The St. Louis region has been struggling for years to grow more high-tech companies. On Tuesday, it got a truckload of fertilizer.
During a visit to the Center for Emerging Technologies, Gov. Jay Nixon said he would use $16.9 million in federal money to help plug what has long been called a hole in Missouri's economic development pipeline: early stage financing for high-potential but unproven tech firms.
"This is an area where there's a huge need," Nixon said. "It's a place where dollars are directly needed."
The money comes from a $26.9 million award the state is due under the State Small Business Credit Initiative, part of a small business act signed by President Barack Obama last fall. The $10 million balance will go into a more traditional loan program, designed to boost hiring and expansion for companies with fewer than 500 people.
Although these sorts of firms don't grab the big headlines of a corporate headquarters or big factory, they're at least as important to Missouri's economy, Nixon said. And helping businesses that are already here to grow is often easier and cheaper than luring in big employers from elsewhere.
"You have to grow business inside your state," he said. "It's the most efficient economic model there is."
Yet the people who work to build medical and biotech businesses in St. Louis say they've been watching too many leave once they get to a certain size. When companies need a big infusion of capital, they frequently have to go where the money is — typically California or the Northeast — and they wind up staying, growing and hiring there.
Last year, a Post-Dispatch series on the region's economy — "Can St. Louis Compete?" — found that the area continues to lag behind the nation in the creation of new companies and that local startups had difficulties attracting venture capital.
Some Midwestern states, particularly Ohio and Kansas, have addressed this dilemma by establishing state 'seed capital" funds to help local tech firms grow at critical times in their development, so that they can stay put. But efforts to set up something similar here — most recently the Missouri Science and Innovation Research Act, which would dedicate some taxes from science firms to fund startups — have stalled in the Legislature.
A one-time $16.9 million fund won't eliminate the need for these programs, said Marcia Mellitz, vice president for business development at the Coalition for Plant and Life Sciences. But she thinks it could help prove the case.
"What I'm hoping is that it will actually spur support for programs like MOSIRA, if people see how valuable these funds can be in creating companies and creating jobs," Mellitz said.
The $16.9 million, which will be used to create new Missouri IDEA Seed and Venture Capital funds, and the $10 million Grow Missouri loan fund are both designed to leverage private investment as well.
Federal guidelines for the program set a target of $10 in private lending for every dollar of public money spent, giving the award a potential impact of $269 million. The loans must be issued within two years, and the state will start accepting applications April 8.
Mellitz said she expected the program would draw a lot of interest from local medical and biotech entrepreneurs such as those working at CET, situated in the Central West End neighborhood.
They're smart people, building the sort of companies that will power the economy in the 21st century, she said, and Missouri would be smart to help them stay close to home.
"This sort of thing is how we're going to grow St. Louis' economy," she said. "These folks are playing in a global marketplace, and if we can't support their companies here, they will go elsewhere."
