With the creation of SixThirty Cyber, which plans to invest $10 million over the next five years, the St. Louis area has at least six business accelerator funds. Based on a survey the Brookings Institution published in February, the only U.S. cities with more are San Francisco, New York, Boston, Chicago and San Jose, Calif.
Accelerator programs vary in size and focus, but they all invest in early-stage firms and put them through a period of intensive mentoring. According to the Brookings study, an accelerator can help a community by concentrating entrepreneurial energy and “generating vibrancy around innovation.”
If that’s true, St. Louis is more vibrant than most places. The five existing accelerators have financed more than 120 companies in sectors ranging from technology to agriculture to sports.
SixThirty Cyber is a second fund from the organizers of SixThirty, which was launched in 2013 to focus on financial technology startups. The idea then was to capitalize on St. Louis’ strengths by connecting entrepreneurs with such large firms as MasterCard and Wells Fargo Advisors.
Jay DeLong, managing partner of the new fund, said SixThirty was seeing a growing number of applications from firms specializing in information security.
It invested in some of them, such as Rippleshot, a Chicago company that detects payment card data breaches, but the fund’s managers realized that the online security opportunity extends well beyond the financial sector.
In fact, cybersecurity is a growing concern across all industries. According to a recent study by PricewaterhouseCoopers, corporations boosted their information security budgets 24 percent last year in response to a 38 percent increase in security incidents.
In St. Louis, DeLong said, concerns about online security are acute at health care firms such as Express Scripts, defense firms such as Boeing and government entities such as Scott Air Force Base and the National Geospatial-Intelligence Agency.
“We believe we are going to attract a lot of cyber companies because of our strength in financial technology, but there are all these other firms that are potential partners and customers too,” DeLong said.
The fund will select five firms for its first class, which begins in September; it will invest between $100,000 and $200,000 in each and put the founders through a 14-week training and mentoring program. Most of the sessions will be in St. Louis but some may be at the Washington offices of Collingwood Group, a consulting firm that is partnering with SixThirty Cyber.
Investors in the new fund include Cultivation Capital, a venture capital firm, and the St. Louis Regional Chamber. Cultivation will manage the fund’s operations, a function it also performs for the original SixThirty and other local accelerators.
Those programs have different investment aims but similar operating strategies. Unlike some programs elsewhere, the Cultivation-run accelerators don’t invest in businesses at the idea stage. They require entrepreneurs to have a well-developed product, and usually some customers.
Even when those entrepreneurs come from a larger place such as New York or Washington, DeLong contends that St. Louis is an ideal place to develop their technology. “We are big enough to find a major customer in your space, and we are small enough that you can probably reach out and talk to the CEO,” he said.
Depending on your perspective, St. Louis is either a big small town or a small big town. In the accelerator space, perhaps that in-between size can be our comparative advantage.
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