St. Louis Firms Raise $290 Million of Venture Capital in 2016

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2016 was another very good year for St. Louis startups receiving venture capital. The total amount of venture capital received by companies in the St. Louis region exceeded $290,000,000.  This compares to the 2015 total of $258,000,000 or a 12.5% increase year over year.  As in my report from last year, all of the data reported is from Crunchbase.

The 80/20 rule has never been more apparent than in the 2016 investments, as the top 12 companies out of 64 (top 19%) received $223,000,000 or 77% of the total money raised in the region.

Notable Investments

The top 12 companies based upon money raised in 2016 are:

RankFirmAmount Raised
1Tioma Therapeutics (formerly Vasculox) $86,000,000
2Veran Medical $31,000,000
3Veniti $25,000,000
4Endo Stem$25,000,000
5Tierpoint$12,000,000
6LabelInsight$10,000,000
7OneSpace$9,000,000
8Bonfyre $6,000,000
9Coolfire $5,400,000
10Adarza Biosystems$5,000,000
11Confluence Life Science$4,830,000
12Hatchbuck$4,050,000
Total $223,280,000

Note: Galera Therapeutics, a cancer drug startup born out of research in a lab at Monsanto Co., raised $57 million, but is registered in Crunchbase as headquartered in Malvern, PA and unfortunately is not a part of this year’s data.

The top 4 companies are all Life Science/BioTech firms and together they raised $167,000,000. That amount was 58% of the total raised in the region for 2016. In fact, the Life Science/Bio category crushed the fundraising of the Hardware/Software Technology companies in St. Louis by $201,000,000 to $89,000,000 or 70% of the total capital raised.

Since I am focused on software technology for Cultivation Capital, I am disappointed in our overall performance within the region for hardware/software technology. Congratulations to Washington University, BioGenerator, Cultivation Life Science Fund, MTC, Rivervest, and all of the other life science/biotech supporters for a fantastic year! We will try to outgrow you next year.

Year Over Year Comparisons & Growth

The average deal size in 2016 was over $4,500,000 vs $2,830,000 in 2015, which is a 60% increase. It is also a 50% increase over the last four-year average.

YearInvestment Size# of DealsAverage Deal Size
2013$180,000,00075$2,400,000
2014$169,000,00060$2,830,000
2015$258,000,00091$2,835,000
2016$290,273,00064$4,536,000
Totals$897,273,000290$3,094,000

There were 30 deals in 2016 that were greater than $1,000,000 each. In 2015, there were 24 deals that were greater than $1,000,000 each. The only disappointing number in 2016 was that the total number of venture deals dropped from 91 to 64.

Looking Ahead

I had forecasted that 2016 would see $300 million in venture capital raised across 75 deals for an average of $4,000,000 per deal. I was pretty close on the $300 million raised number and exceeded the $4 million average deal, but I was disappointed in the total number of deals that got funded in 2016. This is something we need to be concerned about and watch in 2017. I also expected two to four exits in 2016, but two of the deals I was forecasting entered into strategic relationships with their future acquirers that pushed the exits out at least 18 months.

For 2017, I am forecasting $320,000,000 in increased funding for a 10% growth rate and I expect the number of deals to increase to 80, which would be up 25%. An average round size of $4,000,000 can be expected in 2017. The average deal size will remain high as our market continues to mature and we see more “A”, “B” and “C” fund rounds funded.

Finally, much of the number of deals and the fundraising growth can be attributed to the increase in the number of accelerators and in the number of local venture funds being created within the region. These accelerator and venture funds have significantly grown their amount of deployable investment dollars over the last five years. This trend of fund growth grew again in 2016. This increase in the number of funds and investable capital should make 2017 another exciting year for startup company funding and for early-stage job growth within the St. Louis region.

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Brian Matthews co-founded Cultivation Capital. Brian has a passion for mentoring and developing start-up founders. He is an investor and mentor at Capital Innovators and a founder of River City Internet Group. Brian is a serial entrepreneur having co-founded and assisted in the sale of the following technology companies: Primary Network to Mpower Communications in 2000, Primary Webworks to Perficient in 2001, CDM Fantasy Sports to Liberty Media in 2006, and IntraISP to Clearwire Communications in 2007. In addition to his role at Cultivation Capital, Brian serves on the boards of LockerDome, Hatchbuck, TopOPPS, Tunespeak, Aisle411, Globalhack, and the Friends of T-REX. Brian is also a General Partner in the SixThirty FinTech Accelerator. Brian has a B.S. in Mechanical Engineering from the Missouri University of Science and Technology and worked at McDonnell Douglas for 12 years before beginning his entrepreneurial career in 1993.