st. louis regional entrepreneurship initiative report seeks to reach immigrants & minorities

7/28/2019 St. Louis Regional Entrepreneurship Initiative Report Seeks to Reach Immigrants & Minorities

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JUMPSTART INC.

St. Louis RegionalEntrepreneurship Initiative

Report

April 22, 2013


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TABLE OF CONTENTS

The REI Vision: A Top 10 Region for Entrepreneurship ................................................................................. 2

Expand existing, high impact resources and attract the complementary resources necessary to

foster a thriving entrepreneurial ecosystem. ............................................................................................. 3

With a vision of transformative change, the REI focused on entrepreneurship in context of two types

of opportunities: i) high growth potential startups, and ii) existing small companies poised for

accelerated growth and value creation. To ensure the REI would benefit from the insights and

perspectives of regional entrepreneurs, investors, economic development professionals, educators

and others, the REI began with the creation of the 40-person REI Committee. With research and

guidance provided by JumpStart and in-region experts, the REI Committee developed the findingsand recommendations by participating in regular meetings and engaging in working groups with the

topics ofCapital Formation; Networking; Marketing and Public Relations; and Economic, Social, andPolitical Climate. .......................................................................................................................................... 3

The Findings: Opportunities and Gaps ........................................................................................................... 3

The Recommendations ................................................................................................................................... 6

Based on the information gathered during this process and regular interactions among the

participants, the REI identified the following opportunities to complement and accelerate existing

efforts to establish and grow a high performing entrepreneurial economy: ............................................ 6

Moving Forward ............................................................................................................................................... 8

Through grassroots efforts and the contributions of foundations, benefactors, universities, private

investors, regional governments, non-profits and others, the region has made substantial progress

since the Initiatives launch in April 2012. The establishment of the REI Committee and the Working

Groups, their work on this Report, and the recently announced partnership between the SLCEC and

St. Louis Development Corporation are examples of the types of collaborations necessary to convert

this Report into the high-impact resources needed by the regions entrepreneurs. The REI

participants are in position to convert this Report into action, but it won't be easy. The St. Louis

County Economic Council and the St. Louis Regional Chamber are ready to help the REI Committee

and the organizations they represent take the steps necessary to develop the detailed plans and

raise the capital required to help the region achieve its vision. The Chamber has committed

resources to validate the regional capacity and interest in raising additional capital to support the

recommendations listed above. By continuing these efforts and collaborations, the leaders can

accelerate the transformation of the regional economy to one characterized by high growth

entrepreneurship and economic prosperity. .............................................................................................. 8

Introduction .......................................................................................................................................................... 9

The Regional Challenge ................................................................................................................................... 9

Legacy of Entrepreneurial Successes ............................................................................................................ 9


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World Wide Technology ............................................................................................................................ 10

Enterprise Holdings .................................................................................................................................. 10

Express Scripts ......................................................................................................................................... 10

Entrepreneurial Support System ................................................................................................................. 10

The Regional Entrepreneurship Initiative ........................................................................................................ 14

Formation and Funding ................................................................................................................................ 14

Goals and Focus ........................................................................................................................................... 14

Initial Research and Analysis ....................................................................................................................... 15

Situational Analysis ........................................................................................................................................... 18

Gaps and Opportunities ............................................................................................................................... 19

Success Drivers ................................................................................................................................................. 23

Recommendations ............................................................................................................................................ 26

Working Group Actions and Planning .............................................................................................................. 34

General Guidance ......................................................................................................................................... 34

Transformative vs. Incremental Actions ...................................................................................................... 34

Core Questions.............................................................................................................................................. 35

Capital Formation Working Group ........................................................................................................... 35

Network Working Group ........................................................................................................................... 36

Marketing and Public Relations Working Group ..................................................................................... 37

Economic, Social and Political Climate Working Group ......................................................................... 38

Moving Forward ................................................................................................................................................. 40

Appendix ............................................................................................................................................................ 42

Appendix A: Organizations Interviewed for the REI Planning Process ....................................................... 42

Appendix B: Commercialization Framework................................................................................................ 44

Appendix C: St. Louis Regional Deal Flow ................................................................................................... 48

Magnitude of Deal Flow ........................................................................................................................... 48

Trends in Deal Flow .................................................................................................................................. 50

Composition of Deal Flow ........................................................................................................................ 51

Appendix D: Startup Capital Report ............................................................................................................. 54

Appendix E: Economic, Demographic and Entrepreneurial Profile of St. Louis ........................................ 55

Appendix F: Glossary .................................................................................................................................... 56

Appendix G: Bibliography.............................................................................................................................. 60


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EXECUTIVE SUMMARY

Introduction: The Situation

During the last 20 years, Pittsburgh, Cleveland, Detroit, Buffalo, Rochester and St. Louis, each a thriving

manufacturing-based economy through most of the 20th Century, lost hundreds of thousands of jobs as a

result of global competition and major disruptions in the world economy. With talent, cultures and policies

shaped by the dominant presence of large companies, it was difficult for these regions to respond. Having

become heavily dependent upon large corporations as the primary engines of their regional economies,

these communities are now identifying, developing and supporting the new entrepreneurial companies that

could help transform their economies.

Faced with major economic dislocations

caused by the closure of recent automobile

assembly facilities, regional leaders worked

with national experts (AECOM) to develop aregional economic adjustment strategy1. In

addition to other findings and

recommendations, the strategy identified the

benefits of developing a stronger and more

focused emphasis on entrepreneurship to

drive transformative economic growth and

diversification.

As the first few steps, the AECOM Report

recommended the following:

Catalog the array of regional entitiesand organizations involved in and

supporting entrepreneurship;

Evaluate the climate and capacity forentrepreneurial/small business

development across the region by

defining local strengths and weaknesses, funding gaps and industry best practices; and

Develop a plan to enhance access to resources supporting entrepreneurs and entrepreneurship.The Importance of Entrepreneurship

St. Louis has a rich heritage of starting and growing innovative companies like Express-Scripts, WorldWide Technology and Enterprise Rent-A-Car, now among the largest companies in the nation.

1http://www.slcec.com/cmss_files/attachmentlibrary/AECOM%20Chrysler%20Impact%20-%20sm.pdf


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The regions strengths in the bio, plant and life sciences sectors are well known. These innovation-based sectors are excellent models for growth in other sectors, including but not limited to

information technology and advanced manufacturing.

The region has experienced a rapid increase in high value entrepreneurship support organizationsand service providers that work with companies to help them grow and find the resources they need

to move to the next level. Entrepreneurship is a critical component of the regions economy, creating new and exciting

products and companies, attracting talent to the region and creating jobs.

As reported by the Kauffman Foundation, from 1980 to 2005, all net new jobs in the U.S. economy were

created by firms that were less than five years old2. In its 2012 State of Entrepreneurship Address,

Kauffman also reported that 40 percent of all net new job growth comes from the fastest growing 1 percent

of these young firms.3 Supporting these conclusions, a recent study in Pennsylvania found the fastest

growing 0.3 percent of businesses created 75 percent of new jobs4.

The Response: The Regional Entrepreneurship Initiative (REI)

In April 2012, St. Louis County Executive Charlie Dooley and City of St. Louis Mayor Francis Slay invited a

diverse group of St. Louis regional leaders to develop a regional action plan for strengthening the regions

entrepreneurship ecosystem. The leaders included for-profit investors and entrepreneurs, as well as

representatives from regional economic development organizations, universities, state and local

government, entrepreneurial support organizations and the St. Louis Regional Chamber.

With financial assistance from the U.S. Department of Commerce Economic Development Administration

(EDA), the State of Missouri and the St. Louis County Economic Council (SLCEC), and collaborative leadership

from the City of St. Louis, the State of Missouri, the SLCEC and the St. Louis Regional Chamber, the region

launched a Regional Entrepreneurship Initiative(REI) to create a roadmap for strengthening the regionsentrepreneurial economy.

