Raising capital as an early-stage startup is a crucial step that many founders struggle to do. The St. Louis startup scene has evolved over the years to make this Herculean task just a bit easier. St. Louis-area accelerators, angel investors and venture capital firms have experienced a boom over the last 20 years, positioning the city as the innovation center of the region.
With the number of investment partners available, which include mentorship from industry experts and seasoned investors, startups in the region have plenty of options. Here are a few of the investors, incubators and other local resources founders can use to raise capital as a seed or early-stage startup.
As a startup gains maturity, it should seek funding sources that match its level of growth. In the early days, a startup may simply require a workspace or an incubator to develop. As it progresses, however, it will need more funding, more support and more experienced mentorships to help guide it along. In this first of a multi-part series, we spotlight the accelerators, angel investors and venture capital in the St. Louis region.
St. Louis startup accelerators
Depending on your startup’s current stage, you may want to consider joining an accelerator program. Accelerators are cohort-based, fixed-term programs that also include mentorship and educational opportunities, and typically culminate in a public pitch event or demo day to drive further investment in the company.
Arch Grants
Early-stage startups seeking a direct infusion of funding could hardly go wrong with one of the largest accelerator programs in the region. The annual Arch Grants Startup Competition invites startups to apply for the chance to win $75,000 in non-dilutive grants, with an additional $25,000 offered to companies that relocate to St. Louis. Winners of the competition are also eligible for additional funding of up to $100,000 as part of the Growth Grants program. Startups from the idea-stage to pre-Series A can apply in late winter or early spring, with a Feb. 21 through March 31, 2023 submission date for the 2023 cycle.
To qualify for Arch Grants’ full ecosystem of resources, startups must headquarter their business in St. Louis for at least one year. Headquartering in St. Louis is defined as at least 51% of the founding team or one founder and 51% of the team live in St. Louis for the duration of the program year. At least one founder is also required to work on the company full-time or as their primary profession.
Arch Grants offers its program participants access to a la carte programming, fundraising support, exclusive discounts, talent acquisition support and entry into the Arch Grants network for even more growth opportunities.
Stadia Ventures
Stadia Venture is a global venture capital firm and startup accelerator. Built from a community made up of entrepreneurs, industry partners and investors looking to bring innovative transformation to sports and esports, this organization encourages startups from seed to Series A to apply to take part in their accelerator program.
To qualify for the program, businesses must have some initial momentum built up for their product or service such as revenue, IP, clients, downloads and/or monthly active users (MAU), among other measures of traction. The program is particularly interested in startup businesses focused on one or more of the following:
- Lifestyle and recreation.
- Performance and wellness.
- Fan engagement and experience.
- Content, media and entertainment.
- Esports.
- Sports betting.
The application window runs from October to November and will be followed by three separate rounds of due diligence, pitch meetings and the final cohort selection. The selection process is long and involved, but the cash investment of up to $100,000 in addition to a sweat equity investment equal to three times the cash investment makes it a worthwhile endeavor. Upon completing the program, startups have the opportunity to earn more investment if they are able to demonstrate efficient growth and impressive knowledge of their customer base.
Angel investors in St. Louis
Angel investors go by many names, such as business angel or angel, but their role remains the same: provide capital for startups during early stages when risk is highest in exchange for convertible debt or ownership equity.
St. Louis Arch Angels
Like many other angel investment groups, St. Louis Arch Angels focus on investing in companies they believe have the potential to grow to $10 million or more in annual revenue within five years of the initial investment. They provide seed funding and early-stage capital earlier than most venture capital firms and, in return, they may ask for preemptive rights to invest in your company again in later-stage investment rounds.
The screening process is quite robust and includes an evaluation of your business based on your management team, marketing opportunity, business plan, growth potential and intellectual property protection among other factors.
St. Louis-area venture capital
Venture capital is the primary way for startups fund later stages of growth after the startup has established a foundation. As the level of investment increases, the level of sophistication and due diligence are heightened as startups climb the funding ladder, venture capital firms are both the most flush with resources and the most discerning in terms of making an investment. Preparation is key to impressing VC investors and taking your startup to the next level.
Cultivation Capital
Identified as one of the 18 most active early-stage venture capital funds in North America by Crunchbase News in 2020, Cultivation Capital focuses on startups in their seed through Series B phases. Cultivation Capital’s industries of focus include agriculture tech, geospatial tech, life sciences and health tech, and software and IT.
As would be expected of a venture capital firm, Cultivation Capital infuses companies within its portfolio with capital in addition to counseling startup founders and entrepreneurs to encourage exponential growth and return on investment for investors. The firm’s investments can range from $100,000 up to $3.5 million and they occasionally take on board responsibilities to further help their portfolio companies.
Finding resources to fund your startup is only the beginning, and it takes hard work and determination to convince these investors to take a chance on your business. Getting your financial details in order is a must to attract and improve your chances of winning them over, which is why adding an accountant, CPA or financial advisor to your startup team during its first days is highly recommended. Part two of this series will showcase incubators in the region.
Anders CPAs + Advisors is running a survey targeting startups and startup investors to analyze the St. Louis startup ecosystem. Startups can take the survey here. Funding sources in the startup community can take the investor-side survey here.
Need guidance on next steps with your startup? Anders CPAs + Advisors works with startups and entrepreneurs on their financial needs so they can focus on what they do best. Contact an Anders advisor to discuss your goals and how we can help you achieve them.
Every day at Anders, we serve as a catalyst for those striving to achieve their highest potential and carry this mentality on to our clients and community. Through a collaborative approach and a combination of tax, audit and advisory services, we help our clients achieve their goals.
Kyle Krahl is a manager in forensic, valuation and litigation at Anders with more than 10 years of experience valuing businesses and performing merger and acquisition due diligence. With experience seeing all angles of the financial due diligence process, Krahl is an asset for companies throughout M&A transactions.
