Funding individual startups isn't enough for the county's first angel investor group. It's looking to shepherd an entire generation of Kern's most promising young entrepreneurs.
As it gears up to select its first companies to invest in, Kern Venture Group says it is in discussions with local government, schools and business groups to sponsor competitions, help expand entrepreneurial training in schools and potentially collaborate on one or more small business incubators.
KVG is meanwhile working to multiply the financial impact of its involvement with startups by joining forces with similar angel investor groups.
The group's ambitions place it at the center of the small but emerging entrepreneurial culture in Bakersfield, where until now there has been little of the intense kind of support showered on startups in bigger cities across the West.
Financing remains KVG's core. Since July a little more than a dozen partners have put in about $1.5 million. The group says it will cap for its first round of investments at $4 million.
The idea is to select three startups to fund in late January, and over time invest in as many as 17 more until investors begin to see a return on their equity. The first returns likely wouldn't arrive for seven to 10 years, KVG estimates, when maybe the first of the startups will get sold or go public or otherwise become mature enough to pay off KVG's stake.
NOT JUST INVESTING
Clearly, though, financial returns alone do not guide the group's two managing partners, John-Paul "JP" Lake, who handles real estate for locally based Rain for Rent, and Dave Higdon, a Bakersfield management consultant specializing in intellectual property matters.
Lake said Kern Venture Group wants to identify potential entrepreneurs, train them and fund their enterprises, then pitch in with support.
"We're working to plug all of those gaps," he said.
An example of the group's broader goals is written into its partnership agreements. One percent of all funds raised must be spent on grants funding the exploration and validation of promising business ideas. These disbursements may take the form of competitive awards to college-age entrepreneurs, with no strings attached.
THE INNOVATION ECONOMY
For all its strengths in energy, ag, defense and logistics, the county lags far behind the Silicon Valley, San Diego and Austin, Texas and other cities spinning out small businesses by the dozen that end up selling for millions of dollars apiece.
A study by the Metropolitan Policy Program at the Washington, D.C.-based Brookings Institution identified Kern as 26th among the top 10 U.S. metropolitan areas in job growth between 2006-2016. But in the category of job growth at young firms, the county ranked a dismal 92nd.
Richard Chapman, president and CEO of the Kern Economic Development Corp., called KVG's capital infusion activity a "critical component" of future job growth and talent retention.
"If we don't have a strong startup environment then that has (negative) effects on … general economic growth," he said.
BUILDING ON LOCAL STRENGTHS
Lake and Higdon say Kern need not follow the typical West Coast model of becoming a software engineering powerhouse, at least not in the near term.
The 15 or so local business proposals KVG says it is now reviewing for potential investment, which is about half of the total it has received from across the state, come from aerospace and defense, oil and gas, water monitoring technology, ag, consumer food products and retail.
Neither does the group's work on various educational and support projects focus on one industry or another.
One initiative the group is working on would give 100 local people access for three years to mobile technology designed to train and mentor entrepreneurs.
The system's tech platform was developed by Pasadena-based StartitUp, which during a recent demonstration in Long Beach guided 20 percent of participants — double the typical rate — to take their first steps in creating a new business.
Having introduced StartitUp founder Brad King to many local business and government leaders, Lake said he is working to persuade the City of Bakersfield and the County of Kern to kick in half the $75,000 price tag, with members of the private sector covering the other half.
King said he's optimistic the program will launch locally in the first three months of next year.
Lake said he is also looking to set up or support local business proposal competitions involving more than one Bakersfield group. And without being specific, he said he is in talks with local educational institutions about incorporating entrepreneurial programs in their curricula.
There is the potential, he said, that this could lead to the creation of one or more physical spaces where resources, possibly including dedicated accounting and legal professionals, would be concentrated for the benefit of startups.
One such possibility is the Center for Innovation and Entrepreneurship of Kern County. Lake is working with Nora Navarrete-Dominguez, Bakersfield regional campus director at the University of La Verne, to explore avenues for establishing the center in downtown as a business accelerator that would hone the skills of budding entrepreneurs or an incubator helping them realize their visions.
While Lake pursues those and other initiatives, Higdon is making potentially valuable connections with outside angel investors.
Angel investing has become the preferred method for bringing startups to a level where they can prove their potential. Unlike venture capital, in which managers make decisions on how to spend others' money, angel investors put in their own cash.
The most Kern Venture Group plans to invest in any single company, at least initially, is $200,000. That's still only about a fifth of the sum requested by many of the business proposals it is reviewing. To help businesses find the rest, KVG has in recent months joined groups of angel investors that might be persuaded in put in money of their own.
One such group is the Angel Capital Association, a coalition of 250 groups representing about 13,000 individual investors. Membership Director Sarah Dickey said by joining the association, KVG opens the opportunity for startups it is working with to reach out and strike financing agreements with individuals across North America.
"It essentially puts a flag in the community" signaling the local startup community is open for business, Dickey said of Kern Venture Group's move to become part of the association.
The connection can also give KVG access to expertise from outside the area, she added, and put local entrepreneurs in contact with accomplished mentors in other communities.
'TOUGH TO DO'
Kern Venture Group's support could play an important role in helping promising young entrepreneurs grow their business ideas into profitable endeavors, said Kevin Yebuah, who has helped organize three competitive startup events in Bakersfield since November of last year. His day job is supervising data analytics at Kern Health Systems.
He said support for startups has been lacking locally. One effect of the absence, he said, is that people with business potential don't see that efforts to build an enterprise can pay off.
"You might have a great idea but if you don't have the support it becomes tough to do that," he said, adding that Kern Venture Group "looks like it's going in the right direction" to help fill the gap.