To help manage and inform the project, the SLCEC partnered with JumpStart Inc., a Northeast Ohio venture

development organization. Through its JumpStart America initiative, JumpStart helps regions identify and

capitalize on opportunities to accelerate the development of entrepreneurship as a driver of economic

recovery, growth and prosperity. JumpStart brings a wealth of experience and expertise gathered during its

nine years operating in Northeast Ohio and its work over the last three years in 12 U.S. regions.

The REI Vision: A Top 10 Region for Entrepreneurship

The REI vision is to transform the region into one of the Top 10 best places in the nation to be an

entrepreneur. To help accomplish this, leadership established the following goals:

2 www.kauffman.org/research-and-policy/where-will-the-jobs-come-from.aspx3 www.kauffman.org/newsroom/high-growth-firms-account-for-disproportionate-share-of-job-creation-according-to-kauffman-foundation-study.aspx4 Ben Franklin HiGro Report. August 2, 2011.


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Increase the number of competitive, fast growing firms by identifying high growth potential startupsand providing them with the capital and expert assistance they need to attract follow-on funding,

talent and the other resources needed to succeed; and

Expand existing, high impact resources and attract the complementary resources necessary to fostera thriving entrepreneurial ecosystem.

With a vision of transformative change, the REI focused on entrepreneurship in context of two types of

opportunities: i) high growth potential startups, and ii) existing small companies poised for accelerated

growth and value creation. To ensure the REI would benefit from the insights and perspectives of regional

entrepreneurs, investors, economic development professionals, educators and others, the REI began with

the creation of the 40-person REI Committee. With research and guidance provided by JumpStart and in-

region experts, the REI Committee developed the findings and recommendations by participating in regular

meetings and engaging in working groups with the topics ofCapital Formation; Networking; Marketing andPublic Relations; and Economic, Social, and Political Climate.The Findings: Opportunities and Gaps

The following summarizes the current state of the St. Louis entrepreneurship ecosystem and forms the basis

for the recommendations (see Recommendations section below).

The region has a growing cluster of resources to support entrepreneurs and entrepreneurship, butthese resources are not of uniform quality and are not equally available across all market sectors,

such as biosciences, tech, agriculture, energy, and advanced manufacturing.

The bioscience sector is well-supported and relatively well-funded. This sector has outstanding andsignificant sources of institutional research to generate a flow of opportunities (e.g. Washington

University, St. Louis University, Bio-Research Development Growth Park, etc.), specialized facilities to

incubate opportunities, expert assistance programs to help nurture opportunities, specializedtraining for bioscience entrepreneurs (the Bio Entrepreneur Development), and dedicated

investment funds to finance opportunities at various phases of commercialization. The bioscience

entrepreneurial ecosystem is anchored by BioSTL, BioGenerator, BRDG Park, CET, the Helix Center

Biotech Incubator and CORTEX.

Through the example of BioSTL (including BioGenerator), the region has experience and successfocusing entrepreneurial support through a venture development organization (VDO) that provides

capital and expert assistance, shares related resources, promotes bioscience sector

entrepreneurship, and connects and promotes sector opportunities across multiple providers of

specialized resources.

Events such as the Ag Innovation Showcase, a joint effort of the BRDG Park at the Danforth PlantScience Center and the Larta Institute, facilitate dialogue and deal flow between agriculture industry

leaders, emerging innovators and investors in ag-bio, renewable energy, sustainable materials, food

production, animal health, and farming technologies from 11 countries.

The tech sector benefits from a rapidly growing list of investment and expert resources, and therecent launch of AccelerateStLouis.org should help entrepreneurs and others navigate available

resources more efficiently and effectively. The sector nevertheless lacks the concentration and


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magnitude of dedicated resources and support available in the biosciences sector, and as noted,

suffers from a gap in investment capital for Incubating to early Demonstrating phase opportunities

that require an investment of between $250,000 and $500,000.

Across all sectors, the region benefits from the presence of Washington University and St. LouisUniversity, both attractors of substantial research funding and active supporters of

entrepreneurship. In 2012, St. Louis University attracted $51 million in research funding and

actively supported entrepreneurship and entrepreneurial education through the St. Louis University

Entrepreneurship Center. Washington University attracted $620 million in research funding and

supported entrepreneurship and entrepreneurial education through the Skandalaris Center for

Entrepreneurial Studies. In addition to BJC HealthCare and the St. Louis Life Sciences Project,

Washington University was also one of the three founding funders of BioSTL.

Across all sectors, although to a lesser extent in the biosciences sector, the ecosystem is burdenedby the following critical gaps in the resources available to support entrepreneurs:

o Capital. There is a capital gap between: i) the Imagining phase grants and investments providedby Arch Grants, SLCECs Start-Up Challenge, the Helix Fund and Capital Innovators, and ii) thelate Demonstrating and Market Entry phase, for-profit investments provided by the angel

networks (e.g. Arch Angels, Billiken Angels and FinServe Tech Angels) and Cultivation Capital. In

the bioscience sector, BioGenerator fills this gap.

o Expert Services. The region has two strong mentoring programs (ITEN and IVMS), but is onlybeginning to augment these programs with paid EIRs. ITEN recently received funding from the

Missouri Technology Corporation (MTC) to add three paid EIRs in 2013, one per quarter

beginning in Q2. Since fall 2010, financial support for EIRs also has been available through the

Helix Fund; both BioGenerator and Nidus have received grants through the Helix Fund for their

programs. VDOs and investment funds that service Imagining, Incubating and Demonstrating

phase companies often supplement their volunteer assistance with paid EIRs, especially for

their most promising portfolio companies. Given the substantial flow of Imagining and

Incubating phase opportunities across all sectors, but especially in biosciences and tech, the

region should continue to look for opportunities to use paid EIRs to accelerate the progress of its

most promising opportunities.

o Accelerator Graduates. Regional entrepreneurs and investors agree that the increasedavailability of grants through programs, such as Arch Grants, and the combination of Imagining

phase investment capital and related assistance provided by Capital Innovators has increased

tech sector deal flow. The region is likely to face significant challenges securing follow-on

funding for these deals because of the rapid proliferation of accelerators nationally and the

scarcity of institutional financing and venture capital for rounds of $1 million and greater.5

Regional leaders should strongly consider the impact of this gap on the deal flow andmomentum generated in the last two years.

5 http://mobile.businessweek.com/articles/2013-03-14/waiting-for-the-accelerator-bubble-to-pop
http://mobile.businessweek.com/articles/2013-03-14/waiting-for-the-accelerator-bubble-to-pophttp://mobile.businessweek.com/articles/2013-03-14/waiting-for-the-accelerator-bubble-to-pop


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Outside the biosciences and tech sectors, the available resources (capital, facilities and expertassistance) are not as abundant, diverse and integrated. In the absence of a VDO, such as BioSTL,

or the array of resources focused on the tech sector, the number of opportunities in sectors such as

agriculture, energy and advanced manufacturing remains uncertain. Given the St. Louis regions

historic strengths in these sectors, the potential for significant deal flow and value merits the

commitment of additional efforts and resources.

In addition to the capital gap described above (between Imagining phase and late Demonstratingphase opportunities), the region has little early stage or Series A venture capital. More specifically,

there are very few venture funds with currently available capital that are capable of leading Series A

investments and attracting out-of-region investors (seeAppendix Con St. Louis deal flow for

additional information).

