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1 0 t h A N N I V E R S A R Y

Presented by

2016 ST. LOUISTech Startup Report

Photos courtesy of Romondo Davis (unless otherwise indicated)

Company and Mentor interviews conducted by David Strom

About this ReportThe 2016 St. Louis Tech Startup Report showcases the journeys of entrepreneurs engaged in ITEN programming and other resources throughout the ecosystem, and how those experiences helped grow their companies and their skills. The report represents our best efforts to capture information about the growth, evolution and current state of early-stage technology startups in St. Louis, and the system that supports them. The information in the report includes both self-reported and publically available data.

Table of Contents 2 Introduction 4 Companies, Founders & Mentors interviewed for this report 5 ITEN: The Power of the Network 6 Mentors at Every Stage 9 Engaging an EIR 10 Mock Angels Magic 12 Corporate Collaborations 14 Saying Yes to St. Louis 16 Depth of Resources & Breadth of Access 17 Investment, Revenue & Bootstrapping 18 Getting Out There St. Louis Tech Entrepreneur Pathway & Tech Startup Ecosystem Map

As the catalyst for tech startups in St. Louis, ITEN provides unique programs for rapid business development, connections to talent, essential networking and access to funding. ITEN engages experienced entrepreneurs to help others build successful, growing tech ventures. These critical connections are formed through direct mentoring access, a curriculum of graduated acceleration programs and weekly and monthly networking programs. Designed by entrepreneurs for entrepreneurs and requiring neither payment nor equity, ITEN is a unique community asset and a proven route to venture success.

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ITEN is pleased to present our 2016 Tech Startup Report to the community. For this year’s report, we took a different approach. While this report still represents a thorough account of the data and statistics on early-stage tech startups in the St. Louis region, you won’t find the familiar Top Ten lists from years past. Instead of a focus on ranking the ventures, we wanted to highlight the entrepreneurs driving those young businesses forward. ITEN’s mission has always been about educating and assisting entrepreneurs at all stages of development. So this year’s Report—focused around the theme, The Power of the Network—explores a cross-section of ITEN entrepreneurs across our nine-year history, and their experience utilizing our Network while building their businesses.

You will get a closer look at our mentors, our Mock Angel program and our rapidly expanding initiative engaging startup entrepreneurs with local corporate innovation teams. Through the words of the entrepreneurs we serve, you will get to see the power

that an engaged network can have on a startup’s success, and in turn, our region and beyond.

We hope you enjoy this glimpse into the Network that ITEN has been building since 2008. The work is not nearly finished and the next few years pose significant challenges for funding, talent acquisition and a call to action to make the ecosystem inclusive and equitable for all in our region. Addressing those challenges is vital for the continued growth of our innovation community and our region, and capitalizing on the talent, dedication and momentum we are collectively building is key. ITEN welcomes everyone into our Network who shares that vision and drive.

Let’s get to work!

Francis Chmelir Executive Director, ITEN

Introduction

ITEN by the numbers:320+ active companies, onboarding an average of 6 per month

60+ Mentors5 Entrepreneurs in Residence56 Mock Angel Graduates5 Corporate Engagement Partners

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Community of support and access to potential large company clients make St. Louis a great place to build a company like ours.

Bonfyre

St. Louis has rolled back 15 years of decline in its local startup rate in just 5 years.

St. Louis is the New Startup Frontier by FiveThirtyEight.com

The connections between novice and experienced entrepreneurs that ITEN facilitated are probably the single-biggest factor in St. Louis’ entrepreneurial emergence.

Washington Monthly

St. Louis named one of the fastest-growing startup scenes by Business Insider.

When we engaged with ITEN we went from a 2nd grade to college-equivalent level of understanding of what is important to investors.

Chris Deck, Deck Commerce, 2016 ITEN Mock Angel graduate

Startups should get involved with ITEN as soon as they can, it is a very sophisticated and accessible resource.

Amanda Patterson, Health Call List

OffCampus Media/Bonfyre (May 2008) Mark Sawyier is the co-founder & CEO of both ventures. He completed ITEN programming as OffCampus Media in 2009, and launched Bonfyre, a mobile platform for employee engagement, in 2011.

The Call List/Health Call List (May 2016) are video participation platforms and smartphone apps, facilitating real-time, face-to-face conversations between hosts and their digital audiences across the globe. Amanda Patterson is the founder and CEO.

clEAR (February 2016) provides audiologists custom auditory rehabilitation exercises in a gamified platform. Nancy Tye-Murray is the CEO & founder.

