St. Louis, entrepreneurial boomtown.

AuthorStangler, Dane

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METRO AREAS ALL OVER THE COUNTRY ARE TRYING TO NURTURE STARTUPS, WITHOUT MUCH LUCK. THE GATEWAY CITY IS SUCCEEDING. WHAT'S ITS SECRET?

Back in the mid-oughts, Jarret Glasscock was happily ensconced at the Genome Sequencing Center at Washington University in St. Louis, working on the federal government's Human Genome Project. He and his fellow scientists were exceptionally good at what they did: they could sequence the DNA of a cell for about 1/100,000th the cost of traditional methods. Pharmaceutical companies soon came knocking on their door with contract offers to do DNA sequencing for drug development purposes. But the center was busy fulfilling government grants and kept turning the offers down. After a few years of this, says Glasscock, "we finally got it through our thick skulls that maybe there's a need for some kind of company to exist."

So, in 2008 Glasscock and a few colleagues pulled together whatever money they could, rented a former photographer's studio downtown off Craigslist for $700 a month, and filled the office with half a million dollars' worth of used genetic sequencing machinery--which they cleverly managed to convince the company that sold it to them to finance. Pretty soon, their new company, Cofactor Genomics, was making money. They hired more staff, bought better equipment, and briefly made international news when they helped map the genome of heavy-metal icon Ozzy Osbourne.

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Eventually, Glasscock became the company's CEO and the firm moved to its current digs, a squat brick industrial building in Midtown St. Louis that backs up to Interstate 64. A metal coatings factory sits on one side; on the other, across a vast empty parking lot, a giant grain elevator looms.

Inside, the decor is contemporary high tech with a slight midwestern twist. It's mostly one big open space, with a couple of glassed-in conference rooms with math equations scrawled on the panes. Two ski lift gondolas, bought for $800 each from a resort in Wisconsin, are available for more intimate meetings. On a wall is a vintage sign that reads "Gun Shop" next to a picture of a revolver. The barrel of the gun points toward the back, where the gene sequencing lab is located behind closed doors secured with pushbutton combination locks--a precaution demanded by Cofactor's pharmaceutical industry clients, who are serious about protecting their intellectual property. In a corner by the back door is a drum set and some old bikes the company's eighteen employees can use to go to lunch. There haven't been many places to eat in this aging industrial part of Midtown. But more and more restaurants and coffee shops are popping up to cater to the 150 startups now occupying sever al rehabbed buildings in the neighborhood, which has been renamed the Cortex Innovation Community.

Cofactor is now being feted by the kind of West Coast venture capital investors who, a decade ago, would never have thought to put money into a St. Louis startup. The firm's leaders were invited to spend last summer networking at Y Combinator, the famed Mountain View seed fund that nurtured Airbnb and Dropbox. In February, Cofactor acquired a San Francisco-based competitor, Narus Biotechnologies.

To many Americans, St. Louis is known for urban dysfunction and slow economic decline. It was in the nearby suburb of Ferguson in 2014 that riots broke out after a white police officer shot an African American teenager. St. Louis is one of those places where every year or two another big homegrown company seems to get bought by outside owners: aircraft maker McDonnell Douglas in 1997, food processor Ralston Purina in 2001, May Department Stores in 2005, brewer Anheuser-Busch in 2008. As this magazine recently reported (see Brian S. Feldman, "The Real Reason Middle America Should Be Angry," March/April/May 2016), as a result of changes in federal antitrust and other competition policies, the number of Fortune 500 companies located in St. Louis has shrunk from twenty-three in 1980 to nine today.

But as the story of Cofactor Genomics illustrates, a city that has lost so many big old companies is becoming home to a lot of small new ones. Last year, Popular Mechanics deemed St. Louis to be one of the fourteen best startup cities in America, and in January of this year, Business Insider said it had the "fastest-growing startup scene" in the country.

St. Louis is a long way from becoming another Silicon Valley. But its sudden emergence as a hotbed of entrepreneurship holds lessons for a country struggling to make a growing economy benefit Americans who don't happen to live in a handful of booming coastal megalopolises. For decades, St. Louis followed the familiar economic development playbook: try to attract big out-of-town companies, or keep local ones from leaving, by showering them with tax breaks and other subsidies. While it hasn't exactly abandoned that old strategy, St. Louis has increasingly shifted to a new one of attempting to grow its own small firms. Metro areas across the country are trying to do the same, in many cases with little to show for their efforts. St. Louis seems to have hit on the right formula, though actions in Washington could determine whether, over the long term, it succeeds or fails.

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