The regions entrepreneurial ecosystem lacks certain enabling functionality, resources andinfrastructure critical to maximizing the impact of currently available resources. The following

capabilities help ensure that entrepreneurs find needed resources as quickly and efficiently as

possible, and provide leaders with the information they need to fill gaps, capture opportunities and

ensure the availability of resources over the time period necessary to achieve the desiredtransformation of the regional economy. The following is a list of the missing capabilities, resources

and infrastructure of which the St. Louis ecosystem could benefit:

o Region-wide communications and marketing. In the context of promoting the region as a fertileenvironment for entrepreneurs, investors, and entrepreneurship, the regions current efforts are

fragmented at best.

o Commonly used deal intake and CRM system. St. Louis has no common intake system orcustomer relationship management (CRM) system to ensure that entrepreneurs are quickly and

productively linked to the resources they need. This limitation results in unreliable data, missed

opportunities and an uncertain and confusing path between entrepreneurs and the resources

they need.

o Consolidated metrics collection and reporting system. The region lacks consistent terminologyand a commonly used system to measure entrepreneurial performance and impact. Most

individual organizations provide some measure of their own accomplishments, but no

mechanism exists to: i) collect, validate and analyze process and outcome metrics on a

consistent basis for the overall region; ii) accurately determine regional deal flow by capturing all

relevant opportunities and reconciling duplications; and iii) consolidate this information into a

useful tool for promoting the region and assessing resource needs and opportunities.

o Talent attraction and retention. The region has only recently begun to recognize the importanceof developing specific programs to address the talent challenges facing startup companies.Similar to other Midwest economies, the region lacks a sufficient number of entrepreneurs with

actual experience building and leading successful startup companies. The lack of experienced

C-level and senior talent continues to inhibit the growth and success of young companies.

Although the region has several outstanding entrepreneurial educational programs for students,

these do not address the near-term need for experienced senior-level talent.


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o Inclusion of minority, women, veterans and immigrant entrepreneurs. St. Louis has noorganized initiatives to ensure that all of the resources available to help high potential startups

include or reach minority, women, veteran and immigrant entrepreneurs. As is the case in most

regions across the U.S., the region is not effectively reaching or leveraging the entrepreneurial

talent in these disconnected communities in a meaningful, consistent and sustained manner.

o Efficient and productive matching of entrepreneurs to required resources. The region lacks adatabase and related system to efficiently and productively match entrepreneurs with the

resources they need. AccelerateStLouis.orgshould help with this challenge, although the region

would benefit from continuing to enhance this capability.

The Recommendations

Based on the information gathered during this process and regular interactions among the participants, the

REI identified the following opportunities to complement and accelerate existing efforts to establish and

grow a high performing entrepreneurial economy:

Continue Collaboration. The region needs to continue to collaborate in order to develop moredetailed operational and implementation plans in relation to specific action plan priority areas.

Bridge the Pre-Seed Capital Needs. In sectors other than biosciences, the region lacks funding tobridge companies from the available validation funding (grants, convertible debt and equity

investments in amounts less than $100,000) to the investments provided by angel and venture

capital investors ($500,000+). Given the significant deal flow in the tech sector, this gap

(investment capital in the range of $250,000-$500,000) represents a real opportunity. An

evergreen fund (similar to the Bioscience Seed Fund available through BioSTL/BioGenerator) is

compatible with the risk profile of companies at this phase of commercialization.

Launch a Regional Customer Relationship Management System. As the diversity, intensity and paceof entrepreneurial assistance continues to increase so does the need for and value of a system to

track the assistance, investment and related impact. The system provides the ability to answer

fundamental questions such as: i) who are we currently helping; ii) what are the specific assistance

or resources we are providing; iii) what is the impact of the resources or assistance; and iii) are we

missing something?

Develop a Common Measurement and Metrics System. With the metrics and related systems,practitioners and funders will know sooner whether their actions are on track to produce the desired

results.

Develop Coordinated Marketing and Communications. The rapid development of the region'sentrepreneurial support system over the last two years has left many entrepreneurs, investors andservice providers confused. The recent launch ofAccelerateStLouis.orgis a powerful first step in the

development of an integrated approach to bringing together the components of a high performing

entrepreneurial economy. Additionally, the region would benefit from an intensive, comprehensive

and sustainable approach to expanding awareness, increasing participation, attracting and retaining

talent, and attracting capital from within and outside the region.
http://www.acceleratestlouis.org/http://www.acceleratestlouis.org/http://www.acceleratestlouis.org/http://www.acceleratestlouis.org/


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Develop Inclusion Programming. Only a small percentage of St. Louis regional deal flow comes fromminority, female, veteran or immigrant entrepreneurs, though they represent significant portions of

the regional population. Similar to other regions throughout the U.S., they remain disconnected from

the resources available to support high growth potential startups. The solution begins with a

commitment to actively, professionally, consistently and intensively pursue inclusion across all of the

actions and functions within the entrepreneurial economy (e.g. talent, leadership, policy, investing,

mentoring, etc.). The combination of this commitment and the measurement/metrics system is a

powerful first step in understanding the dynamics and impact of including a much larger and more

diverse population in the high growth potential entrepreneurial economy.

Strengthen Expert Assistance (Entrepreneurs-in-Residence) Programs. The region has two strongmentoring programs (ITEN and IVMS), but is only beginning to augment these programs with paid

EIRs. ITEN recently received funding from the Missouri Technology Corporation (the MTC) to add

three paid EIRs in 2013, one per quarter beginning in Q2. Since fall 2010, financial support for EIRs

also has been available through the Helix Fund; both BioGenerator and Nidus have received grants

through the Helix fund for their programs. VDOs and investment funds that service Imagining,

Incubating and Demonstrating phase companies often supplement their volunteer assistance with

paid EIRs, especially for their most promising portfolio companies. Given the substantial flow ofImagining and Incubating phase opportunities across all sectors, but especially in biosciences and

tech, the region should continue to look for opportunities to use paid EIRs to accelerate the progress

of its most promising opportunities.

Develop Regional Entrepreneurship Talent Programs. With a legacy of slow population growth, largecompany economic dominance and few recent high profile exits, St. Louis needs senior talent with

experience founding, funding, growing and exiting from technology-based startups. As many

startups have learned the hard way, the experience gained primarily in large companies often

doesn't translate into the combination of skills and personal traits necessary to succeed in a startup.

A dedicated talent recruiting service to help the increasing number of startups across the various

sectors attract talent would have a material positive impact on the regions entrepreneurialeconomy.

Increase the Availability of Series A Venture Capital. In St. Louis and the rest of the country, twofactors have created a critical shortage of the Series A venture capital needed by startups to

aggressively enter the market and scale their businesses. The first is the contraction of the venture

capital industry since late 2008. The second is the huge number of tech accelerator graduates

across the country over the last few years.6 These factors plus the relative lack of successful

venture capital funds in areas other than the coast have created a shortage of Series A venture

capital. This shortage is becoming a major constraint on the success of high growth potential

startups. Numerous states and regions across the country have helped establish large Series A

funds or pools of capital to co-invest with and attract venture capitalists (a Series A Fund). By

following this approach or establishing an aggressive effort to secure venture funding for the region's

top opportunities from venture funds located elsewhere, the region should increase the number of

its successes and increase the odds that the region will retain its successful startup ventures.

6Inc. Magazine. Where Has All the Funding Gone? Competition heats up for million-dollar VC deals, April 2013


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Identify Next Market Sector. Opportunities in the tech and bioscience sectors have captured thelargest share of the regional validation funding and related support. The region's historical strengths

in advanced manufacturing, advanced energy, clean tech and agricultural sciences have not yet

translated into strong startup deal flow. A well-structured validation pilot would help provide leaders

with greater insights into the entrepreneurial potential of these sectors.