Deck Commerce (May 2015) is a SaaS omni-channel commerce enablement platform for retailers. Chris Deck is the CEO.

Digital Medical Arts (December 2015) has developed MAX, an interactive multimedia platform used by healthcare providers to educate and empower patients about their healthcare choices. Barbara Hawatmeh Pozzi is a founder & CEO.

FocalCast (February 2015) connects individuals from any device so groups can collaborate and annotate documents in real-time. Co-founders are Devin Turner, CEO; and Charlie Beckwith, CTO.

Hoperator (August 2013 as SlackTravel) is a messaging platform for the hospitality industry. Chris Douglas and Michael Foltz are co-founders.

Label Insight (June 2012 as FoodEssentials) is the leading provider of data solutions that power transparency between CPG brands, retailers, and consumers. Anton Xavier is one of their co-founders.

Ryvit (April 2016) is using a SaaS model to create an integration platform to simplify the path to success for software vendors in the construction industry. Tom Stemm is the CEO & co-founder.

Saving Memories Forever (February 2013) is a mobile app and website that records and shares family stories. Harvey Baker is the founder & CEO.

Tallyfy (January 2015) is a SaaS workflow software company that aims to improve customer onboarding and other business processes. Amit Kothari is their co-founder & CEO.

Whoozini (December 2015) is the smartphone platform to search & connect to people and things near you. Create your own “avatars”, advertise to others and search for others near you. Kaustuv Mukherjee is founder & CEO.

David Schenberg is currently a Business Innovation Consultant with Asynchrony Labs. Prior to that he co-founded the tech venture, BusyEvent, an ITEN Mock Angel graduate.

Dave Sellers is currently the CEO of Evtron, a tech startup offering extremely effective thermal

dissipation technologies. Prior to that, he was President of Ventraq and CEO of Strata Group Inc., both global software solutions companies.

Margie Skiljan is a Technology Specialist advancing digital architecture, product development and productive thinking

practices. She has held a wide-variety of positions at private to Fortune 20 companies.

David Strom is a writer, speaker and online communications professional who has founded numerous technology print and online publications.

Companies & Founders (ITEN join date)

INTERVIEWED FOR THIS REPORT:

Mentors

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ITEN companies span a wide range of tech industries and represent all levels of development—both in the company stage and the skills of the entrepreneur. Our program offerings and the network we’ve built are designed to be impactful all along the continuum. The companies included in this report represent a cross-section of ITEN client companies in terms of when they joined, what programs they utilized, what they learned and how it has affected their company development. Our goal is to highlight the variety of entrepreneurial paths and provide insight for others embarking on similar journeys.

“ITEN has a very unique mission to help develop startups. Its sole purpose is to help you improve and succeed,” says Chris Deck of Deck Commerce, a 2016 Mock Angel graduate. This is a sentiment shared by many founders.

Amit Kothari of Tallyfy, who came to St. Louis in 2015 after receiving an Arch Grant, has high praise for ITEN. “It really is quite unique,” he says. “There is nothing like it in the Bay Area, with its ‘no-strings-attached’ philosophy. There are a lot of companies in California that want to take some equity if they give you advice, even if you just have a short conversation. ITEN is a pretty awesome resource.”

The general consensus was the sooner you find ITEN the better. Kaustuv Mukherjee, cofounder of Whoozini, said, “There are a lot of steps to set up your own company, and ITEN gave me the right recommendations. Networking also helps, since you can meet other entrepreneurs and learn from each other.”

Amanda Patterson, the founder of The Call List, had many reasons to reach out having recently returned to St. Louis to build her business, “I wanted to expand my network, find mentors and other champions, leverage investors, refine my investor pitch and get a better understanding of the St. Louis startup ecosystem. Startups should get involved with ITEN as soon as they can, it is a very sophisticated and accessible resource.“

Nancy Tye-Murray, the founder of clEAR (customized learning: Exercises for Aural Rehabilitation), adds, “I spent 17 months in the backwoods of academia with my business idea, and since finding ITEN and other resources I have made incredible progress in the past 8 months.”

Barbara Hawatmeh Pozzi, the founder of Digital Medical Arts, got started with ITEN after she had developed her minimal viable product (MVP). “I wish we had engaged with ITEN right after we had our initial idea. We needed to get from the MVP to commercialization and we could have gotten there quicker if we got their advice sooner.”

Serial entrepreneur Tom Stemm, the founder of Ryvit, agrees, “ITEN has been invaluable to help us identify and position for investment opportunities. Having an EIR to help us develop a plan with appropriate growth milestones has been critical to accelerate traction. I wish I had ITEN when I started my first company, key decisions such as how to organize and where to invest in my business at different stages of growth would have been clearer and more successful early on.”

