This week a Business Insider article listed St Louis as the fastest-growing startup scene in the US with 342.7% deal growth in 2015 and 33.02% growth since 2012. This is great news for a city that was just shunned by the NFL and publicly insulted by one of its native sons in the process. St. Louis beat cities like Austin, Boulder, and the NFL franchise cities of Seattle, New York, and San Francisco. How did we get here? When did St. Louis sneak up on the startup scene?
St. Louis’’s success is the product of investments in the community that started a little more than ten years ago. A few people believed in the talent of St. Louis and the natural byproduct of that top talent: great universities and world-class companies. Through the “Build it and they will come” vision, people and institutions like Bill Danforth, John McDonnell, and WashU built a formidable base of venture funds and support infrastructure for entrepreneurs. In time, supporting entities like Cortex, Arch Grants, Cultivation Capital, and Capital Innovators blossomed. From this, entrepreneurs who dreamed of a better way created large notable successes like Square, Express Scripts, and Savvis.
The investment that these visionaries made in St. Louis pales in comparison to the money spent to bring the Rams to St. Louis. Honestly they probably invested less than the remaining tab St. Louis has to pay after the Rams are long gone. This comparatively small investment in entrepreneurs has already made a greater impact on the city than a pro football team ever will. If you understand the power of American innovation, you know the entrepreneur dividend will continue for years to come.
If you live in St. Louis, Kansas City, Cleveland, Nashville, Memphis, etc., there is an important lesson here. The best way to invest in your city is to invest in your local talent. The smart, creative people in your town will do a whole lot more to make it great than a sport that is becoming less about great athletes and more about a bunch of rich owners living off a city’s tax base to drive NFL advertising profits.
To illustrate this point, consider the costs associated with bringing the Rams to St. Louis twenty years ago. The Edward Jones Dome, built in 1995, cost taxpayers in St. Louis, St. Louis County, and the State of Missouri $258 million. Using data from the Kauffman Foundation, if that $258 million were invested in entrepreneurs in 1995, the value of that principal investment would now be worth $30.7 billion. Using Pitchbook data from 1995-2015, we find that the median revenue of companies that have exited in the last twenty years is $33 million and the median revenue multiple at exit is 2.1x. Applying these metrics to the hypothetical $30.7 billion, St. Louis would have $14.6 billion in new company revenue spread out over 443 companies. If we assume that the average revenue per employee at these firms is $200k per year, this equates to a total of 73k new jobs. In contrast, the Rams employed 200 full time employees and each football game’s cumulative economic impact (8 per year) was estimated at $10 million.
Every great city in the midwest must learn from St. Louis’s struggles. Worried about your city? Worried about lack of jobs? Want to improve your region’s economy? Investing more in area startups is the only place to start.
Until now, investing in entrepreneurs was hard. It took a lot of time to find companies, figure out who to trust, and sort through the complexity. An investor then needed to write a $100k investment check into each company. Even if you are well off, it was too hard, which is why only 3% of accredited investorsnationwide ever invested in startups.
iSelect fixes all of this. iSelect sorts through hundreds of emerging companies, across the midwest, finding the 2.5% that are worthy of investment. iSelect partners with regional venture capital firms to build the companies. With iSelect individuals invest as little as $50k, spreading that investment across 10 or more companies, diversifying risk. If you earn an individual income of over $200k per year, a joint income of over $300k, or have a net worth not including your home of over $1 million, iSelect might make sense for you.
Economics aside, I did love it when the Ram’s won the super bowl. If St. Louis wants that civic pride, lets invest in our entrepreneurs first, build a wildly successful regional economy, and let some emergent rich entrepreneur just buy a team with petty cash. More broadly, I will take great pride when iSelect helps Kansas City, Cleveland, Austin, Denver, Fayetteville, New Orleans, Atlanta, etc beat St. Louis as the next high growth startup city. All it takes is a few local investors in a few short years to transform the landscape.