Moving Forward

Through grassroots efforts and the contributions of foundations, benefactors, universities, private investors,

regional governments, non-profits and others, the region has made substantial progress since the Initiatives

launch in April 2012. The establishment of the REI Committee and the Working Groups, their work on this

Report, and the recently announced partnership between the SLCEC and St. Louis Development Corporation

are examples of the types of collaborations necessary to convert this Report into the high-impact resources

needed by the regions entrepreneurs. The REI participants are in position to convert this Repor t into action,

but it won't be easy. The St. Louis County Economic Council and the St. Louis Regional Chamber are ready to

help the REI Committee and the organizations they represent take the steps necessary to develop the

detailed plans and raise the capital required to help the region achieve its vision. The Chamber hascommitted resources to validate the regional capacity and interest in raising additional capital to support the

recommendations listed above. By continuing these efforts and collaborations, the leaders can accelerate

the transformation of the regional economy to one characterized by high growth entrepreneurship and

economic prosperity.


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INTRODUCTION

The Regional Challenge

With the closure of Chryslers North and South Plants in 2008 and 2009 and the concurrent severe

economic recession, the St. Louis Metropolitan Statistical Area (MSA) lost almost 70,000 jobs since 2007.

These closures accelerated St. Louis ongoingeconomic decline from the 10th ranked MSA for economic

output and population in 1970 to the 19th in 2011.7 The regions manufacturing base decreased by more

than 35 percent since 2000 and net migration has been negative. Although St. Louis is home to 21 Fortune

1000 companies, these anchor businesses are increasingly vulnerable to a globally competitive economy.

For these and other reasons, community leaders recognized the need to diversify the regional economy.

AECOM, the Los Angeles-based management services organization retained to develop a strategic plan to

overcome the impact of the Chrysler closings, observed

the Region has arrived at an economic crossroads, where relying on the status quo

will lead in the direction of under-performance and insufficient growth, and more

proactive strategies will require very deliberate decisions about how organizations,

leadership, and resources can be realigned to encourage regional economic growth.8

As one of a number of suggested solutions, AECOM recommended the region:

energize entrepreneurship and grow nascent companies with potential to become new

economic engines for the region.

AECOM also identified potential high growth entrepreneurship as a bright spot in St. Louis economy.

Legacy of Entrepreneurial Successes

Building companies from startups into major businesses is something St. Louis has a long tradition of doing.

Dating back into the early to mid-20th Century, some of the regions early and most successful entrepreneurs

built companies like Anheuser Busch, McDonnell Douglas and Purina. These companies went on to become

some of the regions largest corporations and civic leaders. Today, the regions entrepreneurial spirit

continues and the next generation of startups can gain inspiration from companies like World Wide

Technology, Enterprise Holdings and Express Scripts, which all began as startups and have grown into

successful businesses.

7Economic, Demographic and Entrepreneurial Profile of the St. Louis Region, Jack Strauss, Simon Center for RegionalForecasting, September 2012.8St. Louis Regional Economic Adjustment Strategic Plan, September 30, 2011, prepared by AECOM for the St. Louis CountyEconomic Council, State of Missouri, and City of Fenton.


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World Wide Technology

Founded in 1990 by co-founders David L. Steward and Jim Kavanaugh, World Wide Technology (WWT) began

with four employees and initial funding from a $250,000 Small Business Administration loan. In a May

2001 St. Charles County Business Record article, Steward recalled times when the company was not able to

pay its bills, and an occasion when he looked out his window and saw his car being repossessed. However,Steward's vision for the company's future, along with a passion for technology and the ability to attract the

right people, would prove instrumental as his company grew. During WWT's formative years, the company

mainly worked for the U.S. government. It quickly gained a reputation for on-time delivery and quality. After

forming a number of strategic alliances with other technology firms, WWT saw its commercial business begin

to grow. During the 23 years of WWTs existence, the company has seen strong growth nearly every year and

now employs more than 2,000 professionals, has grown its annual revenues from $812,000 in its first year

to nearly $5 billion in current annual revenue, and is now the nations largest African-American owned

business.

Enterprise Holdings

Enterprise Holdings has a rich and distinctive heritage. It tells a remarkable story of how entrepreneurship,

hard work and a big dream can turn a small startup into a world-class company. The founder, Jack Taylor,

started the company in 1957 in a small, lower-level office in a St. Louis Cadillac dealership, with a fleet of

seven cars, one employee and a commitment to provide a uniquely personal brand of customer service.

Enterprise Holdings is now the largest car rental service provider in the world, measured by revenue,

employees and fleet. The companys annual revenues are $15.4 billion, it employs more than 74,000

people and its affiliates own and operate almost 1.3 million cars and trucks. Enterprise Holdings, and its

affiliates, offer a total transportation solution and are united by a common mission: to be the best

transportation service provider in the world ... to exceed our customers' expectations for service, quality and

value ... to provide our employees with a great place to work ... and to serve our communities as a committed

corporate citizen.

Express Scripts

In September 1986, a health maintenance organization and a regional drugstore chain started a company

so small, it went unreported by the hometown newspaper for more than two months. Today, that entity is

Express Scripts, the countrys leading pharmacy benefit manager whose mission is to make prescription

drugs safer and more affordable. Based in North County, Express Scripts employs 4,000 people in the

region and 30,000 people nationwide. The company has grown into a $93 billion industry leader that

processed more than 1.4 billion prescriptions for more than 100 million Americans last year. By leveraging

information technology and bringing together three complementary capabilitiesbehavioral sciences, clinical

specialization and actionable dataExpress Scripts has built practical solutions for three key decision areas:

drug choices, pharmacy choices and health choices.

Entrepreneurial Support System

Although companies like WWT, Enterprise Holdings and Express Scripts are shining examples of the power of

entrepreneurship, the AECOM report and regional leaders recognized the need for a more comprehensive

and complete support system for entrepreneurs seeking to bring their innovative ideas to market.


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Fortunately, the St. Louis region had already begun to build a substantial base of entrepreneurial assets and

successes. In the late 1990s, the community developed and implemented programs to promote technology

development and commercialization of plant and life science technology. In the last few years, the region

benefitted from a rapid increase in the breadth and depth of resources supporting entrepreneurship in the

information technology sector.

Examples of regional progress in developing and deploying effective, high impact resources and

collaborations in support of high potential startups include, but are not limited to the following:

In the bioscience sector, BioSTL and its subsidiary, BioGenerator (collectively, BioSTL), haveemerged as a full-service venture development organization (VDO). With significant financial support

from Washington University, Barnes-Jewish Hospital, St. Louis University, and large corporations and

family foundations, BioSTL provides entrepreneurs with investment capital, expert assistance,

equipment, facilities, and other critical resources:

o BioSTL and its partners also provide leadership in the form of marketing, communications andadvocacy to help bioscience startup companies acquire the resources they need to succeed;

o Specialized physical facilities are available through the Helix Center, the Danforth Plant ScienceCenters Bio-Research & Development Growth (BRDG) Park, the Center for Emerging

Technologies and the overall CORTEX development;

o Research activities are growing at universities and large and small companies, and a growingbase of entrepreneurial talent is now emerging. Collectively, the bioscience ecosystem has

stimulated a consistent flow of new startups and an influx of capital from local and national

investors.

Since 2008, the region generated more than 54 bioscience startup companies. These efforts

demonstrate the potential of focused action and investment to accelerate private sector action,

collaborations and leveraged investments.

In the information technology sector (tech), entrepreneurial support organizations raised the levelof startup activity and investment in tech-based entrepreneurship. While no single organization

anchors or consolidates core functional programs to the same degree as BioSTL, the tech ecosystem

offers a number of the needed functions:

o ITEN provides expert assistance through a managed mentor network and recently receivedfunding from the Missouri Technology Corporation (MTC) to augment these programs with paid

EIRs;

o Capital Innovators and Cultivation Capital provide specialized investment capital and expertassistance from entrepreneurs-in-residence (EIRs); and

o T-REx and several general purpose incubators provide physical facilities.Since 2008, these efforts have helped create 55 tech companies, 40 of them in just 2011 and

2012. This represents tremendous progress in a short period of time and sets the stage for

continued growth.