ITEN: The Power of the Network

I wish we had engaged with ITEN right after we had our initial idea.

Barbara Hawatma Pozzi, Digital Medical Arts

One of the strongest assets of ITEN is our mentoring program, both in the depth and quality of the volunteers and the increasing number of them. We currently have approximately 60 mentors available to ITEN companies through our Mentor Match database and encourage all new companies to connect with at least 3-5 mentors and begin building their network as soon as they join. Founders can also return to Mentor Match at any time and search for other skill sets or expertise they may need as their company develops.

When recruiting mentors we look for one or more of the following characteristics: serial entrepreneur, subject matter expertise, investment experience in the tech space, and large personal networks. Our mentors are generous with their time and dedicated to improving the St. Louis community through helping to develop strong entrepreneurs and startups.

This definitely drives long-time mentor Dave Sellers, “I really want to help local small businesses to succeed and bring jobs and financial gain to St. Louis, and I believe there are tons of things that you just cannot learn from a classroom or a

textbook. Since I have led four different technology companies, I have learned a lot the hard way and I hope I can share with these folks so that they don’t make the same mistakes I did.”

While there are a variety of styles when it comes to mentoring, our mentors not only bring their knowledge to the table, but also the ability to listen to the entrepreneur’s unique needs so they can be the most effective. “There is no one-size-fits-all solution, but founders have two typical challenges,” says Margie Skiljan, a mentor new to ITEN in 2016. “They have an idea but can’t create a product or service from it without some help. Or they have a product but don’t have any understanding of whether anyone would pay for it or if the product is actually viable.” Sellers, agrees. “Most founders are so enamored with their idea that they haven’t fully thought it through or understand all the steps involved. There is a lot of ‘if I build it they will come,’ which can be a challenge.”

David Schenberg, a serial entrepreneur and new mentor to ITEN, says it is important to understand the “communications cadence” in terms of

Many founders are so enamored with their idea that they haven’t fully thought it through.

Dave Sellers, ITEN Mentor and Serial Entrepreneur

THE POWER OF THE NETWORK: Mentors at Every Stage

ITEN Mentors spent over

3500hours mentoring companies in 2016

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how often to schedule meetings and of what length. “I try to find out if they prefer regular meetings scheduled in advance or if their schedules are more fluid and also figure out what forms of communications: phone calls, texts or emails, work best between us.”

“Some entrepreneurs just want a couple of meetings, to resolve a specific issue or two,” says David Strom, who has been mentoring for ITEN since its inception. “Others have trouble getting their business off the ground, or figuring out the best markets or how to target their messages.

Each of our founders used this pool of mentors somewhat differently, which also attests to the maturity of the program. The Call List’s Patterson, for example, “needed help to better articulate my value proposition and to better understand how to navigate the St. Louis investment community.”

Tye-Murray met with one mentor twice a week for more than six weeks, and “he has completely recrafted my pitch and how I conceptualized my market. I can’t sing his praises enough! He also helped us to find an accountant who is a good match for our business.”

Hoperator’s Chris Douglas “got great advice from one of our mentors who told us to take as little venture funding as possible and focus on building one single part of our service and test that with actual users before adding any other features. These conversations really changed our trajectory and helped us to identify what we really wanted to build and move a lot quicker.”

One startup that really exercised the ITEN mentor program was Tallyfy, which ended up talking to 20 mentors. “You have to be proactive at reaching out to mentors, you can’t just wait around for them to call you,” said Kothari. “You also have to weigh their advice carefully, and know what questions to ask them so you can be productive. It also helps to know the mentor’s background ahead of time too.

Many of our founders brought extensive business experience, but needed help translating that into the startup environment. The founders of Whoozini and The Call List both came from the management consulting world, but still needed help. “Initially we wanted to validate our business model and we found a mentor to give us advice and motivate us to move forward. While we had a lot of experience in traditional IT consulting, we had never done a startup before,” said Kaustuv Mukherjee, one of Whoozini’s co-founders. Patterson explained, “I spent my career in management consulting, but always saw that as a professional education before I found the right opportunity to start something on my own.”

Often companies know one particular market or business model but are starting a venture in a completely different direction. Such was the case with Deck: “Selling on-premises software really limited how many customers we could serve. We needed to reinvent ourselves and move to a Software-as-a-Service (SaaS) model to more effectively scale up our operations. We have made that transition and now are 70% SaaS business. We had a huge advantage as an established business that could pivot rather than start from scratch. Had we stayed away from SaaS, we would have shrunk as a company.”

