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Why Here

Why You Should Start a Company in... St. Louis

It used to be, if you were serious about starting a tech company, you went to Silicon Valley. But emerging entrepreneurial hubs around the country are giving startup aspirants options. In this series, we talk to leading figures in those communities about what makes them tick.

Why You Should Start a Company in... St. Louis

Jack Dorsey, the Twitter co-founder, calls St. Louis his hometown. So does uber-VC John Doerr of Kleiner, Perkins, Caufield & Byers. Dorsey even launched his latest effort, credit card processing startup Square, with a St. Louis-based co-founder and kicked off the use of Square at a food festival there in September. But the startup scene is still a bit sleepy in St. Louis, with more of the activity happening in the life sciences and agriculture arenas. There are also some hopes being pinned on a new runway at Lambert-St. Louis International Airport that could lead to the establishment of a Chinese trade hub there.

Keith Alper, CEO of Creative Producers Group, talked to us about what makes St. Louis’s startup scene unique.

What makes St. Louis a great place for startups?

In its heyday, St. Louis was the fastest growing city kind of west of the Mississippi—in the 1800s. St. Louis is trying to continue to redefine itself from being in the top 10 cities in America to now being in the top 20 towards the lower 20 side. It’s a manufacturing city. There’s a lot of universities, and some decent universities here. I don’t know if a lot of people would call it a great startup city, but there are a lot of great startups that have been very successful and founded in St. Louis. Everything from 150 years ago Anheuser-Busch to what now is Boeing—McDonnell Douglas—and probably the fastest growing farmer company from the high tech side is Express Scripts which is not even 15 years old and is 30 or 40 plus billion dollars. Emerson Electric. Monsanto. There’s just a lot of great DNA of the big companies that are here today that were founded here by entrepreneurs. You’ve heard of the "Spirit of St. Louis." You know, 100 yards from my office is where they gave Lindbergh the money to go do it and he named his plane the Spirit of St. Louis. So they’ve always been investing in innovation. The X Prize was founded in St. Louis for flight.

To the question of what makes St. Louis great for startups, first of all the cost of doing business in St. Louis is unbelievable. We have probably one of the lowest housing costs in the country. The talent is very reasonable here. We have world class universities with the biggest being Washington University, which is a top med school in the U.S. It was one of three places in the world to sequence the human genome. St. Louis is really a biotech and ag city. That’s where a lot of the growth is coming from.

Are there particular startups that do better there?

We have a lot of life science business based here. We have a thing called the Danforth Life Science which is one of the largest in the world doing food, bio and plant research here. There is also a small but thriving tech community growing. Jack Dorsey, one of the co-founders of Twitter, is from St. Louis, he just started a new company called Square and Square is half based in St. Louis and half in Silicon Valley. There’s a new company called Aisle411 that just closed out a $4 or $5 million round. So there are a number of tech companies and then there is a group through the university that are focusing on innovation and how to make the tech community better.

Does St. Louis breed or attract entrepreneurs?

First of all, down the street in Kansas City, which is on the other side of the state, we have one of the greatest entrepreneurial supporters called the Kauffman Foundation. So the state and the city does a lot of programs with Kauffman to support entrepreneurship not only in schools but also among entrepreneurs and big business. There are a number of programs, we have a group called the RCGA (Regional Chamber and Growth Association), which is kind of our chamber that is working to really attract new business and especially on what they’ve claimed is the Bio Belt to go get work under biotech and attract startups, existing VC-run companies.

Are there sources of capital available in St. Louis?

There’s a few angel groups here. St. Louis is a very old conservative city. So it tends to favor more life sciences and bio but most of the money coming in for these are not from St. Louis. There might be a fund that places money here—you’ve got probably 10 real kind of VC capital sources but the rest is from out of town and they are happy they are here because of the lower cost of living and doing business or they are happy they are close to Monsanto or stuff like that. The other sources are just the typical start up friends and family sources. There used to be a lot of community banks that were doing some of that but with the financial crisis a lot of those banks are gone. But we’ve got very medium level angels and you don’t have a lot of VC capital coming into the St. Louis market.

Is St. Louis a billion-dollar exit playing field?

I would say that St. Louis has had its handful of decent exits but you’re not seeing billion dollar exits. I don’t know who is seeing billion dollar exits today. There’s a number of people in the medical and medical device areas that have made exits. Probably the only billions are the Express Scripts of the world and maybe a few others. But I don’t think there’s a lot of billion dollar exits out of St. Louis.

For more from this series:

  • Why you Should Start a Company in...Austin
  • Why you Should Start a Company in...New York
  • Why you Should Start a Company in...Los Angeles
  • Why you Should Start a Company in...Chicago
  • Why you Should Start a Company in...Boston

Laura Rich is a freelance writer and co-founder of Recessionwire.

[Photo by Joel]

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