St. Louis historic economic strengths also come from agriculture, advanced energy and advancedmanufacturing(AEM) sectors. A number of organizations provide assistance, although not yet at


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the level of the bioscience or tech sectors. Examples of high impact programs in the AEM sectors

are:

o Innovate St. Louis provides expert assistance through its Innovate Venture Mentoring Service(IVMS);

o Nidus Partners offers EIR assistance and funding to advanced energy and clean tech companieswith technologies of interest to their corporate partners;

o The BRDG Park at the Danforth Plant Science Center hosts the international Ag InnovationShowcase, which attracts small agriculture and plant science companies and investors in a

forum that has led to $66 million in post-showcase investment since 2009; and

o Local angel funds also occasionally invest in the AEM sectors.Since 2008, the region has generated 23 AEM startups, about half the number generated in each of

tech and biosciences. Given the limited dedicated resources, the lower rate of startups is to be

expected and could be an opportunity for ecosystem growth.

The region also benefits from a number of innovative financing programs that provide entrepreneurswith limited amounts of startup capital. Examples include:

o A variety of business plan competitions in St. Louis that give startup companies financialresources and services to propel them forward.

o Arch Grants, a program started in 2012, makes $50,000 grants to startups in the ImaginingPhase9 through a competitive award process. Although Arch Grants are available to

opportunities in the bioscience, tech and AEM sectors, most of its grants have been in tech and

bioscience to date.

o Capital Innovators invests in tech startups in the Imagining phase of commercialization. CapitalInnovators offers equity investment capital and expert assistance through an accelerator model

(approximately $50,000 per investment).

o Arch Angels, Billiken Angels and FinServe Tech Angels are for-profit networks of high net worthindividuals that invest in local technology-based startups (approximately $250,000 per

investment). The angel networks invest primarily in companies in the late Demonstrating and

early Market Entry phases of commercialization.

o Cultivation Capital is a new for-profit fund started by local serial entrepreneurs who investbetween $100,000 and $1 million in companies in the late Demonstrating and Market Entry

phases of commercialization.

The efforts described above represent only a portion of St. Louis large and complex entrepreneurial

ecosystem. Figure 2 provides a graphical depiction of the regional organizations offering assistance to

entrepreneurs.

Although the region has reason to be proud of its progress over the last few years, it is important to

understand that St. Louis is playing catch-up. In terms of timing, scope and magnitude of investment,

many of these efforts trailed those in comparably situated cities such as Cleveland, Pittsburgh, Detroit and

9For a definition of the five phases of commercialization (Imagining, Incubating, Demonstrating, Market Entry, and Growth &Sustainability), see the detailed explanation in theAppendix B: Commercialization Framework.


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others. These and other regions have made commitments to support entrepreneurship that far exceed

those of the St. Louis region. The St. Louis region has made extraordinary progress during the last few years,

especially in the less visible but high impact area of collaboration, which has enormous potential to

accelerate the development of the entrepreneurial economy. As described in more detail later in this Report,

St. Louis is well-positioned to leverage certain gaps and opportunities to sustain and accelerate its progress.


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THE REGIONAL ENTREPRENEURSHIP INITIATIVE

Formation and Funding

Consistent with the strong recommendations contained in the AECOM report, the St. Louis County EconomicCouncil (SLCEC) identified the need to develop an approach to energize entrepreneurship . Initiated by the

leadership of St. Louis Mayor, Francis Slay, and St. Louis County Executive Charlie Dooley, the Regional

Entrepreneurship Initiative (REI) provided a platform to address the impact of the Chrysler plant closings and

the need to support entrepreneurship. With this leadership and funding from the U.S. Economic

Development Administration (EDA), the SLCEC partnered with JumpStart, a Northeast Ohio-based venture

development organization (VDO) that, through its JumpStart America initiative, helps regions identify and

capitalize on opportunities to accelerate the development of entrepreneurship as a driver of economic

recovery, growth and prosperity. In partnership with the EDA and the State of Missouri, the SLCEC and

JumpStart initiated a 10-month planning process to produce this Regional Entrepreneurship Initiative Report

(the REI or Report). To ensure the Report would benefit from the insights and perspectives of regional

entrepreneurs, investors, economic development professionals, educators and others, JumpStart and SLCECformed a nine-member Executive Committee and a 19-member Advisory Group.

Goals and Focus

To achieve the vision of the REImake St. Louis a Top 10 region for entrepreneurshipthe project focusedon two main goals:

1. Increase the number of competitive, fast growing firms by identifying high potential regionalopportunities and then providing them with the capital and expert assistance they need to attract

follow-on funding, talent, and the other resources needed to succeed; and

2. Help the region expand existing resources and attract additional complementary resourcesnecessary to foster a thriving entrepreneurial economy.

In accordance with the EDA proposal and the AECOM report, the REI project focused on entrepreneurship in

the form of high potential startups. High potential startups are new or young companies, often technology-

based, with the potential to achieve accelerated growth, value creation and wealth creation, and in the

process, create large numbers of high paying jobs.

Below is an illustration of the path a high potential startup follows on its way from idea to successful

company. The first three phases of commercializationreferred to as Imagining, Incubating and

Demonstratingare also sometimes called the Valley of Death because entrepreneurs without extremely

deep pockets, wealthy relatives or enormous luck often find that their great ideas stagnate or die duringthese phases of commercialization.10 The Valley of Death begins when the entrepreneur exhausts his or her

personal resources (sometimes referred to as friends and family money) and ends when the opportunity is

sufficiently mature as to be able to attract resources from for-profit investors (e.g. angels, venture capitalists,

10SeeAppendix B for detailed description of the phases of commercialization.


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strategic investors, banks, etc.). In considering approaches to create a thriving entrepreneurial economy, the

Valley of Death is the focus. The challenge is to identify efficient and effective mechanisms to create a large

number of great ideas and then help them cross the Valley of Death and become great companies, or, as a

next step, create great investments for angel and venture capital investors.

Figure 1, Phases of Commercialization

Initial Research and Analysis

In pursuit of the goals listed above, the REI conducted primary and secondary research, asset mapping, gap

analysis, assessment of regional entrepreneurial opportunities, and extensive community engagement.Primary research included interviews with entrepreneurs, investors, researchers, economic development

professionals, entrepreneurial support organization leaders and others, as well as a survey of the

perceptions and attitudes of entrepreneurs. The persons interviewed and focus group participants

represented over 60 different organizations (seeAppendix A for a detailed list). JumpStart also performed

an extensive literature review. For secondary research, JumpStart and the SLCEC commissioned two special

studies to provide statistical support for the recommendations.11 Throughout this process, JumpStart

solicited information and data on regional deal flow with a focus on high potential startups in the first three

phases of commercialization (seeAppendix B for a description of the phases of commercialization and

Appendix Cfor JumpStarts estimate of deal flow).

Based on this research and stakeholder engagement, JumpStart prepared a summary of its findings (see theSituational Analysis, Gaps and Opportunities section), and an outline of preliminary recommendations (see

11REI Startup Capital Report, St. Louis Regional Chamber, March 2013 (see Appendix D) and Economic, Demographic andEntrepreneurial Profile of St. Louis, Jack Strauss, Simon Center for Regional Forecasting, September 2012 ( seeAppendix E).


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the Recommendations section). In August 2012, JumpStart presented this summary at a meeting that

included the Executive Committee, the Advisory Group and a number of additional attendees.

In response to the findings and preliminary recommendations, the SLCEC, the St. Louis Regional Chamber

(SLRC) and others reached the following conclusions:

1. The REI would benefit from engagement with a larger group of local participants. As a first step, St.Louis leadership created the REI Committee, a 40-person group that included the nine-member

Executive Committee, the 19-member Advisory Group and 12 new members. The members of the

REI Committee are listed in Table 1 below.

