PaulHeirendt, a principal at True Bearing Advisors and co-founder of multiplestartups,has first-hand experience withhow hard itcan befor entrepreneursto find seed funding in St. Louis.
Of theninestartups I’ve been involved with inSt. Louis inthe last few years, four had to relocateto find adequate seed-stagefunding, saidHeirendt.
Relocation is far from the worst thing that can happen to startups thatfail to find seed funding. More often they end up folding – which is precisely why the phasebetween capital formation andSeries A funding is referred to as The Valley of Death.
Recognizing a clear need, the St. Louis region has launched a fund designed to help startups make it out of the Valley of Death alive. TheSt. Louis Regional Chamber of Commerce,Cultivation Capital,Twain Financial Partners, and several of the region’s banks have created the $5 millionSpirit of St. Louis Fund 1. The fund will specifically address the seed-funding gap identified through research conducted by DaneStengler, former head of policy for the Kansas City-based Kauffman Foundation.
St. Louis has done a tremendous job of generating activity at thetop of the startup funnel, said Andrew G. Smith, Vice President of Entrepreneurship and Innovation at the St. Louis Regional Chamber. But the truth is that capital markets are at their least efficient when it comes to early-stage companies. That’s when proximity to capital matters most, and cities like St. Louis are at a significant disadvantage compared to coastal innovation hubs. We have to be strategic and deliberate about overcoming that disadvantage.
The Spirit of St. Louis Fundisn’t the first investment the Regional Chamber has madedirectlyinto the St. Louisstartupecosystem. The organization has put more than $1 million in capital into several area funds and accelerators, includingSixThirty, 630 Cyber, Stadia Ventures, Prosper Women Entrepreneurs, and the Yield Lab.
According to Smith,those investments have resulted in nearly $100 million in follow-upcapital, and the creation of more than 600 high-paying jobs.
Those jobs are a big reason why the region has invested so heavily in the startup ecosystem.
Intheir announcement, Regional Chamber CEO Joe Reaganidentified the need for the newfund by saying that, Crossing the ‘valley of death’ doubles the chance of success for entrepreneurs and the substantial net new jobs they create. This is an urgent need for St. Louis.
Reagan’s comment stands out for an important reason.
Identifying the connection between entrepreneurship and job connectionisrelatively rare. More often the emphasis is on disruption, innovation, and creating billion-dollar unicorns.
However, the Chamber’s fund seems to overtly recognizetworealities.
The first of those realities is that large companies rarely – if eve – relocate.This week,former White House Entrepreneur-In-Residence and 500 StartupspartnerPaul Singhwas in St. Louis on his ResultsJunkies North American Tech Tour. At a presentation given atOPO Startupsin St. Charles, Missouri,Singhnoted that companies withsevenor more people are rooted.
In other words, they aren’trelocating to a different city justfor a taxincentive.
The second reality is that the United States isn’t going to suddenlyre-employa large manufacturing-basedworkforce. Manufacturingas a sectormight be healthy, but large-scale employmentfrom factory workisbecoming rarer all the time.
That means good companies and good jobswillultimatelycome from homegrown startups.
Which means that the Spirit of St. Louis Fund 1 and its planned successorfundare about more than just gettingnew companiesthroughtheValley of Death.
These funds are about changinghow communities approach job creation and economic development in a way that recognizes the realities of the modern economy.
And that’s a great thing.
This story first appeared on Silicon Prairie News.