Startup Exit Awards 2020

Lewis & Clark Ventures accelerates portfolio as it eyes new fund

Investor of the Year – Winner

To understand why the past year has been significant for St. Louis-based venture capital firm Lewis & Clark Ventures, you only need to flip through the pages in this awards publication.

Both of this year’s Top Equity Funding Transaction winners are Lewis & Clark portfolio companies. They were among the firm’s 10 — out of 18 — portfolio companies that completed funding rounds in the past year.

Launched in 2015, Lewis & Clark has backed firms in the software, health care and agtech sectors. It places emphasis on providing capital to startups “between the coasts.” Prominent St. Louis startups in its portfolio include Benson Hill, Summersalt and Adarza BioSystems.

Lewis & Clark is led by General Partner Tom Hillman and Managing Director Brian Hopcraft. The Business Journal spoke with Hopcraft about Lewis & Clark’s growth in the past year, its investment strategy and the impact of Covid-19 on venture investing.

Lewis & Clark has significantly grown its portfolio since its launch in 2015. What strategies have allowed for that expansion? At Lewis & Clark Ventures, our strategy is to identify amazing entrepreneurs and do everything we can to support them as they grow from early stage to expansion. We focus on becoming part of the team, partnering with our portfolio companies to build exciting businesses. Our “operators first, investors second” mentality really resonates with entrepreneurs, many of whom are first-time CEOs and appreciate having an investor who understands the challenges of growing a business. We believe our highly supportive, engaged approach also leads to better financial outcomes.

Our focus “between the coasts” is another key strategy. We look for great businesses in areas of the country that are often overlooked by coastal venture funds. St. Louis is a core part of this geography, and we are proud to say that six of our 18 portfolio companies are St. Louis-based.

What kind of growth in its investments and portfolio companies does Lewis & Clark forecast in the next year? Lewis & Clark Ventures is at an exciting growth point, as we look to start investing from our second fund. We will be continuing to invest in amazing entrepreneurs at the Series A stage of investment, likely averaging two to four investments per year for the foreseeable future.

How do you expect the overall funding landscape to change due to Covid-19? The funding landscape is certainly changing due to the economic impact of the Covid-19 crisis. As the crisis began in March and April, most venture funds, including our own, paused, or significantly slowed investments in new companies. This was a natural reaction to the resulting market uncertainty. Evidence of this pause was apparent in recent data that showed early-stage investing down by 20% in Q1 from the prior year. We expect deal terms to generally move in line with what we are seeing in the market, with round sizes and valuations likely decreasing and terms becoming more investor-friendly.

What tips are you giving portfolio firms as they navigate Covid-19? Our guidance had three themes: cash, culture and value proposition. Regarding cash, we collaboratively worked with our CEOs to understand their cash runway, how various financial scenarios may impact that, and the best course of action going forward. We also worked with our founders on communication and culture. Founders and companies that successfully organize, manage and inspire their teams throughout the crisis will better endure this period of adversity. The final theme of the value proposition, namely to take this opportunity to find ways to strengthen it; times have changed and it’s important to continue to differ in the time of Covid and post-Covid era. Times like these require leaders to step up by taking initiative, and we’ve been delighted with how our CEOs have risen to the occasion.

St. Louis’ startup ecosystem has grown tremendously in the past several years. From an investor’s perspective, how do you expect the pandemic to impact that growth trajectory? The pandemic and the resulting economic environment are clearly challenges for early-stage companies. Companies without strong business models or those that are capital-inefficient will struggle to raise capital. But there is an opportunity here, and we see many leading entrepreneurs leaning into this opportunity. They are challenging assumptions in their business, reducing non-critical expenses, and getting closer to customers. Those actions can lead to healthier companies that are better equipped to weather the storm. These near-term obstacles ultimately won’t change the positive trajectory of the longer-term growth prospects. We remain very bullish on our ecosystem’s future.

This article originally appeared in The St. Louis Business Journal. View the rest of the article here.