The evidence has been in for a while – when it comes to innovation, Kansas City’s small businesses are leaders. What perhaps hasn’t gotten as much attention are the partnerships between larger, corporate businesses and start-ups/early stage businesses to advance innovation.
That was the message speakers offered at the April meeting of ACG Kansas City, “Is Innovation in Your Own Backyard? Why large corporations and early state innovators need each other in Kansas City.” The panelists for the discussion were Dennis Odell from Evergy Ventures (parent company to KCP&L and Westar), Jeff Kostos with Spear Power Systems, and Scott Ford with Pepper IoT. Darcy Howe of KCRise Fund led the three in their talk.
Odell and his team first broached the idea of Evergy being venture capitalists a few years ago. It wasn’t an immediate “yes” from the utility’s top management, but now the company is involved with more than 30 startups, primarily in the Kansas City area, including Spear and Pepper.
The partnerships enable Evergy to be involved in innovation that can be helpful to its core businesses and offers it the opportunity to give back and be even more connected to its community.
But make no mistake; the company isn’t in the business as a philanthropy.
“We only make an investment if we think we are going to make money,” Odell said. “There needs to be an opportunity to move our company forward.”
Both Spear and Pepper fit all the criteria, although these businesses got there in different ways.
Spear designs lithium ion battery storage systems for defense, marine propulsion, oil and gas and mining. In Frost’s words, Pepper is a company “making the connected things you buy better.”
When he first learned about Spear, Odell knew it was a great fit for Evergy. It was the first time he approached his company’s managers about investing and even now is a bit surprised that they said, “yes.” But he jumped on the opportunity.
The investment and partnership has been fruitful for both entities. Evergy has a seat on the Spear board and is learning about technology that could be helpful down the road. Spear has an influx of capital and seasoned business partners to call on for advice and guidance, as well as providing credibility for the company as it looks for additional capital and customers.
“Having their logo, seeing these guys supporting us, that makes a difference when we are raising other money,” Kostos said. “It’s also valuable to customers.”
Frost agreed with the assessment of Evergy’s name lending credibility to Pepper as a start up. This is particularly true since Pepper’s leadership team didn’t have experience in utilities, having primarily come up through the Sprint and wireless worlds.
“We’ve been using Dennis’ team as a way to get through the crazy utility environment,” Frost said. “He and his team have helped us understand the regulated/unregulated space, where the opportunity is, etc. And, they've been able to introduce us to real-time prospects.”
With Pepper, the road to “yes” wasn’t as quick. Initially, Evergy initially passed on investing in the IT company.
“But the great thing about working with start-ups,” Odell said, “is that there is never a hard ‘no.’ You stay in touch, you watch their progress, and then then time is right.”
Aside from seeing a good return on their investments, Odell said working with start-ups is good for a well-established company such as Evergy.
“It’s an opportunity to move our company forward,” Odell said. “Because of all the energy efficiency efforts, our load is flat. Our business model has to change. “
“It’s a cultural thing, and it doesn’t happen overnight. We have 5,000 employees. We have to introduce people to the idea of thinking differently.”
All of the panelists talked about the importance of being located in the Midwest and, specifically, Kansas City, when it comes to the deals they have been able to put together.
“This is our sixth time raising money,” Kostos said. “There’s always been a strong contingency of Kansas City money. We’ve always had good success. The area has a lot to offer in raising money.”
Both Frost and Odell said that are investors may be slower in their decision-making processes, but it’s worth it, Frost said, to not have to deal with the overhead of Silicon Valley.
Plus, Odell said, “Investors here may be a little slower to say, ‘yes,’ but once an investor says it, it is committed.”