Harvey Baker of Saving Memories Forever brought a similar background. “I had been operating multi-million dollar international businesses for years and I thought if I built it they would come. Well, they didn’t. Having the skills to launch a startup from scratch isn’t the same as growing a $10 million business to $50 million in revenue. Getting to market and finding the right market is what matters, and that is a lot harder than being in an established market.”

And there is a difference when it comes time to formulate a pitch for investors, as Douglas found out: “For over 10 years I have been pitching clients for various advertising campaigns, but pitching a business model to investors

You have to be proactive at reaching out to mentors. Weigh their advice carefully, and know what questions to ask.

Amit Kothari, Tallyfy

Companies join ITEN at different stages

Represents companies who joined in 2016

Funded5%

Revenue13%

Product (pre-revenue)

23%

Prototype 27%

Concept 32%

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is so different. Our mentors helped us deconstruct and rebuild our pitch to make it a simple and engaging story, and hone our financials.”

That was also the case for Tom Stemm, who had been running an IT consulting firm for several years with over 60 employees, and had the idea for a new venture called Ryvit that would require raising outside capital. “We needed to refine our pitch and put together a business plan that was a completely different sales model from our existing business. We had a lot to learn and quickly realized the programs offered by ITEN would be invaluable to finding answers.”

Learning from the experience of others was important to Anton Xavier, a co-founder of Label Insight. They have created countless iterations of their pitch, largely through the input from ITEN mentors and other advisors. “It really helped that we had access to mentors and other professionals who have done this before.”

Helping an entrepreneur decide how to spend their extremely limited resources wisely is a common task for ITEN mentors. Pozzi was given the advice to

switch to local developers. “In the end, you save money because the software is of higher quality when you have local control.” And she found her mentors invaluable in terms of understanding her sales model. “We assumed a direct model was the right way to go, but after talking to our mentors we are now changing to a more channel-focused strategy.”

The mentors also benefit from this contact, it isn’t all a one-way street. “I have learned a lot from my mentees,” says Strom. “They have a different perspective that can be refreshing, and sometimes they connect me with someone that I have wanted to meet.”

Finally, as one indication of a maturing ecosystem, mentoring now includes some of the older “startups” mentoring the newer ones. Such is the case for Mark Sawyier, co-founder of Off Campus Media, one of ITEN’s first client companies, and now the co-founder and CEO of Bonfyre. “One of the hardest things for a young company is getting enough evidence to roll the dice and show that you can get results. We often get startups coming to us, wanting us to share our experience,” says Sawyier.

Our goal is to maintain an engaged and sophisticated mentor pool to meet the diverse needs of our companies, one that includes both experienced long-standing mentors as well as newcomers.

Jing Stiffler, Director, Mentor Engagement & Information Systems, ITEN

54% of ITEN companies have first-time founders

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…and were more than

4X as likely to have 2016 revenue.

At ITEN, we began our Entrepreneur-in-Residence (EIR) program in 2013 and it remains at the heart of all we do. EIRs are contracted by ITEN but, like all ITEN offerings, their services are free to the entrepreneur. Each of our 5 EIRs are working with approximately 6-12 companies, spending dedicated time to help founders move their venture to the next level.

So what’s the difference between a mentor and an EIR? Senior EIR Chuck Vallurupalli explains it this way, “If I meet a company as a mentor I will give them advice or make introductions on an ad hoc basis; it’s up to them to follow through. My engagement with companies as a EIR is more proactive and broader in scope. I am empathetic to their needs and challenges but I also hold them accountable and encourage them to step out their comfort zones to increase the probability of success. Levels of commitment and expectations are definitely higher.”

This was the experience for Ryvit’s Stemm, “Within a month after we started working with our EIR, we gained a tremendous amount of insight into how to structure our business. This would have taken us much longer on our own. We were able to model our business appropriately and put together milestones that could position us for growth. It is a lot of time to devote to the process but it is time well spent.”

Devin Turner of Focalcast adds, “Our EIR was very valuable for fundraising ideas and helping us plug in more into the startup ecosystem. He was willing to spend a lot of his time with us and welcomed us with opened arms. Business is all about networking—especially in those critical early stages—and the introductions and connections that ITEN staff and mentors provided were important and useful for us in trying to launch our company.”

