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BusinessSeptember 16, 2023

Chris Carnell carries a passion with him regarding tech startups. He’s happy to talk about entrepreneurship. He’s more than willing to do the work behind-the-scenes to help those who want to bring tech jobs to the Cape Girardeau region, and he’s thrilled that his organization creates programs to teach people coding skills...

Chris Carnell, co-founder of Codefi, stands in their offices in Marquette Tower. Carnell is passionate about boosting entrepreneurship and start-up culture in Southeast Missouri.
Chris Carnell, co-founder of Codefi, stands in their offices in Marquette Tower. Carnell is passionate about boosting entrepreneurship and start-up culture in Southeast Missouri. Photo by Aaron Eisenhauer

Chris Carnell carries a passion with him regarding tech startups. He’s happy to talk about entrepreneurship. He’s more than willing to do the work behind-the-scenes to help those who want to bring tech jobs to the Cape Girardeau region, and he’s thrilled that his organization creates programs to teach people coding skills.

But on the day of this interview for B Magazine, he’s not quite as comfortable being the face of Cape’s growing tech sector. Carnell was up until past 2 a.m. the night before working on future entrepreneurship programs. He somewhat sheepishly hopes this will be a no-photo kind of interview. He’s tired, but the work is fun and rewarding.

Carnell, wearing a backward ball cap and glasses, represents one of the pistons that powers the 1st50K competition, now in its eighth year in Cape Girardeau. Carnell is the co-founder of Codefi and the executive director of the Codefi Foundation.

Codefi, which began as a coworking space but also provides tech education and on-the-job training programs, is the organization behind the 1st50K, a startup competition in which founders and executives give pitches to win $50,000. The idea is to attract tech startups to the Cape Girardeau region and spark economic development.

Carnell, along with Dr. James Stapleton, who recently announced he is moving to Southwest Missouri to continue his work at a new Codefi location, has been with Codefi for nine years. He works in the clean and trendy coworking space enveloped by the old Marquette Hotel, an iconic downtown Cape Girardeau structure once scheduled for demolition. Codefi was one of the first tenants of the historic building, and it subleases spaces to many small businesses, gig workers and entrepreneurs.

While the building itself is welcoming with a design mashup of 1920s architecture and 2020s hipster décor, Carnell’s workspace is more or less a desk and a computer. More important than the interior design is that he’s surrounded by people who share common interests, which is to build new tech businesses in Downtown Cape.

If he’s tired from late-night work, it’s hard to tell. His passion for startups shines through as he begins sharing some of the successes of businesses that have been through the program. He has data and figures at his fingertips, which he pulls from a database used to track trends and growth.

The 1st50k contest was launched, Carnell explains, out of a desire to attract more startups to the community.

“There needed to be more technical-startup activity here in our region, and so one of the biggest barriers for startups, especially in high-growth tech startups, is first investments,” Carnell said. “So, at the time, St. Louis had a program that they had run for several years called Arch Grants, where they gave away $50,000 to attract companies from all around the world, and so we basically said, ‘Can we do that same thing here?’”

Codefi raised money to start up the contest. Codefi also offered free office space to winners for their first year as part of the incentive.

Codefi delivered the prize money from the first competition in 2015 to a company out of Los Angeles, California, which was required to have a presence in Cape Girardeau once a quarter. The winners, Amir Atchehchi and Mike Ahdoot won with their bicycle security device called Nutlock. With input from local bike shop owners, the startup founders were able to design a sampling package and understand what shop owners are looking for in a product. But Nutlock did not stick around Cape Girardeau.

Thereafter, 1st50K required that founders of winners commit to fully locating in Cape Girardeau for at least one year. The first couple of years the awards went to small local startups. The preference, Carnell said, is to recruit companies from outside the region. He said that’s not to say a local company still couldn’t win it — in fact local entrepreneurs from Cape Girardeau have recently won contests — but the contest’s primary goal is to recruit outside tech business founders into Cape Girardeau. Marketing efforts have expanded to reach a wider footprint.

