incredibly valuable to a very early-stage startup, but (the startups) didn’t know how to ask for them. And the corporations didn’t know how to offer them up. So we make a lot of those connections.
MBA: The Digital Sandbox launched a new program called Energy Sandbox focusing on early-stage entrepreneurs in the energy sector. Why energy?
JS: You know, we have Great Plains Energy headquartered here. They had some interest in if we can stimulate early-stage ideas in the energy sector.
When we sat down and talked about it, Great Plains’ response was, “Let’s get it started and see what kind of ideas we can stimulate.” … And so we broadened beyond digital. We’ll see how energy goes. There’s always the possibility to pick up other industry-specific areas as well.
MBA: What is your assessment of the early-stage funding landscape in Kansas City?
JS: I would never say raising any funding is easy. It’s hard. But, you know what, it should be hard. It’s competitive. You need to be fully prepared. You need to be able to tell your story, and you need to have a good management team. You need to seek out those investors that are most interested in the space and stage that your company currently resides.
Even I am so pleasantly surprised at the large number of companies that we’ve been able to help secure their first real round of funding. The last impact study we did, we’ve funded 65 projects, and 49 of those had received add-on funding after we funded the project, which is something like 75 percent. That’s unheard of. I don’t know if we can continue at that pace. But certainly what we found is there is early-stage funding available.
So when I hear people say that you can’t get early-stage funding in Kansas City, I kind of have to step back and say, that’s not true. We’ve gotten over $28 million collectively across 49 very early-stage companies.
MBA: What’s your vision for the future of the Digital Sandbox?
JS: We’ll look to expand the program in a couple of ways. We’ll look at those other market segments, like we are with energy, and we’ll look at (other) geography.
Another major sponsor for the Digital Sandbox is the Missouri Technology Corporation. The MTC has been a strong partner from the beginning, so their interest is, “Hey, it’s successful in and around the Kansas City area. Can we expand it further across the state of Missouri?”