Codefi launches investment fund for startups

James Stapleton: Most startup investments will range $50,000-$200,000.

Nic Lamphear: Innovate SOMO Funds is a valuable addition to the startup community.

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Cape Girardeau-based technology incubator Codefi Foundation on Rural Innovation has launched a new southern Missouri investment fund.

Innovate SOMO Funds, which has a starting size of $2 million from nonprofit and for-profit sources, seeks to invest in startups across the 47 counties served by the Southern Missouri Innovation Network, said James Stapleton, Codefi president and CEO. The Southern Missouri Innovation Network, dubbed Innovate SOMO, is an existing partnership of Codefi and Missouri State University’s Efactory. Innovate SOMO’s programming, first announced in 2022, includes training and education programs, business-building assistance and help in creating jobs for entrepreneurs in southern Missouri.

Stapleton said Codefi and Efactory leadership have talked about the creation of Innovate SOMO Funds for around two years, noting the Missouri Technology Corp.’s strategic plan released last year identified the need to fill venture funding gaps across the state as one of its top priorities.

The $2 million in Innovate SOMO Funds will go toward high-growth potential software in preseed or seed stages. The investment funds will support innovation in a range of industries, including information technology, tech manufacturing, financial services, health care and agriculture, with the goal of driving economic growth and job creation.

Stapleton said most investments will range $50,000-$200,000 and include other strategic co-investors. The goal is for the initial investments in the funds to be deployed in two to three years.

“The kinds of companies that we’ll be trying to support are ones that have high-growth potential,” he said. “It’s pretty specific to companies that can really have a higher level of economic impact on our community than maybe a kind of traditional small business. These are going to be tech-focused or enhanced businesses that normally would not be the kind that just sell goods and services locally but would be what we refer to as traded economy firms. That means they trade outside of the region.”

Early investments
As part of Innovate SOMO Funds, Springfield Innovation Inc. subsidiary Accelerate SGF Inc. is transferring ownership of previous investments made through the Efactory business accelerator program. Crystal Owens, head of startup programs for Codefi, said Accelerate SGF is donating its $30,000 equity investments in 21 startups, as well as $100,000 in cash, to Innovate SOMO Funds. With the funds transfer, the business accelerator program will not continue, said Allen Kunkel, associate vice president for economic development at MSU.

Springfield Innovation Inc., a 501(c)(3) organization associated with Jordan Valley Innovation Center and the Efactory, has a mission to retain and create jobs within the community by promoting scientific and technological-based research.

Additionally, Innovate SOMO Funds – which combine a nonprofit fund from charitable contributions and a for-profit fund backed by limited partners – has received $700,000 in commitments. The Springfield-based Hatch Foundation invested an undisclosed amount in the fund.

“Our foundation is pleased to invest in supporting the next generation of entrepreneurs and the companies they inspire, that will create more high-quality occupations for the people living in our communities,” said Erin Danastasio, executive director of the Hatch Foundation, in a news release. “We also think it’s important this is a broad regional effort and invite others across southern Missouri to join us in supporting it.”

Perryville-based The Bank of Missouri has committed $100,000 to help offset administrative and management costs of the funds for the first two years. Stapleton said other fund commitments were undisclosed.

“The other thing we’ll do is obviously there’ll be an application process, and we’ll have due diligence on really how much work that the companies have done to validate their business models and really the feasibility of their ideas,” Stapleton said, adding he and a yet-to-be-announced investment committee will make decisions on which startups receive funding.

In addition to the applications, Innovate SOMO plans to hold a pitch event every six months in Springfield.

“We don’t have an exact date yet, but the first pitch event for the fund will be in January 2025,” he said.

Startup value
Funding at the early stages of business growth is extremely valuable and could be a difference-maker for any startup, said Nic Lamphear, chief operating officer for Springfield-based software company OMNI RTLSl. Lamphear is among six owners of the company, which has operated out of the Efactory since its founding in 2021.

It started as MiddleCoast Solutions LLC but rebranded in 2023, he said, adding OMNI stands for operation management and notification intelligence, while RTLS is a common acronym for real-time location system. He noted the RTLS is a main feature the company offers clients in the correctional facilities industry.

“We launched OMNI RTLS with the goal of making detention and correctional facilities safer for both inmates and staff,” he said, adding it has two Missouri jails – in Buchanan and Franklin counties – as clients. “Our system does this by tracking, recording and reporting on the precise location and biometric data of all individuals within. OMNI then uses this critical information to automate a full list of day-to-day functions.”

Lamphear’s company was among those that received $30,000 in seed money in 2021 as part of the Efactory’s business accelerator program, according to past Springfield Business Journal reporting. Aside from that investment, he said the company is lucky to be self-funded. However, he said seeking additional investments in the future is possible.

“The introduction of the Innovate SOMO Funds is a fantastic idea,” he said via email. “There are so many intelligent, hardworking people with big ideas in 417-land. These funds could give them the boost needed to make their business idea a reality. We only see this infusion of business funds and support as a good thing for our community.”

The Innovate SOMO Funds announcement comes as Codefi plans to create and host a tech-centered event, Ozarks Startup Weekend. The 54-hour event, which is expected to draw participants from four states, is scheduled June 21-23, according to past reporting.

Free to participants, it will involve designers, developers, marketers and startup supporters working together to develop a tech business idea and compete for a chance to win monetary investment and support to get their startup off the ground.

Stapleton said securing investments for Innovate SOMO Funds is ongoing.

“This gives us time then to raise the rest of the fund between now and sometime this fall when we’ll actually do our first capital call,” he said. “That is when the investors who make commitments will actually put their cash into the funds. Then that’ll have us ready to go at the end of the year before we do our first pitch event.”

As for startups, he said Codefi hopes to have the application process detailed on the Innovate SOMO website, InnovateSOMO.org, sometime next month.