Old St. Louis wants to become hot with young startups.
Civic and business leaders are raising $100 million to kick the region’s burgeoning startup scene up a notch. Dubbed the Regional Entrepreneurship Initiative (REI), it seeks to attract venture capital over the next five years to support the “rapidly growing entrepreneurial ecosystem and high-growth startup activity” as well as fund new ventures.
“A year ago, I asked what we needed to provide the best environment to help our best startups grow, and the answer came back with a resounding ‘get them more money,’” said St. Louis County Executive Charlie A. Dooley. “Now we are saying we need the money and are putting an aggressive plan in place to raise that capital. This guaranties the best new companies will stay in St. Louis and thrive for years to come.”
St. Louis is not exactly what you’d call a startup hub. The dominant industries are manufacturing, healthcare, and shipping, and the city is home to large corporations like Anheuser-Busch, Enterprise Rent-A-Car, Purina, and Energizer. It may not be a “bastion of progressivism,” but this is beginning to change.
Local entrepreneur Aaron Perlut said that over the past couple years, the region’s business and entrepreneurial ecosystem has begun to dramatically evolve and flourish and is becoming a “tech town.” Technology job postings are on the rise, as are salaries, and St. Louis is attracting enough human, intellectual, physical, and financial capital to emerge as a center of innovation. A startup called LockerDome recently closed $6 million in Series A financing, “big data” company Appistry pulled in nearly $40 million from private investors, and CrowdSource.com closed $12.5 million.
“St. Louis is seeing an incredible amount of early-stage tech activity right now, which is leading to a strong funnel of great deals,” said Gabe Lozano, the chief executive officer of LockerDome. “Without question, we will be globally recognized as a top 10 city in technology within 10 years.”
Square cofounder Jim McKelvey is a St. Louis native and said that in the past, many St. Louis startups left the area to get their business off the ground, but now that migration is reversing. REI is designed to fuel this trend by attracting new talent and keeping native success stories home. This requires access to capital, which is one of the main roadblocks that entrepreneurs outside of the tech bubble face, and it’s one of the main reasons they head to the Valley.
The impact that a thriving startup scene can have on the economy is well known, and President Obama is a vocal supporter of initiatives that support technology and innovation. REI is not only about capital flow but also about strengthening St. Louis’s ecosystem as a whole. Other components include building a regional customer relationship management system (CRM) to track startup assistance, investment, and impact; developing a common measurement system to track results; creating marketing and communications campaigns aimed at expanding awareness and increasing participation from people inside and outside the region; establishing programs to include minority, female, veteran, and immigrant entrepreneurs; and setting up regional mentorship programs. The $100 million will also contribute funding to pre-seed companies as well as increase the availability of Series A venture capital.
REI received a $1.5 million grant from the U.S. Economic Development Administration, will be entered at AccelerateSTL.org, and includes a coalition of public and private sector leaders as well as the region’s leading entrepreneurs and venture capital community. Some of the existing players in the St. Louis scene include Cultivation Capital, Arch Angels, Billiken Angels, and iSELECT Fund. There are also the incubator programs Arch Grants and Capital Innovators.
The money hasn’t been raised yet, but the passion is there. It is, after all, a city with a lot to offer. It has the Gateway Arch, the Cardinals, and a wealth of American history. Plus, it’s home to the gooey butter cake, which for me is enticement enough to go.