Destination St. Louis. Why Scottish tech companies might soon be beating a path to an up-and-coming US innovation ecosystem
When you think of the great tech ecosystems of the United States, it’s the Silicon Valleys and the clusters concentrated around the Ivy League universities in Boston and New York that usually come to mind. St. Louis in Missouri is not yet a household name, but thanks to an endowment fund set up by some very wealthy benefactors, the up-and-coming city in what Americans call a “flyover” state is carving quite a niche for itself in the global tech economy.
With the help of the wealthy benefactor John McDonnell, one of the heirs to the famous military aviation company McDonnell Douglas, the city is investing heavily in its bio, plant and health sciences industries, both to support local entrepreneurial endeavours coming out of universities like the well-regarded Washington University and to build links into innovation ecosystems around the world.
And it appears to be working: since it was formed in 2001, thanks to the support of another local luminary, William H Danforth, BioSTL, initially called the Coalition for Plant & Life Sciences, has gone on to work with 16 countries and has an impressive portfolio of more than $2.5bn in follow-on-capital for St. Louis bioscience companies. One only has to note the staggering rate of company growth supported by the organisation’s BioGenerator Labs in the graph below to witness the transformative impact of a well-managed and mature ecosystem, something which Scotland has been trying to emulate of late with its nationwide Techscaler scheme.
But it hasn’t always been that way, says Donn Rubin, CEO of BioSTL, who is in Scotland this week on one of the many international engagement trips that has helped lift St. Louis’s profile as a ‘fly-to’ destination for global entrepreneurs and investors.
“The reason why BioSTL came about was largely because we had lost our entrepreneurial edge,” he says. “St. Louis is an industrial city, and for over a hundred years we had built these large international corporations like Anheuser-Busch, the world’s largest brewing company, and Monsanto, which became the largest agri-tech company in the world, McDonnell Douglas and many other companies. They consolidated, employing many St. Louisans, but over time there was a recognition that St. Louis was stagnating, and it was looking for the catalyst to spark the next generation of growth.”
St. Louis went through what many cities with industrial legacies do, and that is to embrace change. With the realisation that many would-be founders were being enticed by the tech opportunities on America’s east and west coasts, they needed to “remedy” the situation. In that sense BioSTL was an infrastructure play, expressly designed to harness the intellectual capital that had played such a fundamental part in establishing some of America’s greatest companies a generation earlier. Fast forward two decades and Rubin’s organisation now employs 50 people, “plus an orbit of lots of other folks”, who are dedicated to creating companies, investing in them, building teams and intellectual property strategies that are nourishing the talent pipeline of St. Louis, keeping them in the city where possible, and building networks at home and overseas.
It is precisely that reason why Rubin is taking a look at promising companies in a three-day trip spanning Glasgow, Edinburgh and Dundee. We meet in Glasgow, at Scottish Enterprise’s Atrium Court building, where Rubin and his colleagues have just sat through a packed schedule of pitches from 11 Scottish healthcare and bio-tech startups, including Infix Support, an operating theatre scheduling platform, Waire Health, a wearable medical device firm and Solasta Bio, a bio-pesticides company.
The focus is not scattergun, either. Rubin says the collective buying power of the corporations investing in innovation in healthcare and biosciences in St. Louis tops out at around $400bn. His business missions, he says, are therefore based on a carefully curated “shopping list” of those companies’ innovation requirements.
“Those corporations are where the decision-makers are based and who are looking for innovation to build their competitiveness, solve their pain points, and add value to their organisations,” says Rubin, who comments favourably on what he has seen so far in Glasgow. “‘I’ve only been here for less than 24 hours, and I’ve met some really great innovators with cutting-edge and creative ideas that can be life-changing. And I’m looking forward over the next few days to seeing a whole lot more, in healthcare, and agri-tech and food tech, also.”
For Scottish companies themselves, access to the US market creates an orders of magnitude effect. Although the healthcare systems are very different, there have been successful homegrown startups that have exported their products and services. Edinburgh-headquartered Craneware, a virtually unknown firm here, deploys its management software in American hospital and pharmacy settings, and now employs over 750 people. The Edinburgh founders of Current Health, a care-at-home platform, sold to US-based Best Buy, a technology retailer, in 2021, for a reported $400m.
