• St. Louis Regional Chamber Releases 2017 Investment Capital Report

    Aug 01, 2018

    The St. Louis Regional Chamber today released its 2017 Greater St. Louis Venture Capital Overview report. Each year, the St. Louis Regional Chamber compiles and publishes data on venture capital investment in the region with the objective to provide innovation ecosystem partners with a comprehensive statistical overview of the “State of Venture Investment” in the St. Louis MSA, and to put some of those numbers into a comparative and historical context. According to the report, presented by St. Louis Regional Chamber VP Entrepreneurship & Innovation Andrew G. Smith, in 2017, the greater St. Louis region maintained its strong momentum as a Midwestern hub for startups and venture capital. However, the next few years will likely be a critical time as many startups work to scale their businesses and seek next stage funding.

    The region continued to see significant inflows of risk capital as well as growth in the number of new firm births. St. Louis now ranks as #3 among Midwestern cities for startup activity. The modern era of venture investment in St. Louis began sometime around 2013, coinciding with the launch of the St. Louis Regional Chamber’s Accelerate STL Capital Initiative.

    While Greater St. Louis continues to rank among the top Midwestern cities for startups, there are some troubling trends in the data. The number of VC funded deals has fallen by almost two-thirds since peaking in 2015, and the average deal size has ballooned from under $2MM as recently as 2012 to $7MM in 2017 with the median deal size following a similar trend. This slight downtrend in our market contrasted with an overall increase in US venture capital investments, which reached $82.4Bn in 2017.

    Smith says the regional innovation ecosystem is at an inflection point. Over the last decade, investors have directed billions of dollars into high-potential startups. While there have been a few early exits during that period (e.g., Confluence Life Sciences in 2017), most of the startups that received funding are still scaling their businesses. To the extent that a sufficient number succeed, the region will see re-investment of proceeds into the ecosystem, increased confidence and appetite for risk, job growth, and talent attraction. The alternate outcome is that too many startups could fail, leading to a depletion of risk capital, a loss of confidence, job loss, and talent out-migration.

    "The next several years will be critical to the long-term success of the greater St. Louis startup economy," Smith says.

    There are some underlying structural challenges facing the ecosystem, including (but not limited to):

    • Heavy concentration in bioscience investment
    • A steady trend towards larger, later-stage investments (and away from early-stage seed investments)
    • A decrease in the number of deals being funded

    "In order to sustain momentum, the region must continue to support existing startups while also funding new ones," says Smith.  "We must push for meaningful and sustainable levels of state funding for innovation activities. We must continue celebrating successes and supporting the organizations that serve as the 'aquifers' of innovation."

    “As highlighted in recent national studies by the Brookings Institution and JPMorgan Chase, the bioscience cluster is of central importance in St. Louis’ innovation economy; and as reflected in the Regional Chamber’s report, venture capital success in bioscience startups has driven St. Louis’ rising status overall in the rankings,” said Donn Rubin, President and CEO of BioSTL.

    Groups like Arch Angels, Arch Grants, BioGenerator, the St. Louis region’s array of Accelerators, and the Chamber-led Spirit of St. Louis Fund 1 continue to deploy capital into early stage companies and represent the vital “aquifers” of the entrepreneurial ecosystem.

    “We appreciate the attention this report helps to shine on the importance of Arch Grants and other local organizations that support early stage entrepreneurship in our region,” said Emily Lohse-Bush, Executive Director of Arch Grants. “Arch Grant companies represent a significant percentage of successful startups in our region and will continue to create high-paying jobs and opportunities in the coming years.”

    “The Regional Chamber’s report shows how far the St. Louis startup ecosystem has come in the last decade.  We have clearly established ourselves as one of the top innovation hubs in the Midwest, said Brian Matthews, Managing Partner of Cultivation Capital. “In order to sustain the momentum, we will need to re-dedicate ourselves to the work of supporting early stage ventures.”


    Read the full report.

    Read the executive summary

    Read the 2017 Greater St. Louis Venture Capital Overview Supplemental Report: The Emerging Agtech Boom 

  • Venture Capital Investments Fuel Innovation in Greater St. Louis

    May 29, 2018

    Venture capital (VC) investment in the St. Louis area has maintained momentum in 2017, with over $334 million invested in a total of 48 local start-ups. Investments spanned many industries, from Bioscience research firm Adarza to software developers like Hatchbuck and investment research firm Prattle Analytics.  Individual companies have continued to attract higher investments than in previous years. In addition, seven startups received investments of over $10 million and 18 startups received investments of $1 million or more (1).

