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Nicklaus: St. Louis has a homegrown unicorn. Maybe the next one will stay home

Nicklaus: St. Louis has a homegrown unicorn. Maybe the next one will stay home

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St. Louis has finally created a technology “unicorn,” but there’s a catch.

In 21st-century venture-speak, the mythical beast is shorthand for a privately funded company worth at least $1 billion. Gainsight, a software firm born and nurtured in St. Louis, achieved that valuation on Monday, setting off a round of congratulations among local investors and entrepreneurs.

“This is really exciting,” said Cliff Holekamp, a partner in Cultivation Capital, a venture capital firm that invested in Gainsight. “It means the St. Louis startup complex can grow a unicorn; the St. Louis origin is a key part of the story.”

The catch is that Gainsight isn’t based in St. Louis. Its headquarters moved to San Francisco in 2013 after a West Coast firm, Battery Ventures, led a $9 million investment round and recruited technology veteran Nick Mehta to lead the company.

That clearly was the right move. Mehta led Gainsight to rapid growth in a new category known as customer success software. On Monday, he announced an investment by Vista Equity Partners that reportedly values the company at $1.1 billion.

The local celebration might be even more jubilant if we had a unicorn headquartered here. Still, Holekamp sees Gainsight’s achievement as a win for St. Louis.

For one thing, the West Coast investors kept a sizable presence here rather than moving the whole company. Gainsight employs 54 people in Town and Country, a number that may grow with Vista’s backing.

For another, Gainsight’s success validates several pieces of St. Louis’ modern tech ecosystem. The company, originally called JBara Software, was Cultivation Capital’s very first investment in 2012. It was an original tenant of the T-Rex technology incubator and among the first companies mentored by Capital Innovators, a local accelerator fund. Other early backers included the St. Louis Arch Angels and state-funded Missouri Technology Corp.

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Local companies seeking West Coast money today, Holekamp says, face less pressure to move. “It doesn’t happen that way anymore, but it still happened in 2013,” he said. “It is so hard to build a tech team that investors are unlikely to break that team up.”

Indeed, software firm Balto raised $10 million this year, with a Silicon Valley lead investor, while remaining firmly planted in downtown St. Louis. Varsity Tutors raised $50 million in 2018, also from Silicon Valley, without budging from Clayton.

The career of Jim Eberlin, Gainsight’s co-founder, provides solid evidence of St. Louis’ growing capacity to support tech startups.

Host Analytics, founded by Eberlin in the early 2000s and now known as Planful, moved most of its operations to California after raising venture capital. Gainsight moved its headquarters but kept a large presence here.

Eberlin says his latest startup, TopOpps, is committed to growing in St. Louis. He founded TopOpps, which uses artificial intelligence to help companies forecast sales, in 2014 and it now employs about 30 people.

Eberlin had previously sold his stake in Gainsight, but he still found last week’s announcement exciting. “It means a lot here locally, especially since they have a great team in St. Louis,” he said.

He’s convinced that St. Louis will produce more unicorns, but cautions against unrealistic expectations. “It’s a long game; there’s not a short-term solution,” he said. “You’ll attract investors if you have the right kind of mentors and founders with the true grit to make it happen.”

Holekamp said out-of-town investors have called to ask which St. Louis startup might be the next Gainsight. With luck, our next homegrown unicorn will be one that stays home.

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