THE POWER OF THE NETWORK: Engaging an EIR

ITEN EIR companies were more than

twice as likely as non-EIR companies to raise outside funding…

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“You never get a second chance to make a first impression”. This old adage is one of the realities that led ITEN to begin Mock Angels in 2009, to give entrepreneurs a safe and supportive environment to make their mistakes. Our oldest and most well-known program, Mock Angels prepares entrepreneurs for initial presentations to sophisticated investors, and the due diligence that will follow. Mentors that participate as Mock Angels are themselves accredited investors, have raised money as tech entrepreneurs, or bring other applicable

experience or knowledge of the equity-raising process. A number of our Corporate Engagement Program (CEP) partners also participate as Mock Angels.

The pitch session mirrors a typical initial meeting with a venture capital or angel group, but following the pitch itself is a constructive feedback session on how the pitch contents and delivery can be improved. Individual Mock Angels also work with entrepreneurs following their initial pitch to help them prepare for their graduation pitch. Alongside

this process entrepreneurs prepare a cloud-based data room for review by ITEN’s due diligence committee, led by EIR Jane Vancil. To be a Mock Angel graduate means it is ITEN’s opinion that the company is prepared to ask for other people’s money. Upon graduation ITEN introduces the founders to over 80 investors and investor groups with whom we have relationships.

Entrepreneurs go into Mock Angels with a variety of expectations, but all come out having learned something.

“Mock Angels was much more helpful than I anticipated and is a very sophisticated tool for startups,” said The Call List’s Patterson. “I was

able to meet several mentors who helped me refine my business plan and introduce me to people in the healthcare community that could apply my technology. When I first applied, I thought of Mock Angels as more of a gateway that I needed to pass through so I could apply for venture funding, but I realized that it is a way to develop a sustainable business model and to train me to become a better business leader. I was able to meet with potential investors through my ITEN connections but that was almost secondary to all that I learned from Mock Angels.”

“I got a ton of value hearing the questions at Mock Angels and understanding what in my presentation wasn’t clear. I learned the breadth of different perspectives that’s out there, and many mentors caught things that I didn’t realize and helped me change my strategy. All of the comments – even the negative ones – were productive and helpful,” said Deck Commerce’s Chris Deck.

Pozzi of Digital Medical Arts agrees: “I was ready to be beaten up, but the questions that I got during my session were very constructive. People really know what they are talking about.” Turner’s first pitch also had a lot of feedback: “We were torn up at that first Mock Angel session. But we ended up working with one of the Mock Angels who went from saying that our business model didn’t make any sense to being a big advocate and a huge help for us to go to market and raise funds.”

It’s important for entrepreneurs to have a strong understanding of their business, but also be open to having it challenged. Baker looks back on the experience with mixed feelings, “My expectations were that I would stand in front of a bunch of VCs at my Mock Angels presentation and they would give me money. That

THE POWER OF THE NETWORK:Mock Angels Magic

Equally important to the pitch practice is introducing startups to the due diligence process required for equity investment. VCs are not inclined to wait for documents; they will move swiftly to the next opportunity.

Jane Vancil, ITEN EIR and Chair of the Mock Angels Due Diligence team

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Photo courtesy of ITEN

didn’t work out quite that way. You really have to understand all components of your business from the feasibility of your ideas, your competition, what it’s going to take to get to market, what people are willing to pay. I think I was too arrogant when I presented at Mock Angels, I didn’t listen to the comments because I thought I knew my stuff.”

Stemm agrees with Baker: “There is a degree of humility needed. You have to be able to get out of your way to find success when you are trying to build a mountain out of nothing. You have to open your mind, and be willing to constantly grow and evolve. And to seek the hand of the person in front of you who has walked that path before.”

“And standing in front of an audience to explain your plan will give you a lot of clarity. After one Mock Angel session, I immediately went back to my office and changed my revenue model – something that I wouldn’t have come up with on my own. I definitely received a lot of constructive criticism but that’s the point; overall it created extremely positive outcomes,” added Stemm.

Patterson had a similar experience, “I had a lot of serious pushback from the Mock Angels, but I came away a tougher person and created a much stronger business, too. You are going

to get challenged by lots of different people and you have to come up with answers and withstand a lot of harsh criticism. But even the mentors that were the most negative about my pitch had useful thoughts that helped shape my business.”

One of the biggest reasons for going through ITEN’s Mock Angel program is for entrepreneurs to understand the mind of an investor. “Before we came to ITEN, we never had done a business plan or a pitch deck before,” said Deck. We stumbled around for a few months until we got engaged with ITEN and then went from a second grade to a college-equivalent level of understanding of what is important to potential investors. Eventually, we were able to raise a funding round. What was interesting was only five percent of my original pitch deck survived after Mock Angels. I think I am on the 28th version now.” Mukherjee of Whoozini said, “We want to perfect our pitch and Mock Angels is perfect for that. We will be able to focus on our target audience and craft a better pitch to more clearly communicate our value proposition.” And Tallyfy’s Kothari found his experience with the Mock Angels program extremely valuable, as he was able to refine a winning pitch that got him accepted into Silicon Valley’s 500 Startups accelerator program.