    These investors recognize strengths in the St. Louis region, with local companies developing potentially transformative technologies.  For example, Adarza Biosystems, a life science company specializing in diagnostic technology based on “multiplex protein detection”, received $17 million from local investment firm River Vest (2).  Medical startup CardiaLen, which is developing a device for treating atrial fibrillation, received $978,500 in angel investor funding (4).

     Venture capital also plays a vital role in St. Louis’ growing agricultural technology sector.  NewLeaf Symbiotics, an agricultural technology company, received investments of $30 million from Monsanto Growth Ventures and S2G Ventures. (5) S2G highlighted NewLeaf’s innovation as a key factor in his firm’s decision, saying the company was “driving the sustainability revolution” with its groundbreaking research.

    Another emerging leader in the agtech field, Benson Hill Biosystems, raised $25 million for developing CropOS, a platform which “integrates crop data and analytics” to “unlock the global genetic potential of plants” (6, 7).

    VC investments in 2017 illustrate the dynamic nature of the regional economy, where technological innovation intersects with entrepreneurial vision.  Venture capital is not only contributing to the regional economy; it is building the future industrial base of the region.

    Numerous investment opportunities make St. Louis an ideal location for launching and growing a startup. The region benefits from a range of venture capital firms with expertise about specific industries; from SixThirty, a seed fund that assists financial technology startups (8), to RiverVest Ventures, which identifies emerging leaders in the biosciences industry (10).

    Angel investors also play an important role in the growth of start-up firms. Of 48 start-ups that received venture capital funding in 2017, 18, or 37.5%, were funded by the St. Louis Arch Angels, a group of accredited investors in the region. Seven new start-ups were funded by the Arch-Angels and 19 received follow-up investments, with three companies receiving $1million or more.

    Opportunities such as the Startup Connection Venture Showcase, and InvestMidwest (www.investmidwestforum.com) give entrepreneurs the chance to secure early-stage investments (11). Over the last 17 years, InvestMidwest, an annual venture capital conference supported by the Regional Chamber, has raised over $1 billion for Midwestern companies.

    Just as importantly, St. Louis startups have increasingly drawn the attention of national investors. MediBeacon, a startup developing diagnostic devices, raised $11 million in funding from New York-based venture capital firm HC2 (12, 13). The region’s largest venture capital investment in 2016 was secured by Veran Medical Technologies, which received $31 million from Washington D.C.-based firm Oxford Finance (14). This funding enabled further development of the SPiN Thoracic Navigation System, a software designed to allow more efficient diagnoses of lung cancer (15).

    Between 2013 and 2016, companies in the St. Louis metro area raised over $1.3 billion in venture capital, or an average of $325 million per year. Startup companies raised these funds over almost 400 separate investments, with 2015 setting a record of 133 investments in 117 individual companies. The total value of those investments remained high, at $334 million, in 2017, although the number of investments decreased to 52. There has been a national trend towards fewer, more high-value investments over time. The St. Louis economy generally aligns with this national trend.

    As local companies fuel innovation, it’s no surprise that the St. Louis region is gaining national recognition by venture capital firms and industry leaders.

    Sources:

    (1) “St. Louis MSA Venture Capital Investments 2017” St. Louis Regional Chamber, May 11, 2018.

    (2) “About Us” Adarza Biosystems 2018.

    (3) “Adarza Biosystems Closes on $17 Million Series C Financing” Adarza Biosystems, Jan. 19, 2017.

    (4) “An Innovative solution in a world of ineffective stopgaps” Cardialen: Therapy, 2016.

     (5) “St. Louis Crop Science company raises $30 million” St. Louis Business Journal, Sept. 7, 2017.

    (6) “Press Release: Benson Hill Bisystems Closes $25M Series B Financing” Benson-Hill Biosystems, March 28, 2017.

    (7) “Benson Hill adds investors in $25 million financing round” St. Louis Business Journal: Technology, March 28, 2017.

    (8) “About SixThirty” SixThirty 2018.

    (9) “RiverVest leads $17 million investment in Adarza, brings on new President” St. Louis Business Journal: Technology, Jan. 19, 2017.

    (10) “60 startups that will pitch at Venture Showcase” St. Louis Business Journal: Technology Oct. 23, 2017.

    (11) “What is Startup Connection?” Startup Connection, 2015.

    (12) “New York firm invests another $10 million in MediBeacon” St. Louis Business Journal March 27, 2017.

    (13) “MediBeacon History” MediBeacon 2018.

    (14) “Veran raises $31 million from East Coast private equity firm” St. Louis Business Journal: Healthcare, Dec. 27, 2016.

    (15) “How it works” and “Benefits”, Veran Medical Technologies 2018.