A Note From the Scale Team

This month, as we officially enter Fall and head toward the end of 2022, we are SO excited to have launched Cohort III. Some of our newest founders are still in stealth, but we can't wait to publicly announce the seven amazing companies across diverse sectors that make up our third cohort. Meanwhile, our cohort I and II companies are continuing their strong year!

🏉 Meet the Scale team here 

🏆 Scale portfolio → here

🤝 Collaborate with top funds & founders in our newly launched Flyover Tech community (Join here)

💰 Midwest Economics

• With governmental and private support, Missouri continues to demonstrate a commitment to tech innovation. A new, statewide, strategic initiative to allocate $95 million in state funding for small businesses, entrepreneurship, and startups was unveiled last week and Boeing announced their $5 million investment into the Advanced Manufacturing Innovation Center in St. Louis this month.

• Kansas City VC-Backed Startup Report released this month showed more companies raising more money in the region including 18 new companies that raised $217.4 million to reach a record $1.72 billion. The Cardinals may be winning the baseball rivalry but let's see who can bring more VC-funding to the state this year

• Biotech and healthcare was on 🔥 this month: Chicago-based Cour raised $30 million to develop novel immunotherapy, Madison, WI-based Elphas Biosciences raised $45 million to predict responses to immunotherapy, and St. Louis-based TCARE raised $17 million in an oversubscribed Series A round to bring improved technology to caregivers with the goal of reducing hospitalizations and nursing home admissions

• This month, Missouri stocks took a bigger hit compared to the market. In July and August, Missouri stocks had outperformed the market in all timeframe categories, but September was different. This month's 180 is likely driven by the hike in interest rates which largely affects capital-intensive industrial companies concentrated in Missouri.

💰 Midwest Deals

• Kansas City-based Rx Savings Solutions was acquired by McKesson for a record-breaking $875 million which is the largest startup exit for the metro area!

• Real estate and design firm Al Neyer closed their $200 million Fund II for development in their home-base Cincinnati as well as Pittsburgh, Nashville, Raleigh, and beyond.

• College Raptor, an Iowa City-based college planning platform was acquired by Citizens Financial Group 

• Cloud based, farm management software startup, Traction Ag, raised $3 million for farmers across the midwest.

• ML startup Voxel51 raised $12.5 million in Series A funding 

• Check out the 83 deals we tracked in September here!

🐄 Midwest Macro Trends

• Unemployment in Missouri was steady at a 10-yr. low of 2.5% compared to the national rate of 3.7% and 3.3% in the Midwest ✅

• Missouri’s Purchasing Manager Index stayed steady through August 47.3, well below the national and Midwest indices 🔻

• Midwest Consumer Price Index was steady at 8.6% compared to the national rate of 8.5% 🔺

📈 Macro Trend Report

• INFLATION | New analysis shows that a recession is likely inevitable - if not already here.

• TECH EMPLOYMENT | Meanwhile, large investment firms continue to attract talent by luring potential employees with uniquely high cash salaries at the expense of carried interest. We heard that our good friends at Hallway and TheGoodz are actively hiring 👀

• HOUSING | A new initiative from Bank of America may make home buying easier in historically disadvantaged markets.

• VENTURE CAPITAL | Globally, venture funding continued to decline through the end of the summer to reach a 52% decline year over year and 10% month over month. The trends we saw begin early this year including fewer sky-high valuations and decreased late-stage conviction have continued this quarter, but we remain optimistic that VCs are holding onto more capital than ever which suggests an eventual correction. Even though there has been an increase in down rounds in 2022, it's not an indicator of long-term failure in fact, 87% of companies who have raised a down round have had a successful future exit.

🧠 This Month's Recommendations

📚 What We’re Reading

• We've all been shocked by our grocery bills this year, but what's going on in the countries most at risk for food insecurity, and what can be done to reduce the impact of this continued crisis.

• Reinforcing why first principles are key to building companies (especially using hot tech like SaaS) that last.

• For more on what cities like St. Louis can do to recruit entrepreneurial talent, experts (aka actual entrepreneurs) weigh in and provide their advice. 

🎧 What We’re Listening To

• Our friend M25's GP Mike Asem chats about why he thinks the Midwest is the best place to invest. [31 minutes]

• Brad Burnham of Union Square Ventures discusses how founders can change their thinking to become better leaders. [35 minutes]

• The stellar David Lieb talks all things product with 20VC. [57 minutes]

📅 What We’re Doing

• Connection and conversation with top founders and entrepreneurs in Kansas City at Startland News LIVE in Kansas City: 10/5

• Celebrating the best of the best impact-driven recipients of the Halcyon awards: 10/20

• Getting ready to celebrate entrepreneurship and startups in St. Louis for St. Louis Startup Week in November.

🎮 Midwest Tech of the Month

• Boddle, a gamified, multiplayer and augmented reality platform first brought to Kansas City area math classrooms in 2020 has raised a $3 million seed round to help them solidify elementary school use in all 50 states!

🛠️ Resources

• Have trouble forecasting your dilution? Find our handy Cap Table + Dilution Calculator here 📒 

• Helpful resources for early stage companies here 🌐

• Need help with your deck, get to market, product, or cash burn model? Sign up here for a chance to win a 1-hour strategy session with our team ⛑️

• Finance Tip of the Month: If you are a founder raising consecutive rounds via Post Money SAFE, it is imperative to understand the dilution effect of each. Post Money SAFEs do not dilute each other. The common misconception as that each follow on SAFE dilutes the previous SAFEs. In addition, SAFEs will not be diluted by increases in options pools prior to a priced round.

Why should you angel invest? Because Venture Capital is the sexiest asset class that improves society while producing outsized returns, duh. Also, venture returns have proven to outperform public equities during a recession. -> If you are interested in angel investing, then sign up here 😇