urbanSTL

Stifel is buying the Institutional Fixed Income Brokerage Division of Knight Capital Group
Source: http://www.bizjournals.com/stlouis/blog ... s-and.html

As part of this acquisition, Stifel will bring on KCG's European Institutional Fixed Income Operations and Sales teams. This acquisition will add 100 new employees: 60 in the US and 40 in Europe. This continues Stifel's acquisitions in KCG as the company is dismantled before full acquisition by Getco, L.L.C.; recently, Stifel had acquired KCG's Debt Brokerage Division.

Meanwhile, the Biz Journal's print edition had a great article pointing out how Stifel's now ranked as the 10th largest domestic municipal bond underwriter, largely due to its recent historical acquisitions (not including this one).
Source: http://www.bizjournals.com/stlouis/prin ... -bond.html

What makes this ranking important is that it has captured the primary market, muni underwriting, that made a Morgan Keegan acquisition so attractive in the first place. MK was a solid brokerage with a great corporate culture, but what made them most attractive was how the firm dominated muni bond underwriting in the Southeast US. The firm was regional but was very much a player for their strengths in munis.

After MK was bought up by Raymond James, Stifel seems to have kept going strong for munis, just in a different geographic focus. Instead of going heavy in the Southeast, they bought muni underwriting operations on the West Coast. Now they have a strong foothold in California, Oregon, and Arizona.

While Merrill and Citi remain the dominant muni players in the US, Stifel is now climbing up the ranks. With all they have going on, this company is not going to be considered simply a "regional" brokerage firm much longer.

Bittersweet story. Could a ConAgra sign loom over Market Street? It couldn't hurt.
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ConAgra keeping St. Louis office following Ralcorp purchase
7 hours ago • By LISA BROWN
St. Louis Post-Dispatch



ConAgra Foods plans to keep about 500 employees in St. Louis following the food company's acquisition of St. Louis-based Ralcorp Holdings earlier this year.

Omaha, Neb.-based ConAgra, whose brands include Chef Boyardee and Healthy Choice, said it notified employees in Ralcorp's downtown St. Louis office today that it will keep a local presence. ConAgra had previously not committed to keeping offices in the St. Louis area following a $5 billion takeover.

"We are confident about the opportunities this business presents, and we believe that it will play an important role in ConAgra Foods’ growth," ConAgra said in a statement Tuesday. "We are excited to have the expertise of our employees in the St. Louis area on board, and we informed them today that we intend to maintain a presence in the St. Louis area."

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I could also see Conagra moving their entire headquarters to STL. Omaha is a small city and air travel in/out of Omaha is literally nil. There is nonstop Southwest flights from Omaha to STL now.

Obsorb, an Arch Grants company, has been acquired by MetaLab of Victoria, BC, Canada
Source: http://www.bizjournals.com/stlouis/blog ... -arch.html

The company will be closing down operations in STL and moving to Canada. Which is a sad part for STL, as this Downtown company will now be moving to the Great White North. The company's founder, who's from Texas, says he's sad to leave STL.

Terms of the deal haven't been disclosed. But, the company so far had recognized $50K in Arch Grants funding as well as $60K from other funding sources (possibly/probably local investors). So, while the company is not being retained in STL, it's fair to assume that the local investors will recognize a pretty good return on their investments in the company. And if an Arch Grants company can be shown to be a good ROI, then that could lead to increased funding to other local companies in and out of Arch Grants. I have no idea how much money Arch Grants itself will make from this acquisition.

For many companies seeking out venture capital, the goals are for the company to one day go IPO or be acquired for a profit. That this company is going to British Columbia doesn't mean that this Arch Grant wasn't a success; rather, it seems that this acquisition proves the viability of Arch Grants, and STL, for producing quality new companies.

Some ideas include:

1) Better organized mid/late-stage VC so there is more money on the table to help these companies grow here.

2) Build an easy-to-find-and-use online database cataloging the product development, engineering, marketing, data support, and production resources that are available within 30 miles of downtown (could be done through a group like PDMA), as well as people with expertise in those fields, and encouraging those companies to reach out to the startup community and calibrate their services accordingly.

urban_dilettante wrote:^ but realistically how much does it help St. Louis when a startup gets bought out and leaves after a year? the investors make some money and Arch Grants becomes popular as gateway to something "bigger and better" but St. Louis doesn't see any growth. would it be detrimental to the program/start-ups to require X years based in St. Louis as a provision to accepting the prize money?

It was the same situation with JBara Software, which was acquired then changed its name to Gainsight with corporate offices established in Cali. Local investors in JBara made money off the acquisition, which is good, but St. Louis is only left with a small office, which is likely to close. Many of the non-local articles I read on the acquisition didn't even mention that JBara had been a St. Louis start-up.

