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From JC to Silicon Valley

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By all accounts, San Francisco-based Zapier is a Missouri company.

All three of its founders attended the University of Missouri and have roots in Mid-Missouri. The app-automation company spawned out of the first Startup Weekend Columbia in 2011 but quickly jetted to Silicon Valley.

Zapier is the perfect example of a problem a new task force created by Gov. Eric Grietens in June seeks to fix. Greitens created the Governor's Innovation Task Force to create a better environment for startups by giving new businesses better access to funding and creating regulatory reform programs.

The task force's leaders also want to make the state more attractive to students pursuing degrees in science, technology, engineering and math so those graduates will stay here after they graduate and create their own businesses or fill open jobs at fledgling startups.

While Zapier's founders have roots in Mid-Missouri, the company flew west when it was selected to participate in the famed Y Combinator startup accelerator in the spring of 2012. Shortly afterward, in October 2012, the company got a $1.3 million seed funding round led by global venture investment firm Bessemer Venture Partners.

Zapier co-founder Wade Foster, a Jefferson City native, said Missouri does have some advantages for startups, though.

Both northern and southern California face housing shortages and low vacancy rates, which have caused rental and real estate prices to soar. Startups, which typically run on lean budgets during their earliest days, may be attracted to Missouri by its low rental prices.

"Missouri has some definite advantages," Foster said. "Things like the cost of living are fantastic because it allows folks to get started on stuff. These other cities that are up and coming are being able to take advantage of the fact that in other places like San Francisco it's so expensive to live there."

An August report by the task force notes a recent study showed Missouri has the seventh highest percentage of college graduates leaving the state after college. Some of the state's problems may be solved by better using innovations coming from Missouri's research institutions.

The report also notes MU generated $46.3 million in technology licensing fees in 2016 and is consistently in the top 25 percent of universities nationwide for money received from technology licenses.

During the second quarter, Illinois led Midwestern states with $814 million in venture capital invested in its firms, according to Pricewaterhouse-Coopers. Michigan and Ohio trailed with $40 million.

Missouri ranked fourth among Midwestern states during the second quarter with $14 million invested in Missouri startups. That's down from $16 million during the second quarter of 2016 and $43 million in 2015.

A 2017 Kauffman Foundation report ranked Missouri No. 10 among 25 large states for startup activity. The number of startups per 1,000 firms grew from 76.8 startups per 1,000 firms in 2012 to 95.5 in 2014, the last year for which data was available.

This year, Kansas City and St. Louis improved their rankings on the Kauffman Foundation's Startup Activity Index, with Kansas City moving up from No. 19 in 2016 to No. 10 this year. St. Louis moved from No. 36 to No. 26.

In a survey of 1,700 participants, the task force found 70 percent of participants said Missouri's climate for startups is improving. But only 24 percent thought startups statewide have enough access to capital. A 2016 Bloomberg report also ranked the state No. 32 for innovation.

As companies spawn around technology created at Missouri universities, talent will stay, investors will seek to invest in Missouri companies, and a startup ecosystem may be formed, both Foster and the task force report indicated.

"If you're investing in these educations and companies are coming out of it, you'll start to create a bigger pool of talent," Foster said. "It's going to take time. It doesn't happen overnight."

Foster said entrepreneurs want communities to be welcoming, particularly to LGBTQ residents and things that help empower folks from different racial, cultural and socio-economic backgrounds.

"Smart, talented folks wants to be in an environment that tolerates strangeness," Foster said. "Part of running a startup is introducing strange, new ideas and being willing to see where things might go."

The task force report also notes it may be most effective to market the state to entrepreneurial Missouri natives who could be enticed to move back: "Attempting to recruit talent that already has lived in Missouri, has social and family networks here, and understand the state's benefits has a higher probability of success than recruiting talent without Missouri or Midwest roots."

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