Rubin admits that it’s “not easy” for startups to land in the “behemoth” that is the US healthcare market, but reassuringly he says everything he heard during the pitch session in Glasgow represent solutions to problems the American health system shares. Though he cautions: “Some are immediately transferable, some are not; we don’t have an NHS, and our system is not always rational. But a lot of the companies here have already thought very deeply about their US strategies. And so a lot of the things we heard today are trying to get at some of the dysfunction that we also have.”
What BioSTL is very much looking for, however, are the more mature tech startups when on their global trade missions.
Rubin adds: “Typically, when we go overseas, we’re not looking for the babies, we’re looking for the teenagers. And our model is not to move that company to St. Louis, we assume usually that company has traction in some country, maybe even beyond that. But they’re really looking to get traction in North America, to scale in the United States. And we want to be their partner to do that, their connector, actually, not just in North America, but to the extent we have built a global network. If we can help that company connect to buyers in other parts of the world, and partners, we will do that as well, as long as they’re partnering with us.”
He says: “If that Scottish company doesn’t establish a permanent presence in St. Louis, sometimes the innovation itself is enough to just make us better, and we want to be better.”
The credit for the trip is very much down to the US-based representatives of Scottish Development International, the overseas arm of Scottish Enterprise, the national business support agency. Jan Malek, vice president of Scottish Development International, who is based in the Greater Boston area of the US, and who helped put it together, said: “This inward trade visit by BioSTL is an excellent opportunity to raise further awareness of Scotland’s world-class healthcare and agri-tech sectors with a key US stakeholder.
“My US-based SDI colleagues and I have developed a productive relationship with BioSTL as the organisation could be a vital interlocutor for Scottish companies in the sector, potentially delivering US export and sales opportunities in the process.”
Scotland may not yet be the dominant player in BioSTL’s portfolio, but it is a small nation with a growing tech base. Israel, Rubin says, is perhaps an exemplar in that sense: there are around two dozen Israeli companies that the organisation is working with; some where the founders have uprooted and moved to St. Louis, others where the companies are partnering actively with St. Louis businesses and winning contracts. It is not one size fits all. One husband-and-wife founded business from Israel is now selling its patient-facing software in the University Hospital of St. Louis, Rubin adds.
One of his favourite stories, though, is actually a UK one. Babylon Health, a London-headquartered health-tech firm, and one of the world’s fastest growing digital healthcare companies, made its first inroads into the US market through BioSTL. The firm, which has revenues of over $300m, has not only worked to reduce health inequalities in Missouri’s rural communities, it is now deeply embedded into health markets across America. “It’s a win-win,” says Rubin. “Not only do we get to connect our population to great innovation, but it supports wider economic development and job creation opportunities across the country.”
In that sense, selling a service into a single care provider in St. Louis can open up to opportunities in multiple states. Rubin cites Ascension, which is the largest Catholic hospital system in the US, with its headquarters in St. Louis. With 142 hospitals, it ranked second largest private healthcare provider by number of hospitals in 2019. “It’s not like you’re just coming in and getting a little taste of these well known entities,” says Rubin. If you partner and have success with them, you’re building a resumé to reach across the rest of the United States.”
BioSTL does more than just connect the innovation buyers to the companies hoping to sell their services to them. Often, the major corporates do not “speak the same language” as the startups, says Rubin, so his organisation helps to nurture the relationships so they don’t wither on the vine after one or two meetings. It’s that focus on business relationships, and finding common ground, that can eventually lead to a breakthrough. “It’s like a matchmaking service in many ways,” he adds. “Sometimes you just have to give it time.”
Time is not always what startups have in a crowded market, where a good idea usually comes up against competition pretty quickly. But if BioSTL can help support some of the talented companies coming out of the Scottish ecosystem, with new networks and opportunities to grow, then it will surely only add to the ecosystems in St. Louis and at home. In that sense, the meetings this week in Glasgow, Edinburgh and Dundee are vitally important and a sign that trade partnerships – as demonstrated in a recent inward investment report – are in good health on both sides of the Atlantic.