…only five percent of my original pitch deck survived after Mock Angels. I think I am on the 28th version now.

Chris Deck, Deck Commerce

80% of Mock Angel graduates have raised outside funding

77% of Mock Angel graduates currently have monthly revenue$151

Million raised by Mock Angel graduates since program began

clEAR Deck Commerce Gladitood

HealthCall List Hoperator OpsAnalitica

Manufacturer’s Inventory Ryvit Sitting Duck Advertising

There have been

56 Mock Angel graduates since the program began in 2009 including:

aisle411 Bandura BenMedica Better Weekdays BusyEvent Evtron FocalCast Gremlin Social MeterGenius Label Insight Off Campus Media PenPath PFITR Pixel Press Recursive Labs Respond Well Rovertown SmartCare Tallyfy Yurbuds

2016 Mock Angel Graduates:

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THE POWER OF THE NETWORK: Corporate CollaborationsIn late 2015, ITEN launched its Corporate Engagement Program (CEP) with the goal of connecting tech startups and area corporations in mutually-beneficial and innovative ways to help both overcome barriers to rapid growth. Currently our 5 corporate partners include: Ameren, Enterprise Holdings, Mercy, Monsanto and Reinsurance Group of America. In 2017, we plan to expand both the list of partners and the services ITEN offers.

Each corporate partner is different in how they approach innovation internally, therefore ITEN’s program is designed to be flexible in order to be relevant and impactful to each partner. In order to drive progress, each Partner has an ITEN EIR liaison that keeps momentum in the partnership activities. The following are examples of what the CEP offers its corporate partners:

n Individual Access: ITEN consults with the corporate partner to identify key areas of interest and need. Based on that discussion ITEN identifies individual startups that have potential solutions and facilitates initial presentations or discussion opportunities.

n Reverse Pitch: Corporate partners are invited to turn the tables and present their needs and challenges to groups of tech startups, individual entrepreneurs, and developers looking for opportunities in either a public forum or on the corporate partner’s campus.

n Educational Sessions: ITEN leads seminars for corporate personnel with little or no previous exposure to entrepreneurs or who need a basic understanding of the lean business model and other concept development tools. We also hold an annual State of the Ecosystem event to keep Partners abreast of current happenings and trends in the St. Louis innovation community.

n Peer-to-Peer Learning: ITEN facilitates opportunities for our CEP partners to discuss innovation best practices amongst each other.

ITEN can typically spend 2 or 3 years working with a startup, so we develop an in-depth understanding of our entrepreneurs and their technologies. This provides us with a unique perspective when working with our Corporate Engagement Partners to identify and match innovative technology solutions with their pain points.

Mary Louise Helbig, ITEN EIR and Liaison to CEP Partner Mercy

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ITEN has been a great partner in sourcing entrepreneurial expertise to help us explore new revenue streams, as well as identifying meaningful ways to engage with St. Louis’ vibrant tech startup community.

Farron Blanc, VP Innovation Studio Lead, RGAx

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In addition to our public-facing events, our activities with our Corporate Engagement Partners have included:

n Matching entrepreneurial talent to RGAx’s new market ideas

n Connecting Mercy with 12 startups with potential solutions for their healthtech priorities

n Conducting lean startup model training with Ameren’s innovation team

n Providing EIR expertise on an internal innovation project developed by a Mercy physician

n Creating opportunities for Partners to share innovation best practices with each other

As we continue to expand in 2017, we are focused on the goals of being a major catalyst in advancing technology solutions, attracting and retaining talent for the region and becoming a model for the design and execution of successful corporate-startup collaborations.

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Corporate Partners

Building on the foundation that ITEN started to create in 2008, the St. Louis tech startup ecosystem has expanded and matured over the past few years. The pull of the coasts and the flyover identity, while not completely gone, have diminished as a critical mass of entrepreneurs, and services to support them, continues to expand in the region. When we asked our entrepreneurs, “Why St. Louis?”, they had much to say:

Many founders mentioned the lower cost of living here, such as Whoozini’s Mukherjee who said, “I have had a few opportunities to move to either coast, but the cost of living and hiring talent was prohibitive. It is easier to get a business up and running in St. Louis, and while it still may be more challenging to raise money, we are hopeful about it.”