If this continues, Arch Grants might want to ask for a small stake in the company in return for its investment. I'm all for St. Louis being a tech player, but these capital investment firms should protect themselves against getting robbed. There are some shady swindlers that know how to demo crap.

With Obsorb, it sounds as if it wasn't even absorb by the Canadian-firm. Seems to me, based on the article, the guys got $50,000 and their dream jobs IN CANADA. They are probably laughing all the way to Canada with about $25,000 still in their pockets.

I don't get the negativity toward this. These guys are telling people all over that they were able to get their start in St. Louis. That's great. Not a single city keeps all their start-ups. Of course we should keep more, but if there are more successes like this, I think it helps St. Louis immensely - word gets out that this is where a company can get started. We keep going and some will stay here, some will leave.

Guys: The buyout of Obsorb was a success. Recognize this.

1. STL demonstrates itself as a place where new companies and ideas are taking root and growing.
2. The local investors are to get a pretty good ROI from this, and that money will go back into new STL startups.
3. Arch Grants proves itself as a viable generator of startup companies, attracting even more companies to the competition -- and even more potential investors to participate with their stable of companies.
4. Obsorb's principals will be advocates of STL and the work being done here to back, support, and help grow new companies.
5. More space opens up for the next startup companies to move into the Arch Grants space at the T-REx.

Seriously, how many of us even knew what Obsorb was before this story broke? I didn't.

We mustn't be predisposed for disappointment when we're talking about startup companies being merged or acquired. The majority of startup companies are going to be bought out by bigger companies if they're successful. That's what they do. Plus, we don't even know exactly how much this deal was worth; there should be some hefty payouts coming to STL's startup scene for reinvestment. This is a victory; it's already pretty damn amazing that we have VCs operating partially out of civic love as well as the bottom line. And yes, I would prefer if this company had stayed here, but that's not what happened. That's no reason to give up our hope and take up a posture of lament, because other companies will stay and grow here.

Say Arch Grants backs the next Instagram. Would we cry if Facebook buys them for $1B?
What will we do when one of these companies is bought by Apple or Google? Will we still lament the truck full of money when it pulls up to the T-REx, knowing that plenty of it will go to new startups?

Eyes on the prize...

^Cool cool. Yeah, it sucks that we're losing one, but that's what happens when your kids grow up, they sometimes move away. Let's just hope that the home is all the richer, literally, for their times growing up.

First, I understand that most good start-ups are usually purchased by bigger firms.

Google, Yahoo, Microsoft, Apple etc. are as large as they are because they acquired a few great start-ups along the way. I tend follow world and U.S. business closely – but especially in regards to St. Louis. I have been especially observant of how these grant-giveaway/capital investment initiatives are working out for St. Louis. St. Louis has managed to maintain a lot of homegrown start-ups as well as land many start-ups - especially in biotech – from other cities because of the grant-giveaway/capital investment initiatives and incubators.

St. Louis' grant-giveaway/capital investment initiatives are working like they are supposed to. Investors are getting returns and St. Louis is getting a lot of great media exposure.

Nonetheless, if you read the language in my previous posting, I am not alarmed, YET, because I did say………"If it continues"……….then………

Although I am not alarmed, in recent months there has been a noticeable outward trend. Further, I knew of the Obsorb start-up from the minute it was announced they would be receiving an initial Arch grant. In fact, I've visited their website several times in recent months and still couldn't figure out what the hell they were doing.

Keep in mind too that although the STL BJ says Obsorb was acquired, this is what stands out to me in the article,

Terms of the deal were not disclosed, but Obsorb co-founder and CEO Marshall Haas said the company and its products would be shut down and he and Obsorb co-founder João Gradim would go to work for MetaLab in Victoria, in the Canadian province of British Columbia.

So the company essentially folded and the guys moved to Canada to work for a tech company there, but the spin is that it was "acquired". Perhaps I'm being a cynic, but to me, this story is a red flag. I think it pays to ask questions. Maybe they gave Obsorb all they had, but one of the guy's apparently parlayed his $50,000 stint in St. Louis into a dream job at a Canadian company. In the long-run, how is this beneficial to St. Louis? Yeah....they got a shot in St. Louis, but in the end what does St. Louis get? You can pay $50,000 for a well-placed ad and get some great exposure.

For the record, what makes Arch Grants unique is that it is one of a few start-up funds in the U.S. that doesn't ask for equity in a start-up firm when investing in it. It's good to be unique. Also, I know some start-ups fail and some of the most seasoned investors have invested in duds. Again, I think Obsorb is an exception – for now – but it wouldn't hurt for Arch Grants to assess tougher scrutiny on which firms they give these grants. After all, the goal is about turning an investment into a tangible product.

wabash wrote:How so? Do you know anything about Arch Grants' vetting process?

