Erkios Systems Inc. landed a coveted $50,000 grant from St. Louis-based Arch Grants in October, but the money stopped, and the cybersecurity startup founded in Kansas City now is suing the nonprofit.
Arch Grants, a nonprofit that backs startups, cut off payments to Erkios, alleging that it didn't meet the program's contractual requirements, which included relocating to St. Louis for at least a year.
Erkios filed suit in June in Jackson County Circuit Court. It seeks the $30,000 balance of its grant plus $25,000 in damages and attorney fees. Kenneth Caldwell and Edward Foster of Kansas City-based Caldwell Law Firm PC represent Erkios.
In a motion to dismiss, Arch Grants said that Erkios’ lawsuit is a "shameful attempt to harass Arch Grants with baseless claims” and that the startup “failed to comply with many of its contractual obligations,” including relocating to St. Louis and attending mandatory programming.
Erkios was one of more than 30 startups awarded $50,000 grants as part of Arch Grants’ annual startup competition last year. Founded in 2017 and focused on cybersecurity, Erkios’ hardware technology aims to provide safety against data leaks.
The Arch Grants program requires grant recipients to relocate to St. Louis for at least a year.
According to emails provided by Erkios CEO and co-founder Sean Null, the dispute began to surface in early April, when an Arch Grants official requested that Erkios update its LinkedIn profile to show that St. Louis — not Kansas City — was its headquarters. The company complied, and its LinkedIn page still says it is based in St. Louis.
On April 30, Null and fellow co-founder Philip Vanderstraeten received an email from Arch Grants Executive Director Gabe Angieri notifying them that the nonprofit was suspending grants payments because it received "no confirmation" that Erkios had relocated to St. Louis, according the emails provided by Null. At that point, Arch Grants had given Erkios two $10,000 installments toward the $50,000 grant.
Null replied May 2, saying in an email to Angieri that the suspension was based on "unfounded suspicions."
In an interview last week with St. Louis Inno, Null claims Erkios relocated to St. Louis and rented an office at the WeWork coworking facility in downtown St. Louis. He said he provided his lease agreement and address to former Arch Grants Executive Director Emily Lohse-Busch, who departed the organization in February and was succeeded by Angieri.
On May 7, after receiving notice of the payment suspension, Null requested to speak with Arch Grants founder and Chairman Jerry Schlichter to “start a dispute resolution process.”
In replying to Null’s request, Angieri said that he discussed the dispute with Schlichter and the Arch Grants board and that the group declined the invitation to meet. “We have made repeated requests of you to submit residency documentation (as clearly stipulated in the Comprehensive Grant Agreement you and Philip both signed) which you have refused to provide,” Angieri said in the email.
But in one of his emails to Arch Grants, Null argued that he did send the required documentation and the fact that his company received two disbursements of the grant was evidence to the point. He then accused Arch Grants of disorganized record keeping and said "this is no fault of Erkios Systems."
Reached last week, Angieri declined to comment specifically on the lawsuit but said in a written statement that Arch Grants awards its grants "in exchange for a commitment to headquarter in St. Louis for at least one year. We are very clear on our program's residency requirements."
