Agency hopes to lure interest among Metro East startups
A St. Louis-based nonprofit with money to give away to smart startups is hoping to attract interest from entrepreneurs on the Metro East side of the river.
Ben Burke, director of entrepreneurship at Arch Grants, said he has recently held conversations with supporters of incubator-style projects in Belleville and Alton in an attempt to better understand those efforts and to build on what the organization has done during its first three years in St. Louis.
Working in conjunction with donors big and small and through numerous partners, Arch Grants has raised over $3 million and distributed it via a regimented startup competition to entrepreneurs who agree to locate in the region in exchange for funding.
“We’ve been doing it for three years and funded 55 startups. Of those 55 startups, 50 are still in business, and 49 of them are still in the St. Louis region. We’re pretty happy with that,” Burke said.
This year’s competition attracted 600 applications from around the world, of which 20 were chosen to receive $50,000 each.
“This last class of applicants was from 21 countries and 38 states. Of the 20 that were selected, around 12 were from outside the St. Louis region. We had three international applicants, which is our biggest number. Two were from London and one was from Colombia, South America,” Burke said.
Although Arch Grant’s “region” technically includes Metro East, the organization has had little opportunity — or much reason — to make much of a foray into this side of the river, until lately.
This year, two substantial projects began in Metro East that fueled the overall interest. Burke has had conversations with supporters of the Turner Hall accelerator project in Belleville and the Alton Area Business Development Association, which is pushing a food hub incubator project in Alton. Both ventures have been detailed in depth by the Illinois Business Journal.
“We’re super hopeful there are some things that will come on line very soon in Metro East and kind of inner-wrap so that we can be more intentional about being active in the whole region,” Burke said.
Arch Grants is in the middle of a tech-startup initiative that has gained St. Louis international attention. It is located in the T-REX building on Washington Avenue, a hotbed of co-working space and home to several entities devoted to entrepreneurial activity, including more than 100 startups and a mix of nonprofit and for-profit entrepreneur support organizations, including iTEN, Capital Innovators, Cultivation Capital and SixThirty.
The proximity breeds conversations that are shared multiple times a day, he said.
“Incubators are very important bringing these entrepreneurs together and fostering these interactions in a physical space,” Burke said. “That’s a big part of what’s going on here, in a variety of locations, on this side of the river.”
They are all part of what’s referred to as the Cortex Innovation Community. Cortex is a tax exempt 501(c)3 formed in 2002 by Washington University in St. Louis, BJC Healthcare, University of Missouri – St. Louis, Saint Louis University and the Missouri Botanical Garden “to capture the commercial benefits of university and regional corporate research for St. Louis,” Cortex’s website says.
It’s spread out over a few miles and includes many similar co-working spaces. Burke calls it the “incubation model of density.”
Arch Grants, also a 501 (c) (3), offers invaluable networking. It supports winning companies by providing access to mentoring, free legal and accounting services, collaboration with local universities, and discounts on housing and affordable office space.
After receiving an initial Arch Grant, startups have the chance at a second round of up to $100,000 in funding, along with direct access to St. Louis-based angel investors.
The fledgling businesses are at critical times in their histories.
“These are very early stage companies seeking our grant allocations. Some of them are generating revenue, some are still in product development. This is a stage in which businesses typically do fail,” Burke said.
The fact that so many have met with success speaks reams about the talent that Arch Grants has helped draw, he said.
“We feel this gives some validity to the credibility of the competition and having hundreds of applications. It’s a very regimented judging process we put them through. We are selecting top businesses to come to the region and retain them here in the region,” he said.
The $50,000 cash grants are “nondilutive,” meaning Arch Grants funding does not require any sale of a company’s shares in exchange for funds. Typically, venture capital investment forces aspiring entrepreneurs to sacrifice a significant stake in a company for such backing.
The vitality of its network lies in the quality of the economic development entities that Arch Grants calls its partners. In addition to those mentioned above, Arch Grants works closely with Innovation Gateway Venture Mentoring Service, St. Louis Regional Chamber and Growth Association, St. Louis Transplants, Regional Business Council, Webster University, Harris Stowe University and the St. Louis Economic Development Partnership.
“We give away the money, yes, but one thing that’s overlooked is our relationship with the corporate community and our ability to leverage the corporate community and the for-profit community to really get on board with entrepreneurs in a very tangible way by donating time, resources, or lending expertise,” Burke said.
