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Issue: 1224 Date: 2/6/2014
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Arch Grants: Transforming St. Louis Into America's Next Startup City

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        In 2011, FoodEssentials was going through a tough time. The young company was developing proprietary technology that could change the way consumers, governments, and retailers made decisions about nutrition. The challenges FoodEssentials faced, however, were proving to be real obstacles to success.

        Geographically, the company was spread thin. All three co-founders lived in different countries: one was in Japan, another in Australia, and the third lived in England. Without a physical center, the team was finding it difficult to gain traction.

        In the search for capital, the co-founders came across Arch Grants. Arch Grants offered startup grants worth $50,000, but took no equity in return. There was a catch, however: FoodEssentials would have to launch from St. Louis.

        It wasn't Silicon Valley, but the incentives — funding with no strings attached, cheap office space, and a professional network — were too great to ignore. In 2012, FoodEssentials applied for and received an Arch grant. The team relocated to St. Louis, and that's when things began to change.

        "We landed…in the middle of a thriving entrepreneurial scene," co-founder Anton Xavier said. "It gave us direct access to mentors [and] investors…and the support of the wider community."

        Within a year of relocating, FoodEssentials secured additional funding, hired 45 employees, and grew its revenue by over 100 percent.

        The boost the company received from Arch Grants helped FoodEssentials sign a multimillion-dollar contract with the FDA. The company is set to become profitable by the end of 2014.

        The Arch Grants Approach

        FoodEssentials is not the only Arch Grants recipient to enjoy explosive growth. Since 2012, Arch Grants has awarded $1,950,000 worth of funding to 35 companies and helped generate 128 jobs, $3.2 million in revenue, and $5.8 million in follow-on capital in the process.

        According to Executive Director Ginger Imster, the purpose of Arch Grants is to create a game-changing entrepreneurial culture.

        "Growing our own companies from the ground up is the way to create jobs, generate revenue, and build a more vibrant economy," Imster says.

        Arch Grants offers startup grants of $50,000 that are "non-dilutive." In other words, the organization takes no controlling stake in their investees' companies. The only requirement is that recipients launch in St. Louis.

        This suited St. Louis native Michael Palmer just fine. He turned down two other accelerator programs that "offered less money and wanted an equity stake." Arch Grants allowed Palmer to stay in his hometown and keep full ownership of his company, Code Red Education, enabling him to make new hires and invest in development. In the two quarters his company has been associated with Arch Grants, Code Red has experienced an 800 percent increase in sales.

        Investees get more than just an injection of cash, however. Arch Grants networks its entrepreneurs within St. Louis groups that are relevant to their businesses. It also offers a robust portfolio of pro bono expert service providers in legal, accounting, marketing, and IT support.

        Leveraging Local Assets through Partnership

        Arch Grants isn't the only player dedicated to nurturing St. Louis' entrepreneurial ecosystem. The list of cross-sector partners is long, and it includes the city government, the Regional Business Council, and Washington University in St. Louis.

        As a biotech entrepreneur, Arch grant recipient Preston Keller says that support from key players in government, industry, academia, and the private sector makes a big difference. This, combined with access to robust infrastructure and diverse talent, gives St. Louis "small-town charm with big-city amenities."

        As more entrepreneurs are drawn to the area, a peer network is emerging as well. "Our startups are supportive of one another," says Imster. "It's a close-knit community, one that provides opportunities not only for sharing resources, but connecting with like-minded people."

        While their method is unusual, I'm certainly impressed by what Arch Grants has accomplished. The organization has mobilized a movement, and the value-add it's creating — both for its startups and for the region — is highly unusual. The real question is: For a $50,000 grant, cheap space, solid access to talent, and an instant network, would you move your company to St. Louis?

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