The program has had mixed results in retaining companies. Edible Education, SportsTrace, UpSwot and WATT have all won the contest and relocated elsewhere. But many of those companies’ employees — some trained by Codefi programs — went on to work at other local companies, earning more money at other local companies needing their services, Carnell said.

1st50K winners that remain in Cape Girardeau include Morning Star Behavioral Associates, PumpTrakr, Sequel, SHO.ai, Sizze, Last Mile Liquidators (formerly Stockhaus), Swipesum, Transition and Venku.

A few years into the journey, Codefi partnered with the Cape Girardeau Chamber of Commerce and Magnet, the area’s industrial recruitment organization. Codefi raised $325,000 to expand and continue the competition.

“Between 2016 and 2018, I would say we were really just trying to figure out how to make the program so we are getting the right type of companies that we could bring here,” Carnell said.

In all, the program has awarded funds to 17 projects, only three of which are no longer in business. For context, 20% of all new businesses fail in the first year, according to data from the U.S. Department of Labor; and up to 80% of U.S. startups fail eventually. Fourteen of the contest winners are still in business. Nine continue to have a presence in Cape Girardeau.

Carnell says $850,000 has been raised to provide the $50,000 grants. The nine businesses that stayed in the area raised an additional $10 million in investments and have generated nearly $30 million in revenue. Those nine businesses have also created nearly 100 jobs. Wages generated from those jobs have consistently risen, according to Carnell. He said a 2021 Southeast Missouri State University study conducted of the program’s effectiveness showed a $7 economic return for every $1 invested. Carnell believes those numbers have only increased since the time of the study.

All of the $50,000 goes directly to the founder of the chosen startup company. Carnell said that money is usually used to sustain the founder while he or she focuses on the business for the first year. But the benefits to the companies far exceed the monetary.

Swipesum — 2020 winner

Michael Seaman, whose wife Kelsey is from Sikeston, Missouri, is the founder and owner of a company called Swipesum, which helps businesses obtain better rates for fees relating to online credit card processing. The company launched in St. Louis, and Seaman had a vision to grow the company with large clients in the Show Me State. Seaman said Swipesum was looking to branch out to perhaps Kansas City or Springfield, Missouri, when he learned of the Codefi contest in Cape Girardeau.

Swipesum, which had already acquired several clients by the time it entered the contest, won the 1st50K contest in 2020. Seaman said the help with technology development and the connections that Codefi helped his team make after winning the contest were more valuable than the money itself.

He said Carnell and others put him in touch with companies in Southeast Missouri such as NAPA Auto Tire and Parts, Buchheit’s, Rhodes and Rust Communications. Those foot-in-the-door introductions led to more business deals. In a promotional video he did for the contest, Seaman said his revenue doubled in one year following the competition.

Since winning the competition, Swipesum’s valuation has increased from $5 million to $60 million, Seaman told B Magazine in an interview. Swipesum, of all the winners, does the most dollar volume of all the 1st50K winners, Carnell said.

“We have had huge growth,” said Seaman. “There are several founders going through different early stage software companies, so we’ve built a talent pool through Codefi, so we can leverage each other’s talents to move more efficiently. Other founders, just on the floor of my building — there are five CEOs, myself included — and we’re all talking to some of the top venture capitals across the globe and starting to see those investments coming in.”

Seaman, who also serves as a coach for Notre Dame Regional High School’s track team, said the company primarily used the startup funds for employees and leases. He said the money was spent locally.

“Where the 1st50K is now, is the power of this network and community involvement,” he said.

