Paul Heirendt, a principal at True Bearing Advisors and co-founder of multiple startups, has first-hand experience with how hard it can be for entrepreneurs to find seed funding in St. Louis.

“Of the nine startups I’ve been involved with in St. Louis in the last few years, four had to relocate to find adequate seed-stage funding,” said Heirendt.

Relocation is far from the worst thing that can happen to startups that fail to find seed funding. More often they end up folding—which is precisely why the phase between capital formation and Series 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. The St. Louis Regional Chamber of Commerce, Cultivation Capital, Twain Financial Partners, and several of the region’s banks have created the $5 million Spirit of St. Louis Fund 1. The fund will specifically address the seed-funding gap identified through research conducted by Dane Stengler, former head of policy for the Kansas City-based Kauffman Foundation.

Thanks to our sponsor

Become an SPN sponsor »
Meet our sponsors »

“St. Louis has done a tremendous job of generating activity at the top 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 Fund isn’t the first investment the Regional Chamber has made directly into the St. Louis startup ecosystem. The organization has put more than $1 million in capital into several area funds and accelerators, including SixThirty, 630 Cyber, Stadia Ventures, Prosper Women Entrepreneurs, and the Yield Lab.

According to Smith, those investments have resulted in nearly $100 million in follow-up capital, 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.

In their announcement, Regional Chamber CEO Joe Reagan identified the need for the new fund 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 connection is relatively rare. More often the emphasis is on disruption, innovation, and creating billion-dollar “unicorns.”

However, the Chamber’s fund seems to overtly recognize two realities.

The first of those realities is that large companies rarely—if ever—relocate. This week, former White House Entrepreneur-In-Residence and 500 Startups partner Paul Singh was in St. Louis on his Results Junkies North American Tech Tour. At a presentation given at OPO Startups in St. Charles, Missouri, Singh noted that companies with seven or more people are “rooted.”

In other words, they aren’t relocating to a different city just for a tax incentive.

The second reality is that the United States isn’t going to suddenly re-employ a large manufacturing-based workforce. Manufacturing as a sector might be healthy, but large-scale employment from factory work is becoming rarer all the time.

That means good companies and good jobs will ultimately come from homegrown startups.

Which means that the Spirit of St. Louis Fund 1 and its planned successor fund are about more than just getting new companies through the Valley of Death.

These funds are about changing how communities approach job creation and economic development in a way that recognizes the realities of the modern economy.

And that’s a great thing.

__

Dustin McKissen is a consultant based in St. Charles, Missouri. He’s a two-time LinkedIn Top Voice and a columnist for Inc. and CNBC. 

Save

Save