2. Given the magnitude of the recommendations and the implications for regional entrepreneurshipsupport efforts, the REI Committee should be more involved in refining and prioritizingJumpStarts

findings and preliminary recommendations.

3. Given the Committee members in-depth knowledge of the resources, systems and capabilitiesembodied in existing entrepreneurial support organizations and programs, the REI Committee

should determine the organizations and mechanisms to implement the resulting recommendations.

To fulfill the objectives in conclusions #2 and #3 above, the REI Committee formed the following four

Working Groups: i) Capital Formation, ii) Network, iii) Marketing and Communications, and iv) Economic,

Social and Political Climate. To help inform the efforts of the Working Groups, JumpStart prepared a

Situational Analysis summarizingJumpStarts research and findings, and identifying opportunities for

strengthening St. Louis entrepreneurial ecosystem (see Situational Analysis section).


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Table 1, Members of the REI CommitteeRegional Entrepreneurship Initiative Committee

Heather Beaven, Director of Operations,Center for Emerging Technologies

Eric Gulve, President,BioGenerator

William Peck, Director,Washington University Center for HealthPolicy

Gilbert Bickel, Chairman,St. Louis Arch Angels

Jason Hall, Deputy Director,Missouri Department of EconomicDevelopment

Greg Prestemon, President & CEO,St. Charles County EconomicDevelopment Center

Jim Brasunas, Executive Director,Information Technology EntrepreneurialNetwork (ITEN)

Ken Harrington, Director,Washington University SkandalarisCenter for Entrepreneurial Studies

Joe Reagan, President & CEO,St. Louis Regional Chamber

Dennis Breite, Vice President,St. Louis Enterprise Centers,St. Louis County Economic Council

Laurie Hauber, Staff Attorney,Community Economic DevelopmentProgram,Legal Services of Eastern Missouri

Donn Rubin, President & CEO,BioSTL

Edward Bryant, Vice President,Economic Development Collaborative,St. Louis County Economic Council

Tim Hayden, Director,St. Louis University Center forEntrepreneurship

Theresa Ruzicka, Partner,RubinBrown

Vijay Chauhan, Senior EIR,BioGenerator

Steve Johnson, Executive Vice President,Economic Development and MarketingStrategy, St. Louis Regional Chamber

Sarah Spear, Executive Director,Arch Grants

Gregory Christofel, Counselor,SCORE

Paul Klug, Attorney,Posinelli

Travis Sheridan, Program Administrator,Helix Center

Denny Coleman, President & CEO,St. Louis County Economic Council

Sarah Kinkade, Research Coordinator,St. Louis County Economic Council

Judy Sindecuse, CEO & ManagingPartner, Capital Innovators

Rodney Crim, Executive Director,St. Louis Development Corporation

Dennis Lower, President & CEO,CORTEX

Steve Trampe, President,Owen Development

Jay DeLong, Vice President,New Ventures and Capital Formation,St. Louis Regional Chamber

Brian Matthews, Partner,Cultivation Capital

Christine Walsh, Executive Director,InvestMidwest

Barbara Enneking, Vice President,Enterprise Development,Centers for Emerging Technologies

Tom Melzer, Managing Director,RiverVest Venture Partners

Derek Weber, President,goBrandgo!

Sam Fiorello, COO & Senior VicePresident, Danforth Plant Science Center&President, BRDG Park

Elizabeth Noonan, Vice PresidentBioscience Technology, St. Louis CountyEconomic Council

Kyle Welborn, Executive Director,FinServe Tech Angels

Marilyn Gannon, President & CEO,Innovate St. Louis

Valerie Patton, Vice President EconomicInclusion & Executive Director,St. Louis Business Diversity Initiative,St. Louis Regional Chamber

Kelvin Westbrook, President & CEO,KRW Advisors, LLC

Victoria Gonzalez, Managing Partner,Nidus Partners


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SITUATIONAL ANALYSIS

One of the strengths of St. Louis is the large ecosystem that has formed to support entrepreneurship. Figure

2 below is an overview of the St. Louis assets available to support regional entrepreneurs12:

Figure 2, Regional Assets

12The list of organizations in Figure 2 is not comprehensive. It includes representative organizations that provide assistancein the form of service or capital to business persons and entrepreneurs. Most of the organizations provide general businessassistance and do not have the expertise or resources to service high potential startups.


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Gaps and Opportunities

The following summarizes the current state of the St. Louis entrepreneurship ecosystem and forms the basis

for the identification of opportunities to strengthen the ecosystem.

The region has a growing list of resources to support entrepreneurs and entrepreneurship, but theseresources are not of uniform quality and are not equally available across all market sectors such as

biosciences, tech, agriculture, energy, and advanced manufacturing.

The bioscience sector is well-supported and relatively well-funded. This sector has outstanding andsignificant sources of institutional research to generate a flow of opportunities (e.g. Washington

University, St. Louis University, Bio-Research Development Growth Park, etc.), specialized facilities to

incubate opportunities, expert assistance programs to help nurture opportunities, specialized

training for bioscience entrepreneurs (the Bio Entrepreneur Development Center), and dedicated

investment funds to finance opportunities at various phases of commercialization. The bioscience

entrepreneurial ecosystem is anchored by BioSTL, BioGenerator, BRDG Park, CET, the Helix Center

and CORTEX.

Through the example of BioSTL (including BioGenerator), the region has experience and successfocusing entrepreneurial support through a venture development organization (VDO) that provides

capital and expert assistance, shares related resources, promotes bioscience sector

entrepreneurship, and connects and promotes sector opportunities across multiple providers of

specialized resources.

Events such as the Ag Innovation Showcase, a joint effort of the BRDG Park at the Danforth PlantScience Center and the Larta Institute, facilitate dialogue and deal flow between agriculture industry

leaders, emerging innovators and investors in ag-bio, renewable energy, sustainable materials, food

production, animal health, and farming technologies from 11 countries.

The tech sector benefits from a rapidly growing list of investment and expert resources, and therecent launch of AccelerateSTL.org should help entrepreneurs and others navigate available

resources more efficiently and effectively. The sector nevertheless lacks the concentration and

magnitude of dedicated resources available in the biosciences sector, and suffers from a gap in

investment capital for Incubating to early Demonstrating phase opportunities (investments between

$250,000 and $500,000).

Across all sectors, the region benefits from the presence of Washington University and St. LouisUniversity, both attractors of substantial research funding and active supporters of

entrepreneurship. In 2012, St. Louis University attracted $51 million in research funding and

actively supported entrepreneurship and entrepreneurial education through the St. Louis UniversityEntrepreneurship Center. Washington University attracted $620 million in research funding and

supported entrepreneurship and entrepreneurial education through the Skandalaris Center for

Entrepreneurial Studies. In addition to BJC HealthCare and the St. Louis Life Sciences Project,

Washington University was also one of the three founding funders of BioSTL.


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Across all sectors, although to a lesser extent in the Biosciences sector, the ecosystem is burdenedby the following critical gaps in the resources available to support entrepreneurs:

o Capital. There is a capital gap between: i) the Imagining phase grants and investments providedby Arch Grants and Capital Innovators, and ii) the late Demonstrating and Market Entry phase,

for-profit investments provided by the angel networks (e.g. Arch Angels, Billiken Angels and

FinServe Angels) and Cultivation Capital. In the bioscience sector, BioSTL fills this gap.

o Expert Services. The region has two strong mentoring programs (ITEN and IVMS), but is onlybeginning to augment these programs with paid EIRs. ITEN recently received funding from the

MTC to add three paid EIRs in 20013, one per quarter beginning in Q2. Since fall 2010, financial

support for EIRs also has been available through the Helix Fund; both BioGenerator and Nidus

have received grants through the Helix Fund for their programs. VDOs and investment funds

that service Imagining, Incubating and Demonstrating phase companies often supplement their

volunteer assistance with paid EIRs, especially for their most promising portfolio companies.

