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$283
Million in Venture Funds Reach Start-Up Companies
Regional
businesses are the grateful beneficiaries of increased venture capital
funds.
By Liese Hutchison
More
than $200 million was invested in start-up companies in the St.
Louis area in 1999, according to a survey conducted by PricewaterhouseCoopers
MoneyTree. Gabriel Communications, with more than $100 million,
was the largest recipient of venture capital funds in the region.
The state of Missouri witnessed
more than $283 million in investments, more than double its 1998
total.
Above:
Average
Number of US Employees by Age of Company (source : PricewaterhouseCoopers)
Why
the increase in venture capital funds and will this trend continue?
Andy Hoyne, partner at Armstrong Teasdale and member of the Angel
Network thinks the trend will persist. "Those of us who have been
involved in this area for a long time say that this is the most
vibrant time in St. Louis," he notes. Hoyne says technology-stimulating
companies are leading the way with creative ideas and business
plans. "The momentum has started and is building rapidly." Of
the venture capital money invested in the region last year, 90
percent was earmarked for technology-based companies.
Hoyne
credits the Technology Gateway Alliance, an RCGA affiliated organization
of more than 500 technology professionals whose mission is to
advance the region's technology-based economy, and increase investment
from local venture capital groups like Angel Network and out of
state through investment fairs like InvestMidwest Venture Capital
Forum.
Above:
Average
Cummulative R&D Investment by Age of Company (source : PricewaterhouseCoopers)
The
Technology Gateway Alliance wants to see even more venture capital
money enter the region. The goal is to increase the $283 million
received last year to $1 billion by the end of 2001. Even though
St. Louis was the beneficiary of the bulk of venture capital funds
last year, the region received less than one percent of the more
than $35 billion invested by venture capital groups across the
nation.
Above:
Average
Export Sales/Revenue by Age of Company (source : PricewaterhouseCoopers)
The
RCGA's Alliance sees the $1 billion worth of investments coming
from venture capital firms outside of the region ($450 million),
St. Louis investment firms ($250 million), legislatively incented
funds in Missouri and Illinois ($250 million) and from venture
angel groups, mutual funds and banks ($50 million).
What
exactly do these venture capitalists do? According to a PriceWaterhouseCoopers
study, six things:
-
finance new and rapidly growing companies
- purchase
equity security in businesses
- assist
in the development of new products or services
- add
value to the company through active participation
- take
higher risks with the expectation of higher rewards
- have
a long-term orientation.
Hoyne
points out that not only do venture capital groups provide funds,
but they also work closely with the companies they invest in.
"The key is to make the companies better, nurture them, supplement
their management team and tell the outside world they're there,"
he says. Classified as a venture angel group, Angel Network and
its 35 members invested $1 million in St. Louis companies in 1999.
"It's a good first year and we plan on increasing the amount this
year."
Liese
L. Hutchison is an assistant professor in the department of communication
at Saint Louis University and a free-lance writer.
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