Key funder of early-stage Missouri companies points to fewer startups after state budget cuts | Local Business

The MTC has invested some $44 million into more than 100 startups since 2014, with state funding providing portions of the earliest-stage capital for firms that eventually grew into major success stories, such as Creve Coeur-based Benson Hill Biosystems, which went public last year, and St. Louis-based Confluence Life Sciences, later acquired by Aclaris Therapeutics. It also has helped build the state’s entrepreneurial infrastructure, helping to fund regional co-working spaces and programs.

But Missouri lawmakers have slashed funding for the MTC since 2017, when it fell from $23 million to $2.5 million in 2018. When the pandemic hit, the MTC’s funding was withheld as part of a state budget freeze while leaders braced for the fiscal impact of the COVID-19 recession.

The MTC-commissioned report, conducted by TEConomy Partners of Columbus, Ohio, comes as the MTC managed to recover some of its state funding support last year, with lawmakers appropriating $3 million for the startup support organization. In next year’s budget, which Jefferson City lawmakers are in the process of crafting, the MTC is seeking $4 million, a figure Missouri Gov. Mike Parson has also recommended in his proposed budget.

Still, the requested state funding for MTC is a far cry from the appropriations of around $20 million from 2014 through 2016. And that’s despite state coffers flush with cash from federal stimulus programs and a booming economy.

The MTC, which often helps companies in their earliest stages, has still been able to make investments, largely funded with revenue from past deals. And private investors are putting more capital into the state’s young firms, but the number of deals has declined since a peak in 2015. That, the report says, “suggests a shift toward larger, later-stage investments and away from early-stage deals, making it difficult for many entrepreneurs across Missouri to access risk capital.”

“While Missouri has made significant progress in recent years, inconsistent funding remains a primary challenge to supporting innovation and entrepreneurship,” the report said. “The defunding of MTC in (2018) sent a message throughout the ecosystem that the State of Missouri was not going to expand its entrepreneurial investments that had proven successful, but instead withdraw its support for the ecosystem. This has left founders, programs, and initiatives questioning whether the support and resources they need will be available.”

The report, though, doesn’t specifically call for more state funding for the early-stage investment funds that MTC has historically used to develop a pipeline of new companies. It does call for more investment funds with “resident private fund managers,” as well as the creation of an angel investment tax credit and rural-focused funds to foster investment in outstate businesses.

In a statement to the Post-Dispatch, MTC Chairman Dedric Carter, who is vice chancellor for innovation and chief commercialization officer at Washington University, said the report “speaks to funding challenges and the benefits of consistency in the coming years to increase the significant impact that MTC has had.”

Speaking to an online panel as the report was released Wednesday, Parson didn’t mention funding levels for the MTC.

Instead, he pointed to his proposed budget’s investments in state roads and infrastructure and increases in education funding, including some $470 million for the top building project priorities on the state’s university campuses. Parson also repeated his call for higher teacher pay, a reference to his proposal for $22 million in state grants to boost Missouri educators’ salaries.

“We’ve got to figure out a way to take care of our teachers in this state,” Parson said.