Given the substantial flow of Imagining and Incubating phase opportunities across all sectors,

but especially in biosciences and tech, the region should continue to look for opportunities to

use paid EIRs to accelerate the progress of its most promising opportunities.

o Accelerator Graduates. Regional entrepreneurs and investors agree that the increasedavailability of grants through programs, such as Arch Grants, and the combination of Imagining

phase investment capital and related assistance provided by Capital Innovators has increased

tech sector deal flow. The region is likely to face significant challenges securing follow-on

funding for these deals because of the rapid proliferation of accelerators nationally and the

scarcity of institutional financing and venture capital for rounds of $1 million and greater. 13

Regional leaders should strongly consider the impact of this gap on the deal flow and

momentum generated in the last two years.

Outside the biosciences and tech sectors, the available resources (capital, facilities and expertassistance) are not as abundant, diverse and integrated. In the absence of a VDO, such as BioSTL,

or the array of resources focused on the tech sector, the number of opportunities in sectors such as

agriculture, energy and advanced manufacturing remains uncertain. Given the St. Louis regions

historic strengths in these sectors, the potential for significant deal flow and value merits the

commitment of additional efforts and resources.

In addition to the capital gap described above (between Imagining phase and late Demonstratingphase opportunities), the region has little early stage or Series A venture capital. More specifically,

there are very few venture funds with currently available capital that are capable of leading Series A

investments and attracting out-of-region investors due to their investment syndicates (seeAppendix

Con St. Louis deal flow for additional information).

13 http://mobile.businessweek.com/articles/2013-03-14/waiting-for-the-accelerator-bubble-to-pop
http://mobile.businessweek.com/articles/2013-03-14/waiting-for-the-accelerator-bubble-to-pophttp://mobile.businessweek.com/articles/2013-03-14/waiting-for-the-accelerator-bubble-to-pop


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The regions entrepreneurial ecosystem lacks certain enabling functionality, resources andinfrastructure critical to maximizing the impact of currently available resources. The following

capabilities help ensure that entrepreneurs find needed resources as quickly and efficiently as

possible, and provide leaders with the information they need to fill gaps, capture opportunities and

ensure the availability of resources over the time period necessary to achieve the desired

transformation of the regional economy. The following is a list of the missing capabilities, resources

and infrastructure of which the St. Louis ecosystem could benefit.

o Region-wide communications and marketing. In the context of promoting the region as a fertileenvironment for entrepreneurs, investors, and entrepreneurship, the regions current efforts are

fragmented at best.

o Commonly used deal intake and CRM system. St. Louis has no common intake system orcustomer relationship management (CRM) system to ensure that entrepreneurs are quickly and

productively linked to the resources they need. This limitation results in unreliable data, missed

opportunities and an uncertain and confusing path between entrepreneurs and the resources

they need.

o Consolidated metrics collection and reporting system. The region lacks consistent terminologyand a commonly used system to measure entrepreneurial performance and impact. Most

individual organizations provide some measure of their own accomplishments, but no

mechanism exists to: i) collect, validate and analyze process and outcome metrics on a

consistent basis for the overall region; ii) accurately determine regional deal flow by capturing all

relevant opportunities and reconciling duplications; and iii) consolidate this information into a

useful tool for promoting the region and assessing resource needs and opportunities.

o Talent attraction and retention. The region has only recently begun to recognize the importanceof developing specific programs to address the talent challenges facing startup companies.

Similar to other Midwest economies, the region lacks a sufficient number of entrepreneurs with

actual experience building and leading successful startup companies. The lack of experienced

C-level and senior talent continues to inhibit the growth and success of young companies.

Although the region has several outstanding entrepreneurial educational programs for students,

these do not address the near-term need for experienced senior-level talent.

o Inclusion of minority and women entrepreneurs. St. Louis has no organized initiatives to ensurethat all of the resources available to help high potential startups include or reach minority and

women entrepreneurs. As is the case in most regions across the U.S., the region is not

effectively reaching or leveraging the entrepreneurial talent in these disconnected communities

in a meaningful, consistent and sustained manner.

o Efficient and productive matching of entrepreneurs to required resources. The region lacks adatabase and related system to efficiently and productively match entrepreneurs with the

resources they need. AccelerateSTL.org should help with this challenge, although the region

would benefit from continuing to enhance this capability.

The factors described above served as a starting point for the Working Groups.

In selecting opportunities to accelerate the development of the regions entrepreneurial economy, the

Working Groups and other leaders should continue to take into account the potential benefits associated


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with increasing the engagement of the regions colleges and universities. These institutions have been and

can continue to serve as catalysts and drivers of successful regional economic development efforts focused

on high potential entrepreneurship. Across the country, many innovative and entrepreneurial startups have

emerged from faculty-driven research and development programs, particularly in the field of medicine,

science, technology, engineering, and mathematics. Many educational institutions around the country

provide services and financial incentives to enhance the commercialization of appropriate discoveries.

Graduate training programs involved in these research and development efforts have also yielded promising

entrepreneurs and companies. During the last few years, a rising number of undergraduates have engaged

in entrepreneurial events, particularly in the field of information technology. In recognition of these

opportunities, many campuses have established special centers of entrepreneurship. A widely diverse

campus population, including immigrants and minorities, contributes to and benefits from this environment.

Colleges and universities are also uniquely positioned to accelerate the creation of a productive

entrepreneurial economy by attracting gifted faculty prospects, undergraduates and graduate students, and

then supporting their entrepreneurial inclinations and efforts. Few other regional institutions have a

comparable potential to attract, retain or convene the talent required to accelerate the development of the

regional entrepreneurial economy. Universities are also the sole educators of the specialized business and

legal professionals necessary to help promising ideas become successful companies.

Academic institutions can also bring much needed leadership and financial resources to the effort. Their

trustees represent a unique combination of academic and community leaders. These leaders collaborate

across the traditional boundaries that often separate academia and business. Although universities

occasionally establish venture investment funds within their endowments, their primary value to the

entrepreneurial economy flows from their core missionthe creation and delivery of supportive academic

programs and the resultant change in the regions entrepreneurial capacity and culture.

There is abundant evidence that universities and colleges are essential components of the entrepreneurial

ecosystems. Regions exhibiting successful entrepreneurial ecosystems have in common the presence of

more than one institution that exhibits the qualities described above. These included Northern California

(Berkeley, Stanford and UCSF); Southern California (Scripps, Salk, UCSD and UCI); eastern North Carolina

(Duke, UNC and NC State); and Cambridge (Harvard and MIT). It is important to emphasize, however, that

established universities with global brands are not the only sources of entrepreneurial talent and innovation.

Increasingly, community colleges are hot spots for entrepreneurial activity. As an example, Lorain County

Community College located in Elyria, Ohio, has established a unique combination of resources in support of

entrepreneurship. These resources include an incubator14, a fund that provides capital to early stage

technology-based businesses15, the Blackstone LaunchPad program16, supporting academic programs and

direct involvement of faculty and students.

14 www.glideit.org15 www.innovationfundneohio.com16 www.lorainccc.edu/blackstone


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SUCCESS DRIVERS

Through its JumpStart America initiative, JumpStart helps regions, communities, and cities create, reignite or

accelerate their entrepreneurial economies to generate economic outcomes such as job growth, wealth

creation and increased economic activity. Although interested in JumpStarts experience as a VDO, the EDAwas equally interested in JumpStarts experience bringing together resources and productive partnerships to

create significant leverage, accelerate change and generate a collective impact beyond the reach of any

single organization. In other words, the EDA wanted JumpStart to work with regional leaders to help them

develop approaches designed to generate comparable impact in context of the regions opportunities,

resources and leadership. Over the last eight years in Northeast Ohio and during the last three years in the

course of working on projects to develop and implement plans to support entrepreneurship in 11 U.S.

regions, JumpStart America has refined its process and developed approaches to address the following

questions that are consistently raised by leaders in Northeast Ohio and elsewhere, including St. Louis:

1. How do we mobilize a leadership group to do something that has proven impossible in past efforts?2. How can we break through the paralysis caused by zealous advocacy for existing programs among

the dozens or hundreds of leaders, individuals and organizations in a region?

