They’re not. St. Louis really is becoming an IT startup hotspot.
Kiplinger has called St. Louis one of the 10 best cities in the country to start a business. The Wall Street Journal has said the city “is in the early stages of an entrepreneurial boom” and may serve “as a lesson for the nation as a whole.” AccelerateSt.Louis.org, a new website devoted purely to business startups in the region, typically offers several news stories about new developments every day.
Behind the media attention are the real things -- companies, jobs, and dollars. Scores of startups, in fact, employing hundreds of people and attracting millions of dollars of investment in funding. T-REx, a technology incubator and “co-location” space, which in two years has grown from nothing to 100,000 square feet, and which may be the largest of its type in the nation. And an increasingly supportive ecosystem.
All of this might have seemed entirely implausible as recently as a few years ago. St. Louis’s business leaders had long recognized that the community needed a stronger entrepreneurial culture to provide the job growth that big corporations no longer generally offer. But most of the community’s focus fell on the bio-sciences, while IT got scant support.
Nonetheless, various people like Jim Brasunas, the longtime director of the non-profit IT Entrepreneurs Network (ITEN) here, labored out of the spotlight to nurture the area’s IT resources. Those resources were considerable, they knew, because St. Louis’s colleges and universities pump out large numbers of talented people; IT-labor costs here are low; and many area corporations, like the big financial services companies, as well as MasterCard, Emerson, and others, are IT-centric.
But it was, as Brasunas said as recently as the spring of 2012, “a long slog.”
Judy signed up for the slog in 2010, inspired by a talk from Dr. Bill Peck, formerly Dean of the Washington University School of Medicine and then chairman of Innovate St. Louis, ITEN’s parent. If St. Louis was going to prosper, he explained, it was going to have to grow its businesses community from within. When Judy volunteered to help, Dr. Peck asked her to critique the local startup scene.
She saw two main problems, she soon reported -- not enough mentorship for IT entrepreneurs and not enough IT expertise among investors here to know when to commit their funds.
Came the response: “Fix it.”
Capital Innovators runs a kind of boot camp cum scholarship program for promising startups. Participants apply for acceptance. Those admitted give Capital Innovators a small equity stake, providing investors in a $3 million fund behind the accelerator the opportunity to make a return. For its part, Capital Innovators gives the startups $50,000 in seed money and 12 weeks of full-time mentoring and network-building from Judy. She helps them figure out not only what they need but where they can get it.
Her goal for the startups is to help them achieve the progress in 12 weeks they would need a year for otherwise -- if they could do it at all. Her goal for her investors is to make a solid return. Her goal for St. Louis is to spawn minor and major new employers and help make it the place to be for ambitious IT entrepreneurs in the Midwest.
So far, she says, the results are surpassing expectations. As of this writing, Capital Innovators has invested in 24 businesses, which already employ more than 350 people. The value of these companies has already more than tripled, and several – she won’t name names – are potentially multi-billion dollar enterprises with big local workforces. In addition, Capital Innovators’ success is helping to solidify the slim lead she believes St. Louis now enjoys over other Midwestern cities for the mantle of Midwest IT entrepreneurship leader.
Of course, plenty of other organizations are rowing with her. Arch Grants, launched in 2012, has had tremendous success in attracting entrepreneurs here by offering $50,000 in seed capital with no equity dilution. Early-stage venture capital firms, like Cultivation Capital, have begun to complement the region’s established later-stage venture and private equity firms. Some of the startups, like Lockerdome, Norse, FoodEssentials, and TrakBill, have begun to generate buzz of their own.
That’s the kind of collaboration that lifts all boats, Judy says approvingly.
Meanwhile, despite working the kind of 60-70 hour weeks she hadn’t anticipated for herself at this stage of her life, she couldn’t be happier.
“I am having so much fun with this,” she says with convincing passion. “I’m getting to do what I’m good at, and we’re enjoying even more success than we expected. IT is at the forefront of everything in the world today. And if St. Louis cements itself as the Midwestern hub, the fallout for this region will be amazing.”