COVID-19 Venture

Gateway To Startup Success: Innovation Grows In Missouri         

“We love the Cardinals, we love the Blues, and we love our startups.”

That is how Cliff Holekamp, co-founder and managing director of Missouri’s most active venture capital firm, Cultivation Capital, described St. Louis, aka the Gateway City.

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Successful examples of St. Louis companies include Benson Hill (GV), with 10 funding rounds resulting in over $132 million in total funding and over $4 million in seed-stage funds raised for Balto Software. In fact, the greater St. Louis region’s VC investment for 2018 was $378 million.

And things are looking up, according to the St. Louis Regional Chamber’s senior research director, Tim Alexander. “Greater St. Louis has made great progress in building the amount of VC investments in area companies,” he said. “The total for the last five years of $1.9 billion is double that of the previous five-year period.”

Working together

Multiple forces work together to both maintain and increase the startup capacity of St. Louis and the surrounding area. One of these forces, the Chamber, has devoted a key role to the goal.

Enter Matt Menietti, the Chamber’s director of innovation and entrepreneurship. He uses several pillars to increase capacity for the city’s high-growth startup ecosystem. These include:

  1. Connecting, aligning and celebrating regional startup leaders.
  2. Increasing the number of quality relationships among entrepreneurs.
  3. Reducing the amount of friction new participants to the startup ecosystem encounter when launching new companies (wayfinding, storytelling, etc.).
  4. Co-developing innovation-forward and entrepreneur-friendly policies across the St. Louis region.

“We play a support role and try to find ways that we can best champion and accelerate the excellent work our region’s accelerators, incubators, universities, funders and community leaders are already doing,” Menietti said.

Another crucial player in St. Louis’ startup scene can be found in Phyllis Ellison.

Ellison is vice president of Partnerships & Program Development at the Cortex Innovation Community.

The Cortex Innovation Community is the largest innovation center in the St. Louis region. It is a 200-acre hub for building connections for startups, corporations, academic partners and the broader community, according to Ellison.

In fact, St. Louis has a wealth of entrepreneur support organizations (ESOs) for high-growth startups. With over 75 entrepreneur support organizations and another 22 co-working spaces aimed at the innovation community, Ellison said the area is fortunate that a number of those ESOs are concentrated in Cortex.

Since Cortex’s founding in 2002, 14 buildings have been built or redeveloped, with another five in some stage from late planning to near completion. Additionally, major events like the Startup Connection and STL Startup Week add to the robust and unique flavor of St. Louis’ innovative sector.

“Startup Connection is the biggest celebration of the St. Louis startup community, held each fall,” according to Ellison. “For one evening, we bring together the entire community to celebrate another great year of growth, to highlight 60 high-growth startups that are entering the market and to bring together the largest startup Resource Fair in the region.”

Funding scene

No startup scene would exist without proper funding.

“When Cultivation Capital started in 2012, there was not a single venture capital firm focused on the IT and software space in the state,” Holekamp pointed out. “We knew that there was an important contribution for us to make in the startup community as well as a great business opportunity. With our initial traction in software tech, we followed up with additional venture strategies in life sciences and in agtech. Recognizing the importance of accelerators in catalyzing local entrepreneurial activity, we also founded the SixThirty fintech accelerator and the Yield Lab agtech accelerator.”

Crunchbase News has recognized Cultivation Capital as one of the top 10 most active early-stage firms in the U.S.

Arch Grants is another important factor in St. Louis’ startup scene. Executive Director Emily Lohse-Busch shared that this nonprofit is mainly a vehicle to attract and retain talent to build the future economy in the St. Louis region. Overall, the organization aims to increase economic development in the area via innovation and entrepreneurship by bringing companies to the region and retaining early-stage companies.

“We are partners within the startup ecosystem in St. Louis,” Lohse-Busch said, “and work directly with universities, accelerators, incubators, venture capital firms and others to make sure that St. Louis is one of the best cities in the country to start and grow a high-growth company.”

Lohse-Busch said that through its Global Startup Competition, Arch Grants awards $50,000 equity-free grants and access to an entire ecosystem of support and resources to early-stage companies, ensuring that thinkers and leaders can build and grow companies in the St. Louis region. And the help doesn’t stop there; grant recipients also gain access to angel investors and funding sources, business mentorship opportunities, educational programming, recruitment services and more.

