Technology / Business
6:25 am
Thu March 22, 2012

Making tech start-ups stick in St. Louis

Silicon Valley has been the place for IT development since the dawn of the computer age, but new technology and cheaper resources are leveling the playing field for other cities across the country. As St. Louis Public Radio’s Joseph Leahy reports, a network of local business leaders is pushing to make St. Louis a regional hub for IT start-up companies.

St. Louis misses out on Square

In 2009, two St. Louis natives set out to build a business around a device that could process credit card payments on mobile phones. One was Jack Dorsey, the founder of Twitter. The other was computer science engineer Jim McKelvey.

He says they wanted to base their company called "Square" in St. Louis. 

“We we’re trying to favor the city, but it just didn’t work,” McKelvey said. “We couldn’t get the level of engineering talent and the engineers that we did have in St. Louis, we kept having to fly out to the valley."

He means Silicon Valley and today Square is one of the hottest new companies headquartered there.

St. Louis missed out.

The city that once hosted the World’s Fair and gave rise to mammoth industrial corporations is not today the first place most IT entrepreneurs would think of building the next Google.

A second look at St. Louis

But local business leaders say the Gateway to the West deserves a second look. 

“The problem is everybody can’t go fleeing to the coasts,” said Judy Sindecuse, CEO of Capital Innovators a new investment group that provides capital to technology start-up companies in St. Louis.

“It worked for a while, but the reality is because of that everything has become so expensive on the coasts,” she said.

Advances in technology, she said, are opening the door for IT development in the country’s non-coastal areas.

“Nowadays you can put all of your stuff in the cloud. It’s inexpensive. You no longer have to gravitate to where these locations are. Where you have all of your data store might be in another state,” she said

Riding a wave of tech industry investment, cities like Austin, Atlanta, and Chicago are casting themselves as havens for start-ups, but perhaps no place is this trend more evident than in St. Louis, where business investors are gaining critical mass.

Jim Brasunas is director for IT Entrepreneur Network, a non-profit business advising group in St. Louis.

St. Louis is more than just a cheap place to do business, he said.

“What we’ve seen happen in the last six months is a quantum leap from what was going on before," Brasunas said. "It was a slow build up then all of a sudden, we jumped up to the next level."

He points, for instance, to a new program called Arch Grants which will hand out 10, $50,000 grants this May which are geared toward new IT companies that set up shop in St. Louis.

Old building repurposed to house new start-ups

Perhaps the most visible sign of St. Louis’s bid to transform its industrial roots is on the 12th floor of the Railroad Exchange Building downtown. One hundred years ago the structure was the largest of its kind, and housed offices of many of the country’s biggest railroads companies.

Today, with Wifi antennae mounted throughout the halls, Technology at the Railroad Exchange, or T-REX, is home to 20 IT start-up companies.

Ryan Bell is company founder of one of the T-Rex’s most promising start-ups called Gremln. It’s a social media marketing tool that helps businesses evaluate and control their presence on sites like Facebook and Twitter.

Before coming to TREX, said Bell, Gremln had fewer chances of succeeding.

“We worked out of Starbucks. We literally -- to try and save money -- would come in every day. We actually ended up calculating we spent on coffee than we would have just getting an office space,” he said.

Gremln today has more than 100,000 users and recently rolled out payment plans for its service. Bell says T-Rex has given Gremln a leg up at a critical stage in the company’s development.

“They serve to provide us with mentorship, connections, and opportunities to raise money as well to help us get our businesses started,” Bell said.

The strategy for many start-up companies like Gremln is to be bought by an industry giant like Yahoo, or Google. St. Louis investors hope a couple buyouts like this will cement St. Louis’ place in the IT world.

But, if Gremln hits the big-time, Bell says he has no plans of leaving town.