Tye-Murray adds, “I am growing my business here because I am committed to St. Louis. I find that St. Louis has a vibrant environment for startups, something I wasn’t aware of until I began building my company.” Charlie Beckwith of Focalcast agrees: “We were recruited to come to St. Louis by Capital Innovators and found a flourishing business ecosystem here. We are glad to be in St. Louis!”

And many St. Louisans who have left for the coasts have found their way back, such as The Call List’s Patterson. “I grew up in St. Louis and heard about the startup community while I was living in Boston. When I came back home I was impressed with the sheer number of resources and their accessibilty to startups, even to someone that hadn’t lived here for several years.” And Hoperator’s Douglas adds, “I was working in St. Louis at the time for another startup and was very excited about the startup scene back in 2011. I convinced my partner to come here and give it a try.”

Sawyier, who went to college here, said, “Certainly, there is the potential pull of the coasts. But I can’t think of a better place to start a business than St. Louis. Here it is less expensive to make the mistakes you are inevitably going to make. Plus, the range of people that are invested in your success here is huge. They can open doors and are very willing to work with startups. If we had launched Bonfyre in NYC, and tried to call on the equivalent of an Express Scripts there, it would have been a lot harder to try to get their attention.”

THE POWER OF THE NETWORK:Saying Yes to St. Louis

Here it is less expensive to make the mistakes you are inevitably going to make.

Mark Sawyier, Bonfyre

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When there is a reason for looking outside of St. Louis, it can often be because of specific industry understanding. Deck says, “Coastal investors are more comfortable with a SaaS model than their Midwestern counterparts. But the coastal investors need you to be at a certain level of scale.” Even when dealing with that reality, the desire to headquarter here remains strong. That was the case for SaaS-based Tallyfy. “We have hired a couple of our team based in San Francisco, mainly because they had specific sales

and business development experience with SaaS software,” says Kothari, “but we remain committed to St. Louis to grow our operations.”

One area of increased strength for St. Louis is improving the pathway to finding the right skills needed to grow your company. “There is this misconception that there isn’t any local tech talent in St. Louis,” said Sawyier, “and that is not true at all. It amazes me that people are always surprised at the concentration of IT-related organizations around the area. These businesses are continually creating talent and new opportunities.”

Adds Stemm, “Talent is hard for all companies, but especially for startups to tap into. The first few hires are the most important, and can make the difference between long-term success and failure. With the right talent on board, we will scale far and fast.” Another validation of the talent in St. Louis comes from Label Insight, “St. Louis is a great place to grow our core team of data analysis and engineering,” says co-founder Xavier, who has staff both in St. Louis and in Chicago. “We find more sales staff and product and marketing folks in Chicago, and it is nice to leverage the strengths of both cities in our growth.”

17%Big Data/Analytics

ITEN Company Clusters

14%Healthcare IT

5%

64%Hardware, Software & Mobile Development

Cybersecurity & Financial Services

On average startups are looking to hire

5 full-time employees and 2 part-time employees in 2017.

Founder’s Origin companies founded in last 2 years

St. Louis Metropolitan area

Missouri – Non STL

Illinois – Non STL

US (Remaining)

Europe

Africa

Asia, New Zealand & Australia

Latin America

Other

43%

9%

15%

19%

2%

1%

1%

6%

4%

THE POWER OF THE NETWORK:Saying Yes to St. Louis

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The stories of Label Insight and Focalcast are great examples of how our startup ecosystem has resources that can take a venture from idea through growth and development to funding and scale (see sidebar). It has been almost a decade since ITEN brought a handful of tech entrepreneurs together that thought they were alone in their journeys to share their knowledge and tell us what they needed to succeed. The seeds planted that day were the beginnings of the burgeoning ecosystem that exists today, one that is on a strong trajectory for even greater growth and impact. But depth of resources can only be so successful without breadth of access, and this is what guides our continued focus to ensure all entrepreneurs that need support have knowledge of the resources available and how to take advantage of them.

In support of that effort, the Kauffman Foundation recently awarded a $420,000 grant to the BioSTL-led St. Louis Equity in Entrepreneurship Collective, a group of 12 organizations, including ITEN. This joint initiative will

build on the work of the VISION symposia and other efforts happening around the region to reach out to women and other populations underrepresented in entrepreneurship. Helping to ensure that as the educational resources and funding opportunities continue to expand, the pool of entrepreneurs that benefits expands as well.