Much of their basic vetting guidelines are on the internet, actually. And regardless of the nuisances of the vetting process, they picked an obvious loser in Obsorb. Let's just keep it real.

Further, Arch Grants is new - so new in fact - that it's very likely the vetting processes will (and must) fine-tuned over time. I guarantee it.

wabash wrote: What you describe as "the company essentially folding" is actually quite common in tech. Companies will buy startups for their talent and team and fold the initial project in the process. Let's say you start a company that develops a new system for handling point-of-sale gift card payments via mobile apps. If Amex or Visa want to get into that business they might buy your company for your expertise and team, knowing that you can build the type of platform they're looking for. But in the process the original platform will be "folded".

The point is, it's not a con to get a dream job or a way of duping Arch Grants out of money. It's a common way for larger companies to expand into new businesses without having to build an entirely new team from the ground up. For every YouTube or DoubleClick acquisition that Google makes, there are dozens of much smaller acquisitions that are more personnel than product based.

I am aware of how the start-up culture and acquisition game works.

Let's keep in mind, however, that You Tube wasn't folded by Google. Double-click wasn't folded by Google. Motorola wasn't folded by Google. Why? They all had measurable, viable products. Even St. Louis startup, JBara Software, which was acquired, received a name change (to Gainsight) then moved to Cali is a measurable success. JBara Software's platform is intact with its products sure to be modified and sold. That's measurable success by a start-up, in my opinion, even though I might not like that the firm relocated to Cali.

Obsorb's "products" apparently were not viable (ie. practical, useful) enough to be used by its "acquirer". The fact that their products won't be around is indicative that Obsorb did not have a good product likely from the start.

Did the guys prove they had a tech skill-set good enough to be snagged as employees by MetaLab? Yes. Good for them. They are being integrated into an emerging firm. Did Arch Grants help them to get exposure? Sure. Did they prove they were worthy enough to get the early award by Arch Grants? Sure. But Obsorb was a dud. Again, no products. In what measurable way was this good for St. Louis? I am sure Arch Grants would have loved to have a bigger bang for its buck - most granting organizations do. Perhaps the only upside is that Arch Grants can say that Obsorb was an "acquired" portfolio company.

By the way, Arch Grants itself says as one of its objectives,

"Our mission is to create an entrepreneurial culture and infrastructure to build successful companies in St. Louis."

I still ask, what is successful about a company that has no lasting products or uses? Nothing. Tighten up the process.

A: When that company is acquired by another for what can be assumed to be a good amount of money, which is then distributed to the investors in that company. If a company makes discontinued widgets but is still bought for a big ass truck load of money, then that company is still worth that big ass truck load of money.

I see your point, but I'm still not so sure.

How do we know the company wasn't sold at a discount bargain basement price? Also, an acquisition doesn't necessarily have to involve a monetary purchase. Depending on how they wheeled and dealed, MetaLab could have offered him that position and a six figure salary in exchange for his early-stage non-profitable startup and services.

Further, why then wouldn't an acquiring firm continue to sell the widgets that likely led them to acquire the firm in the first place? For a firm to discontinue selling the widgets either the widgets were bad or were neither useful nor potentially profitable. The acquiring firm didn't even sell the widgets to another firm in order to make a little money. It appears they killed the product altogether. This constitutes a bad product so consequently it appears to be a bad investment by Arch Grants.

Perhaps the designers of the widgets demonstrated promising skill-sets, which is why their expertise was actually bought by the acquiring firm. It's a win-win investment for MetaLab and the founders of Obsorb, surely, but what about Arch Grants and St. Louis?

I would also reasonably assume that neither Arch Grants nor their funders would have their initial allocations of $50K be made to an accepting party without that party signing off on a pile of agreements stating that they can't just tuck and run with the monies or spend it just to boost their own resumes so they can be hired by a bigger company down the road.

I agree. I also would reasonably assume the same as well.

However, that doesn't mean the grant recipient won't tuck and run. When people gave Bernie Madoff money for investments, it's highly reasonable those investors didn't think he would dupe them out of their billions. In general, organizations and grant seekers abuse grant awards all the time. Although five alarms aren't ringing in my head, this smells a little fishy. I could be wrong, and if I am so be it.

My overall assertion is that Arch Grants is granting a lot of money to start-up firms that they anticipate will be a "success" even in acquisition. With Obsorb, there is nothing measurable here – not even widgets. All of that free money and assistance for what? I just think the return should be more measurable. Surely some start-ups are going to be hit or miss. Hopefully more hits than misses, but it wouldn't hurt to tighten up if this continues.