SHO.ai — 2019 winner

Sho Rust, past winner of the 1st50k competition, works on his laptop. Rust is the founder of SHO.ai, a start-up that helps companies use and modify AI technology to build and scale their brands.
Sho Rust, past winner of the 1st50k competition, works on his laptop. Rust is the founder of SHO.ai, a start-up that helps companies use and modify AI technology to build and scale their brands. Photo submitted by Codefi
Sho Rust, past winner of the 1st50k competition, works on his laptop. Rust is the founder of SHO.ai, a start-up that helps companies use and modify AI technology to build and scale their brands.
Sho Rust, past winner of the 1st50k competition, works on his laptop. Rust is the founder of SHO.ai, a start-up that helps companies use and modify AI technology to build and scale their brands. Photo submitted by Codefi

Sho Rust, founder of SHO.ai, a business which, among other things, helps companies use and modify AI technology to build and scale their brands, said networking with people like Seaman and other young executives is perhaps the greatest return upon his company winning the contest in 2019.

Rust won in his second attempt at the contest four years ago. The $50,000 winnings were helpful, he said, but the prestige of winning helped him land two more large investments into his company. That allowed Rust to find some early growth, test the market, learn from some early failures and put his company in position to take some large steps. His company has two dozen employees across the globe, but only three or four locally. He said oftentimes his employees have moved on to larger markets, seeking more exciting nightlife and other cultural opportunities.

Still, Rust has decided to stay. Sho Rust is a grandson of Rust Communications founder Gary Rust. Rust’s father, Gary Rust II, is a director of Rust Communications. But Sho has lived in large markets away from Cape Girardeau for much, if not most, of his adult life. It’s more than family ties that keeps him in Cape Girardeau. There are several reasons for staying, but one big reason is the camaraderie he has found through Codefi since the 1st50K competition.

“We collaborate a lot and help each other out,” Sho Rust said. “Several of us here have a strong motivation to build a tech sector in Cape. We hope to make cash with our companies, of course, but it’s still a struggle, and the local support that Codefi has, has been huge. The value to us is going into the office, and when people struggle, you get input. They know what you’re going through and keep you motivated. In a way, it’s like going to the gym.”

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The uncertain future of 1st50k

The future of the 1st50K is somewhat unknown. The arrangement between Codefi and the local chamber and Magnet (since rebranded as SE MO REDI) is set to expire following its third year of the agreement. It’s not yet known whether those groups will continue to support the competition formally.

Carnell added support for the 1st50K may not necessarily be financial, though financial support is necessary to continue the program at its current level.

Codefi is accepting applications for the 2023 contest, with a deadline of Aug. 31 for feedback on an application, according to its website. Internal evaluations will begin in early November, with pitches slated for Nov. 30 and Dec. 1.

More About the 1st50K

Past 1st50K winners

Cosmetic Car Tech (no longer in operation)

Edible Education (dislocated)

FoodHaven (no longer in operation)

Impress (no longer in operation)

Morning Star Behavioral Associates

Nutlock (this was the first company we awarded that we didn't require relocate to Cape)

PumpTrakr

Sequel

SHO.ai

Sizze

SportsTrace (dislocated)

Stockhaus (now Last Mile Liquidators)

Swipesum

Transition

UpSwot (dislocated)

Venku

WATT (dislocated)

How does the contest work?

Applications must be completed fully and teams must agree to locate to Cape Girardeau, Missouri, for at least one year if selected as a grant recipient to be eligible. Eligible applications are entered into a round where the initial reviewing is completed by three to five of our judges. The pool is narrowed for Zoom video call interviews and from there down to a group that is selected by our competition committee to be invited to Pitch Day. The committee bases its decisions on the innovation of the product, technology, or service; product-market fit; the scalability of the business model; the total impact; qualities and coachability of the team; well-understood and defined problem; and 1ST50K impact. Each applicant has 30 minutes in total — a 10-minute pitch and 20 minutes of Q&A. The committee deliberates, completes its due diligence and awardees are typically announced within two weeks. Applicants not selected as awardees from one round may use the feedback they have received to reapply for the next.

What else do winners get besides $50,000?

Free office space at Codefi.

Significantly discounted technical services.

Access to venture capital and angel investment networks.

Internship programs with local university partnerships.

Professional and high-level business coaching and mentorship.

Personal introductions to strategic business leaders.

Social support and community integration services.

Inclusion as a part of a community of innovative entrepreneurs.

— from codefiworks.com

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