Regional advantages

St. Louis provides a popular launch for startups because of its low cost of living, access to funding, large academic research institutions and the aforementioned framework that is supportive of innovation.

The area has also been named a top city for young entrepreneurs, the happiest city in America, and boasts over 30 four-year colleges and universities, ripe with eager talent graduating each year.

“Some of these advantages,” the Chamber’s Menietti added, “stem from our outstanding academic institutions, nonprofits and innovation districts: Washington University, Saint Louis University, Danforth Plant and Life Science Center, 39 North, Cortex, T-REX, Arch Grants and LaunchCode–to name a few.”

Noted Cultivation Capital’s Holekamp, “What makes the St. Louis startup community special is the interconnectivity and support our entrepreneurs receive from all parts of the greater St. Louis community. Startup news is well covered in the local press, and our entrepreneurs are given a platform here to make their mark. A lot of cities are entrepreneur-friendly, but I know of no city who celebrates entrepreneurs the way St. Louis does.

“We have strong and well-supported co-working clusters,” he added. “T-REX for software and tech, Cortex for life sciences and corporate innovation, and 39 North for agtech.”

Looking ahead

St. Louis has reasons to be excited about the future.

“St. Louis has a much larger and more vibrant startup community than people outside the region realize,” Cortex Innovation’s Ellison said. “We’ve been growing this for 25 years, and with the leadership of organizations like BioSTL, Cortex, Arch Grants, ITEN and others, the region has gone from a handful of entrepreneur support organizations in the late ‘90s to over 100 ESOs, co-working spaces and regional events today.”

While the original efforts were aimed at high-growth high-tech startups, today the community will find a broader mix of programs and spaces supporting artists and creatives, retail and product-focused startups, and woman- and minority-owned businesses, according to Ellison.

“A big part of that growth happened because the ESOs worked together to launch efforts that no one of them could have supported individually,” she said. “Events like Startup Connection (11 years old), the VISION conference, STL Startup Week and more, have been the result of several organizations working together to bring education and services to the St. Louis community.”

But not everything is perfect in Missouri’s largest city.

It’s important to be realistic about issues and areas for improvement to move forward in a meaningful way. Menietti from the Chamber has a few thoughts on the matter.

“We still have a lot of work to do around de-risking early-stage ideas and setting up pre-accelerator capital and programs,” he said. “I think we could be more intentional about community-building in the ecosystem and ensuring that funding and programs are accessible for traditionally overlooked and underrepresented founders. [Nevertheless] I’m confident and excited about our ability as an ecosystem to come together and tackle these challenges in a collaborative, equitable way. The future is bright.”

The reality of COVID-19

During this unprecedented time, it’s important to consider how the current climate of economic uncertainty plays into the St. Louis startup scene.

“Many of our companies are fairly early-stage, and we’re seeing a number of impacts, dependent largely upon stage and industry,” according to Arch Grants’ Lohse-Busch. “… they are tracking both the immediate impacts of the COVID-19 pandemic (particularly those that work directly with schools, restaurants/shops, real estate, etc.) as well as the impacts of the resulting recession.”

Some companies, she added, are seeing a surge in the need for their services–particularly those with medtech, logistics and remote working platforms–and are working through the issue of meeting a rapid demand increase.

As Lohse-Busch wrote in a letter to all of its supporters, Arch Grants is responding by setting up a relief fund to get non-dilutive grants out to founders and companies as soon as possible to help them weather the storm.

Additionally, Holekamp at Cultivation Capital explained that companies have transitioned to working from home, which brings forth the added challenge of how to maintain corporate culture and camaraderie in a virtual work environment.

He added, “Each company is preparing for different economic impacts to their business. Some will be significantly challenged by the quarantine economy, while others have not found as big an impact.  Even those companies who are not seeing customer churn, I do worry about them keeping their sales pipelines full in the current environment.”

Looking forward, he added “I also would warn any company to be prepared for the possibility of tighter financing markets in the next 12 plus months.”

Katy Spratte Joyce lives in Omaha where she writes about travel, culture and business. She is also a startup survivor.

Photo credit:  Brittney Butler via Unsplash.

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