THE POWER OF THE NETWORK:Depth of Resources & Breadth of Access

11%African

American

Founders’ EthnicityITEN companies since 2015

39%Caucasian

45%Asian

2% Multi-Racial

3% Hispanic

Focalcast moved to St. Louis when they were accepted into the Capital Innovators accelerator program. After completing Capital Innovators, they came to ITEN and graduated from Mock Angels. They were then successful in securing an Arch Grant and additional funding from the Missouri Technology Corporation. “We couldn’t have gotten as far as we did without all this support from the various St. Louis programs,” said Devin Turner, their CEO. “All of them were instrumental in our success, and we have enormous respect for the St. Louis startup ecosystem. Each of these programs complements the others and works well for startups. We think St. Louis is a pretty special place and is a really great place for a young company to be located.”

Label Insight began operations in 2008 in New Zealand and moved to St. Louis in 2012 after being selected for the initial Arch Grant cohort. From there they went through the ITEN Business Model Validation process to help them prepare for the Capital Innovators accelerator. Then they returned to ITEN and graduated from Mock Angels, which prepared them for a seed round with Cultivation Capital. “Before we came to St. Louis, we were mostly working out of our garages and on our own, said Anton Xavier, one of their co-founders. “We really needed to put our company on steroids and grow into a real viable business. We found St. Louis an ideal place for this growth, and the second we came into contact with the startup ecosystem here, we flourished and were able to escalate our growth. It was great to be a part of what organizations like ITEN and Arch Grants are doing.”

We think St. Louis is a pretty special place and is a really great place for a young company to be located.

Devin Turner & Charlie Beckwith, Focalcast founders

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18% of ITEN companies are women-owned

THE POWER OF THE NETWORK:Depth of Resources & Breadth of Access

THE POWER OF THE NETWORK:Investment, Revenue & Bootstrapping

Approximately

34% of companies reporting had recurring monthly revenue by the end of 2016, averaging $37,000 per month

66% of founder teams have self-funded company development

2013 2014 2015* 2016

Amount of Self-Fundingin St. Louis Tech Startup Companies

* 1 company represents $6MM of total

9.1MM

3.5MM3.8MM 4.3MM

Over two-thirds of companies reported self-funding company development at some point, with an average of $56,000 per founding team invested in 2016. Whether out of necessity or strictly by choice, the presence of a large amount of bootstrapping entrepreneurs reinforces the need for a strong network. Expert strategies and guidance on how to use every dollar to maximize growth is extremely critical.

St. Louis continued to be a strong source of early-stage seed capital with

6 accelerators investing in

94 companies in 2016; Arch Grants added

20 non-dilutive grants

Whether it’s outside investment, revenue or self-funding, having the capital to continue to move their company forward remains the top concern for St. Louis tech entrepreneurs. 2016 showed a decrease in investment capital with 44 companies raising $37 Million in outside financing. Absent this year were the presence of 8-figure venture capital deals like we had in 2015 when only 5 companies were responsible for $125 Million of the total funding raised.

Over 50% of our founders continue to state “access to capital” is their biggest challenge. This is especially the case for those companies whose needs have grown beyond the typical accelerator-level of investment.

Melissa Grizzle, Director, Entrepreneur Development, ITEN

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Getting Out ThereOne the most important things to do when trying to get a new business off the ground and build a new technology, is to talk to other people about it. Not just mentors or people you have formal meetings with, but everyone you meet. What do they think of the idea? Would they use the product, and more importantly,

would they pay for the product? By attending the various events held in the St. Louis ecosystem every week, you not only glean knowledge and meet people that can help build your business, you can gather valuable informal feedback as well. Check out the list to the right of ongoing events in the region.

1 Million Cups St. Louis 1millioncups.com/stlouis

Gateway to Innovationwww.g2iconference.com

House of Genius St. Louishouseofgenius.org/location/st-louis

InvestMidwest Venture Capital Forum investmidwestforum.com

ITEN 2nd Thursdayitenstl.org

MVF mvfstl.org

Product Camp stlpm.org/productcamp

ShowMeCon showmecon.com

Startup Connectionstartupconnection.org

StampedeCon stampedecon.com

Startup Weekendstartupweekend.org

Venture Café vencafstl.org

VISION Regional Inclusion Symposium visionstlouis.com

St. Louis has close to 100 tech-focused meetup groups including Code Until Dawn, LaunchCoderGirl, Hackers/Founders, St. Louis Game Developers and St. Louis Hadoop Users. Check out www.meetup.com/cities/us/mo/saint_louis/tech/ to find one that interests you.

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Special thanks to these ecosystem partners for their support

Report design by Matt Johnson DesignPrinting by Ultra-Color