An individual entrepreneur would find it “nearly impossible” to accomplish on his own what he could do by having at his disposal people experienced in such fields as venture capital, manufacturing and B2B sales.
“It’s those connections and resource introductions that have been very important for many of our startups,” he said.
Startups run the gamut.
“Certainly, we’re tech heavy — information technology, hardware technology, bio life sciences and medical devices,” Burke said. “But we’ve also funded several manufacturing startups. We’ve funded a couple of fashion companies and several consumer product companies. We’re looking across the board, so long as they are innovative and scalable.”
Some people turn to innovation as a way to escape livelihoods that are going nowhere.
“There’s entrepreneurship out of opportunity and there’s entrepreneurship out of necessity,” he said. “There are all sorts of reasons you go into business for yourself. If you have a good idea, and you can find the support, it doesn’t matter your background.”
Arch Grants finds itself working mostly with members of the millennial generation, but there are exceptions. Currently, the youngest entrepreneur is 18, and the oldest is in his 50s.
He gave a couple of noteworthy examples.
Two Washington University graduates, Abby Cohen and Andrew Brimer, are working on a technology startup called Sparo Labs, which is looking to commercialize a pocketsize spirometer that will allow people with asthma to monitor their lung capacity via a jack plugged into a smart phone. They’ve won Arch Grants and others.
“The take-home medical device market is growing like crazy,” Burke said.
Another is a company called Jolt, the work of an MIT grad, Ben Harvatine. He is working on a head-impact concussion-monitoring sensor that athletes can wear as part of headgear. It sends signals back to coaches or other monitors to warn of head trauma.
“A unique part of our set-up is we are industry agnostic. At the highest level what we look for in a new startup is innovative technologies, products or services, delivered through a business model that is scalable, with national or international impact potential,” Burke said. “What that eliminates are the lifestyle businesses, consulting businesses, your more traditional brick and mortar businesses. And it lends itself to technology.”
Burke, who is from Peoria, Ill., would love to see St. Louis’ success spread to the Land of Lincoln, but he’s hesitant to make predictions about what people here can accomplish.
“Honestly the answer is I don’t know. That is the reason I’ve started to reach out to folks over there. We’re really trying to get involved in the Metro East. What are the opportunities? Are their entrepreneurs who could be applying (for grants)?”
He said he’s been impressed by some of the entrepreneurial efforts under way at Southern Illinois University Edwardsville’s Small Business Development Center and by the Illinois side’s general push toward STEM education. SIUE this year offered its own business plan competition, which attracted 30 applicants.
“The overwhelming thing I’ve learned is there is a lot of interest in entrepreneurship right now,” said Burke, who has been at Arch Grants for a year. “There are a lot of people who come to me — and others like me in similar positions in this ecosystem — who say they just want to get involved. That manifests itself into a lot of support, in terms of mentorship and financial support,” he said. “At Arch Grants, we sit in the middle of philanthropy, economic development and entrepreneurship. Those are three very distinct constituent groups generally speaking, in the community.”
Not all deserving applicants win Arch Grants.
“I wish we had unlimited money to give away,” Burke said. “But just because they don’t receive a grant doesn’t mean they’re a failure. Case in point is a great startup out of St. Louis called Synek that just launched a crowd funding campaign in which they raised $600,000. It didn’t work out with Arch Grants, but we’re rooting for them.”
He added: “It’s not meant to be a competitive thing. The end goal is that people want to move to this region, regardless if we give them free cash or not.”
Arch Grants operates with a staff of only three but a number of volunteers and interns contribute. The other full-timers are Executive Director Ginger Imster and Director of Development Amy Kinsley.
There are also some 120 judges, who lend their expertise in various areas.
Burke said it is part of his job to line up the investment.
“We have to raise every dollar that we give away. That’s a big task,” he said. The challenge is in making a startup seem like a legitimate investment opportunity to somebody who has multiple options, from mutual funds to real estate.
Many angel investors come to Arch Grants or contact entrepreneurs directly to have discussions.
“Anecdotally, absolutely there are people who want to get involved, to do deals that they normally would not get involved with,” Burke said.
Introductions are a big part of it all. Many people with talent and ideas are at the stage where they need to finish product development, think about their supply chain and start making strategic partnerships. They need additional funding — and advice — to scale up their business.
“We provide pro bono services in the area of accounting, legal, marketing, HR, web hosting, mentorship and financial consulting, all donated from for-profit and nonprofit entities from the region through Arch Grants directly to the company,” he said.