3. How can we help regional participants suspend their belief in a zero sum game and consider thepossibility that the right combination of efforts could attract new resources from in-region and out-of-

region sources?

4. How do we encourage sufficient discussion and input, yet not let the effort stall because thediscussion never results in a true agreement and action plan?

5. How do we overcome the natural human tendency to resist change, even when facts demonstratethat change is needed?

6. How, contrary to most regions past experiences, can we turn a planning exercise into funded, highimpact programs and resources?

Despite differences in project scope or tactics from region to region, JumpStart strongly believes that theanswers to these questions stem from the following Success Drivers. These Success Drivers serve as the

backbone for JumpStarts success in Northeast Ohio and the early successes of the newly formed efforts in

other regions. When considering any plan to fill one or more of the high potential gaps in an entrepreneurial

economy, JumpStart analyzes the plan taking into account four primary elements. Specifically, JumpStart

asks if the plan and precise mechanism of implementation is likely to be: i) Catalytic, ii) Inclusive, iii)

Accountable and iv) Sustainable. JumpStart uses these Success Drivers to help guide planning efforts.

Regardless of the scope, organization and governance of the model ultimately selected for implementation

in St. Louis, JumpStart strongly recommends that regional leaders consider the Success Drivers in

developing the specific mechanisms to address regional gaps and opportunities.

The following is a brief explanation of each of the Success Drivers:

Catalytic. To be catalytic, the approach should have a high probability of generating an impactbeyond the results of the individual investment or program. In attempting to make this judgment, it

is helpful to ask:

Is the approach likely to generate excitement and new energy, increase participation and bring new

sources of support to entrepreneurship?Will the approach shake up the status quo?


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In JumpStarts experience, the desired catalytic impact flows from two characteristics of the model:

o Leadership: new, dynamic and entrepreneurial leadershipo Independence: independent decision making in the resource allocation, but connected to

other regional resource providers through knowledge sharing, shared back office functions,

a commonly understood terminology and common metrics

Inclusive. In context of providing resources to support high potential entrepreneurship, mostregions only serve a fraction of the available or potential entrepreneurial talent. Women, minority,

veteran, and immigrant entrepreneurs are not significant beneficiaries of these resources and the

region does not benefit from the opportunities generated by these entrepreneurs. In attempting to

determine if an approach is inclusive, it is helpful to ask:

Is the effort to reach women and minority entrepreneurs as professional, consistent and determined

as comparable efforts to reach mainstream entrepreneurs within the targeted sectors?

Accountable. Whether an approach or plan has the desired level of accountability depends on twocharacteristics of the plan or approach: ownership and measurement. When developing a plan todeliver new or enhanced resources to entrepreneurs, the determination ofownership focuses on thecore services, expertise or capital that will be provided to entrepreneurs. In the case of JumpStart,

these Core Resources are: i) investment capital and ii) intensive expert entrepreneurial assistance.

Ideally, the plan will enable the resource provider to own or take responsibility for the commitment of

the Core Resources. To make this determination, it is important to ask the following questions:

Does the delivery mechanism increase or decrease ownership in the results? Does the delivery

mechanism increase or decrease the likelihood of finger pointing if the results are unfavorable?

The answers to these questions should help determine whether the plan or approach delivers the

desired level of ownership.

o This is especially important because of the second characteristic, measurement. Not allplans, programs or investments will produce the desired results. A strong commitment to

metrics and measurement is critical to the efficient and effective deployment of scarce

resources in support of entrepreneurship. Before implementing a plan to deploy new

resources, it is important to ask the following questions:

How will we measure success? Prior to achieving the ultimate measures of success, what

metrics will we use to determine if the program is on the right path? Do we have an

efficient and effective mechanism to collect and evaluate the data?

The goal is to know sooner rather than later (after all of the money is spent) whether the

program is on track to generate the desired impact. As with any entrepreneurial effort, if awin cannot be achieved, the next best thing is a fast, efficient and informative failure. Only

by combining ownership and measurement can the plan achieve the desired level of

accountability.

Sustainable. The transformation of a regional economy does not happen overnight. Successdepends on a long term commitment of resources, and in most cases, no funder will commit the

amounts necessary over the period required to achieve the transformation. Sustainability, similar to


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the ongoing need for a business to continue to generate revenues and profits, is an ongoing, daily

effort. Success depends on a combination of the three Success Drivers described above. It also

depends on executionthe ability to develop a process to continuously identify and engage new

support resources. Although the specific strategies depend on nuances of the regional

environments, all plans must take into account the need for a continuous, well-executed strategy to

attract resources. Given the need for talented and capable development professionals, and the

associated cost for this effort, fundraising and development is often best implemented as a shared

resource across multiple organizations.


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RECOMMENDATIONS

Based on St. Louis deal flow, the Situational Analysis, and the Success Drivers, JumpStart recommends

regional leaders focus their planning efforts on the following opportunities to accelerate the pace and impact

of investments to create a thriving entrepreneurial economy:

1. Fill Pre-seed Investment Gap. St. Louis has an outstanding array of investment programs to provide thefirst $50,000 for Imagining phase startups. The region also has several existing angel networks and funds

that provide investment capital in the range of $250,000 to $500,000 for companies in the late

Demonstrating and early Market Entry phases of commercialization. The gap in St. Louis begins in the late

Imagining phase and extends through the early Demonstrating phase of commercialization, the very heart of

the Valley of Death. In the Biosciences sector, BioGenerator addresses this gap through its Pre-seed Fund

and expert assistance. In the Tech and other sectors, the gap has the potential to block the progress of

otherwise promising companies.

Companies in these phases of commercialization often lack the commercial and technical proof required by

for-profit investors. In addition to the risk profile of these companies, they frequently require substantially

more expert assistance and guidance than a for-profit fund wishes or can afford to invest. For these

reasons, quality companies often lack the resources they need to advance and succeed. As a solution,

JumpStart suggests the region consider an approach similar in structure to a combination of the

BioGenerator Seed Fund and services. This combination represents the core resources of a venture


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development organization and has proven effective in Pittsburgh, Cleveland, Southeast Michigan and

elsewhere. The amount of each investment and the number of investments will depend on the sector(s) and

phase(s) of commercialization targeted by the venture development evergreen fund. Ideally, the investment

should be sufficient in size to enable recipients to develop prototypes and market ready products, conduct

advanced market research, complete business plan preparation, protect intellectual property, address

startup manufacturing and distribution, and secure talent. The goal is to help these companies become

quality investments for angel, venture and other for-profit investors. Because the gap exists across multiple

sectors, JumpStart recommends the evergreen fund consider all sectors rather than restricting investments

to a particular sector.

JumpStart is not in a position to recommend the specific organization that should deliver the necessary

resources. JumpStart suggests, however, that the regional leaders strongly consider the Success Drivers

and also build on the substantial experience captured via BioGenerator and other similar efforts.

2. Provide Additional Paid Expert Assistance. BioSTL and BioGenerator employ five EIRs and are currently

seeking to fill additional positions. In the tech sector, ITEN has recently received funding from the MTC to

add three paid EIRs in 2013. Capital Innovators and Cultivation Capital also provide EIRs to work with their

portfolio investment companies. Nidus Partners provides EIRs to work with specific technologicalopportunities. Historically, the region has provided expert assistance primarily through a well-developed set

of mentors and mentoring teams. Recently, these investors and resource providers have turned to paid EIRs

st. louis regional entrepreneurship initiative report seeks to reach immigrants & minorities

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