This article first appeared in the St. Louis Beacon, Sept. 12, 2013 - St. Louis has become a hub for agricultural sciences and commercialization but still lags in capital formation. That was the sentiment expressed by attendees at the Ag Innovation Showcase held at the Donald Danforth Plant Science Center this week during a series of breakfast interviews by the Beacon.
“My sense is that the venture capital markets and the equity that is going into ventures around innovation is really picking up steam in St. Louis. Just look around this room,” said Plant Science Center President James Carrington. “There are a lot of local teams here and, as significant as that, a lot of venture capital and equity firms from the coasts. … You’ve got a strong growing local market but really good awareness from the coast these days.”
The three-day get-together was the fifth annual conference and represented industries from food and farm tech to animal health and aquaculture and represented 15 nations across six continents. Over its lifetime, the confab has generated $96 million in post-showcase investment and is fast becoming a destination for investors, entrepreneurs and service providers alike.
"This has become, in our opinion, the No. 1 ag technology event in the country to attend,” said Arama Kukutai, managing director of Finistere Ventures, a San Diego-based venture capital outfit that specializes in agriculture. “One of the nice things about this event is that it doesn’t have 5,000 people. It has a small but very high-quality group working in the space. You have a relaxed environment to network with your peers.”
Kukutai, who has attended all five of the showcases, said the area’s strong university system and partnerships among the research community, nonprofits, corporate interests such as Monsanto and small startups are creating a dynamic environment that has put the Gateway City on the map internationally.
“I think St. Louis is one of the top five locations from the standpoint of looking at agriculture innovation in particular,” he said. “If you think in terms of traditional hubs of startup activity, places like Boston or the Valley, they are also still actively involved.”
Yet, Kukutai felt the key obstacle was attracting the human element, finding the people willing to leave safe jobs and take big risks.
“They’ve got a really robust infrastructure here for technology development,” he said. “I think the challenge, if you look at it from the perspective of a fund like ours that’s based on the West Coast where we tap into markets like San Diego, Silicon Valley and Orange County, is encouraging the pool of entrepreneurs.”
Kukutai represents precisely the kind of attendee the ag startup community hopes to attract.
“Money is a challenge,” mused Carrington. “It always has been for the innovation sector here. It’s improved a lot for the early stage. Where we are seeing a bit of a challenge is those next rounds of funding after companies start up. They’ve grown and they are now ready to get boosted with a little bit of fuel. There are challenges in local capital markets to get those B rounds funded. That’s a space where we could really use help.”
A fair amount of that help is still coming in from the financial centers on the edges of the country, but many dream of a day when St. Louis will produce more venture capital locally.
“I see investor groups growing. I see funds being put together that should address this,” said Carrington.
Philippe de Laperouse, managing director of HighQuest Partners, a strategy advisory firm that works with companies and investors in the agricultural supply chain, echoed that sentiment.
“It’s difficult to get people to travel sometimes,” said de Laperouse who is based at BRDGPark on the Danforth campus. “Sometimes you have to go to where they are. I would say that St. Louis obviously has a role to play and an important one. It’s a big opportunity for the region but sometimes you have to go where the money is located.”
That’s a disturbing thought to many who don’t want to see companies that incubate here forced to leave because of a cash shortage.
Still, de Laperouse said the area is not without its upside for cutting edge ag concerns. New York, after all, isn’t a Midwestern community sitting in the breadbasket of the nation.
“This is the big advantage that St. Louis has,” he said of St. Louis’ ag industry base. “You have a number of companies that have been historically very much involved in agribusiness. We’re sitting in a region that is attuned to agriculture because of its location.”
Overall, de Laperouse is optimistic about the entire sector. Changing demographics in the farming industry are leading to consolidation and a focus on bottom line cost issues.
“With this new institutional capital coming in, it also is driving a lot of the impetus and the push to adopting new technologies, doing things better or more efficiently,” he said. “That’s creating demand for a lot of new products and services.”
But if farming is learning more about finance, finance may also be getting more comfortable with the tangible, earthy nature of farming in the wake of last decade’s bubble-driven economic collapse.
“Because of what happened in 2008, I think investors are looking for real, concrete business opportunities that bring value to end users,” he said.
Attendee Tom Laurita is one of the people hoping to provide that value. As cofounder of NewLeaf Symbiotics, which is commercializing a beneficial type of plant bacteria, he has been through the struggles of raising money. NewLeaf, which achieved series A funding in January, picked up much of its stake from California, Boston, even Vancouver. Some money did come from neighboring Illinois.
While it may be a challenge, Laurita says that local companies can pick up cash from elsewhere. He thinks it’s a matter of having strong research facilities in town.
“A big California venture group isn’t expecting to fund only California-based companies,” he said. “It’s a little bit of a catch-22 but anyone who wants to fund in ag is going to have to go where the science is being done.”
Moreover, Laurita, whose company is in BRDGPark, is here very much by choice.
“We could have chosen to physically locate anywhere. We chose here for reasons of availability of scientific talent and experience of eventual hires,” he said noting that a number of his employees are ex-Monsanto workers.
Like most, he laments the lack of local cash but, then again, it’s not easy anywhere.
“It’s tough all over right now to get venture capital. Venture as a category has not done well in the last 10 or 15 years,” said Laurita.
He said another issue was the scarcity of "ag venture funds. Two of the three funds that ended up giving us money are not historically ag-based. One is from the clean tech area and the other from new materials.”
And St. Louis has its advantages.
“Once you’ve got funding, this is a great place,” he said. “You do want a critical mass of great ideas being spun out. Wash U with medical is a great example. Lots of top professors are there coming up with new ideas in the medical field. In ag, I don’t think St. Louis yet has the critical mass it would need.”
But he hopes to eventually see a symbiosis of ideas, facilities and money uniting here.
“If you get all three of those in one place with people talking and meeting and seeing examples of their colleagues getting funded or starting something new, that’s really the momentum you want to create,” he said.