St. Louis-area tech startups raised $30 million in capital last year, according to a new study by the Information Technology Entrepreneur Network. That’s up from $12 million in 2011 and represents more than 40 percent of the $70.6 million total raised by young tech firms in the area since 2008.
ITEN, a St. Louis group dedicated to promoting entrepreneurship and creating technology jobs, has collected data from more than 350 companies since 2008. The 2012 data was collected from more than 250 companies in the St. Louis area, ITEN executive director Jim Brasunas said.
Brasunas credits the steep uptick in funding figures to both “more and better deals” and more accurate and widespread tracking of those deals.
ITEN does not release specific funding information from the companies it tracks, but according to the report well over half of the new money has gone into a “small handful of local deals,” many of which made the report’s “Top Ten”, “Next Ten” and “Fast Ten” lists. High-profile capital raises in 2012 included Splice Machine’s $4 million round, NorseCorp’s $3.5 million round, and LockerDome’s $1.04 million round.
Friends and family provided most of the overall funding for entrepreneurs at 52 percent, but angel investors (23 percent) such as the Billiken Angels, accelerator programs (9 percent) like Capital Innovators, and grant programs (7 percent) led by Arch Grants also accounted for substantial amounts of the capital raised in 2012.
Brasunas said that more tech startups in St. Louis are reporting revenue and adding new employees. Startups in the ITEN network had 850 employees in 2012, up from 601 in 2011, according to the report, and that number is expected to continue growing in 2013. The report credits this growth to increased access to funding that has never existed before coming from more attentive investors in St. Louis and across the country and more entrepreneurs coming to St. Louis to found their startups. Eight percent of company founders in the ITEN network were originally from states other than Missouri, which Brasunas partially credits to the fact that St. Louis has cheaper cost-of-living than the coasts.
However, Brasunas emphasized that the St. Louis startup community still has “major challenges” to conquer, including a shortage in seed capital and Series A funding and a lack of ability to attract and train the talent startups need to succeed.
The report maintains that a successful entrepreneurial St. Louis should support many deals at all stages of development instead of just a small handful of great deals. Brasunas said in the report that ITEN will look to develop greater collaboration between for-profit and not-for-profit organizations in the startup community and to increase corporate and university involvement in the process.