One VC’s Take on How Startup Innovation Happens Outside Silicon Valley: Kauffman Fellow Scott Ford on Innovation in the Midwest and Beyond
To learn about how new centers of innovation emerge around the U.S. and the world, I interviewed Scott Ford, the Kansas City-based founder and managing director of OpenAir Equity Partners and the CEO of home security and automation firm PEQ. Ford is a Kauffman Fellow and our conversation took place a week before the Kauffman Fellows Reunion VC Summit, an influential gathering of the world’s foremost experts in smart, connected capital.
MG: Can you describe for us OpenAir Equity, and what you’re trying to accomplish there?
SF: We established OpenAir Equity in 2008 after spending decades inside the wireless operator world at carriers like Sprint. OpenAir coincided with the arrival of this thing called a smartphone, and we knew there were going to be really terrific investment opportunities related to the growth in wireless. That original thesis has evolved and is now aligned with how the market is unfolding. The next frontier we believe is the Internet of Things, where the premise is that things with access to power can be connected to, and networked with, the Internet and each other. That’s pretty much the focus of the firm now.
MG: Was there any question as to whether you were going to start OpenAir in Kansas City?
SF: Yes, we debated whether starting a firm based in KC was smart. Today Kansas City has a booming entrepreneurial scene. It feels like Austin was five or six years ago. When we started OpenAir that sort of activity was pretty marginal. But locally there were Sprint, Garmin, engineering firms like Black & Veatch and Burns & McDonnell, and philanthropists like the Kauffman Foundation, that led us to believe that Kansas City was primed for entrepreneurial growth.
MG: Have you seen any coordinated effort in your region to spur entrepreneurship?
SF: What’s required to create an entrepreneurial community is capital. And while there is a lot of capital in Kansas City, it’s historically been focused on less risky types of investments. In response, now we have a new civic effort called KC Rising that includes a fund made up of contributions from area businesses and high-net worth individuals, and it’s focused on Kansas City startups. The fund is targeted at $20 million and has deployed $10 million so far. It’s not huge but the Kansas City focus is key. So the development of firms like OpenAir and funds like KC Rising are two necessary activities to make capital accessible here in the area.
MG: What are some of the investment areas that you think are coming up that might allow more broadly distributed centers of entrepreneurship to emerge beyond Silicon Valley?
SF: In terms of investment themes in Kansas City, life sciences, pharmaceuticals, animal health are big focus areas. Ag tech, obviously, in the Midwest, is a big area of focus — as is IoT with such influence of wireless and telecom in the region. This isn’t Silicon Valley, but the same dynamics are in play. What Silicon Valley has going for it is a history, and the development of, a culture where it’s okay to, and almost a badge of honor, to do two things. The first thing is to jump out of a company and start your own thing. So the Sun Microsystems and the Intels of the world, that’s just sort of a cultural norm for them. Not so much for Midwest companies. Next for developing a startup culture is the notion that failure is part of the journey to success. Kansas City is learning to embrace both of these notions and it is freeing up the talent needed for entrepreneurial success.
MG: What technology breakthroughs are you excited about that have the potential to dethrone software as the place where most of the money is flowing to now?
SF: I don’t think there’s a dethroning of software. I think there’s an expansion of software. Anything that can connect to power or carries its own power has the ability, theoretically, to be connected or networked. The latest data I saw, was 200 billion connections in 2020. All of those things must manifest in some sort of usable form. And that’s where some software and user experience design competencies are going to be leveraged to create those things. Another area attracting interest is smart textiles, which don’t carry battery power and don’t plug into the wall, but can find new forms of energy through motion or body heat.
MG: Tell us about the Kauffman Foundation and your involvement with Kauffman Fellows.
SF: Ewing Kauffman founded it many years ago. It’s now one of the largest foundations focused on the advancement of entrepreneurship. Kauffman is also a multi-billion-dollar investor in funds and other things around the world. They’re very much a local icon in Kansas City, but they also have a broad reach internationally with the endowment funds as well as their influence on developing entrepreneurs.
The Kauffman Fellows Program is a separately organized, separately funded fellowship focused on training the next generation of venture capitalists. Their focus is very much on finding either people within VCs or people who are running venture-backed companies, and training them for two years so they can be the next wave of leaders in the venture capital world. There’s 400-some fellows. I’m lucky enough to be one of them.
MG: The Kauffman Fellows Program is a wonderful resource, do you want to highlight one area of focus that you feel is important?
SF: The Kauffman Fellows Program is on the front lines of advancing diversity — gender diversity as well as geographic diversity in our industry and beyond. The Program itself has a very broad representation of ethnicities and geographies. Our Fellows live and operate in all parts of the world, including throughout Africa and the Middle East. The Program is trying to influence the mainstream in terms of recognizing the importance of ethnic, geographic and gender diversity in venture capital. Through dedicated effort the Fellows Program is showing that entrepreneurship and venture investing is certainly not confined to the vacuum of white American males.
MG: Lastly, what else can we see that will be spurring innovation beyond Silicon Valley?
SF: Critical to developing an entrepreneurial community is getting the word out. This is where the media comes in — having a platform to identify promising companies as well as successful exits, and to celebrate those with the community. That’s been a big issue here in Kansas City. There are plenty of success stories that nobody ever knows about, because there’s no media culture of chasing after what’s happening. Silicon Valley has that, and we need to develop it, too.
A version of this story ran in Inc. Magazine on October 21, 2016.
Mark Gauger has been involved in product development for over 25 years. Trained as a mechanical designer at Stanford University, Mark has experience in all aspects of bringing a product to market. He is passionate about the role of great design as an element and a facilitator of corporate strategy, and he consults regularly with business leaders on how to transform their businesses with design. Prior to founding argodesign with his longtime colleague, Mark was the President and Chief Business Officer for Globant, an emerging market leader in software innovation out of Latin America. From 2002 to 2012, Mark held various roles inside of frogdesign, ultimately taking over as the Chief Development Officer in 2007, where he oversaw frog’s entry into the world of first-party application development, among other duties. It is the business of design that Mark enjoys most — helping clients find competitive advantage by embracing the world of product innovation.