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OUTLOOK SERIES PART 2: What are the sectors of most interest to you?

2016-outlook(EDITOR’S NOTE: This is the second article in our annual multi-part series sharing the insights of angel and venture investors who are either located in East Tennessee or have a specific interest in investment opportunities here. We will be rotating the order of responses on a daily basis.)

Today’s question posed to our angel and venture capital panel was as follows: “Well-known VC Steve Jurvetson said his firm is backing companies in agriculture, robotics, artificial intelligence, and aerospace. Crunchbase suggests that the “hot spots” are augmented and virtual reality, machine learning, and cars. What sectors most interest you and how well-positioned do you see the Volunteer State in that regard”

Andrew Goldner, Founding Partner, GrowthX – Steve and Crunchbase certainly hit on the hot spots. At GrowthX, we’re more interested in founders who are serving a market need, rather than tackling problems that are interesting to solve. We’re looking for winners, and founders will fail when they are not solving a market problem. With that in mind, I would add freight/logistics/supply-chain to the list. We’re fortunate to have Ted Ailing, the Dynamo Accelerator and other proven entrepreneurs in that space here in Tennessee, so I suspect the Volunteer State will continue to lead innovation in that area.

Tony Lettich, Managing Director, The Angel Roundtable – Ag, and aerospace are “hot spot” areas of interest to The Angel Roundtable (ART) in addition to our base foundational areas of interest, big data, clean energy, cloud & SaaS software, medical devices and specialty chemicals.  During 2016 ART completed an ag investment and is currently considering opportunities we would describe as big data-enabled functionality of aerospace start-ups. We would characterize Tennessee as being reasonably positioned in certain subsectors of these “hot spots,” neither being compelling nor devoid.  Each is likely to be a long-term trend as technology develops, so we would like to see increased emphasis in these areas from within the state to support the related opportunity development.

Kristina Montague, Managing Partner, The JumpFund – We do not focus or chase any one industry, but look at the leadership of the company and whether or not the entrepreneur has what it takes to grow and expand whatever product/service they are delivering. That said, the majority of our companies are technology focused and include those using advanced manufacturing, internet of toys, and AI. Tennessee has a great opportunity to capitalize on some of these high growth sectors if we can attract and retain the engineering and development talent required to grow such companies.

Geoff Robson, President, and John Morris, Executive Vice PresidentThe Lighthouse Fund – Morris: Software, healthcare/med devices and imaging. The state has strong resources in these sectors, including capital generated from multiple exits in the space. Robson: Additionally, healthcare IT and healthcare services are “hot spots” locally due to the successes we have seen in the past five to 10 years.

Jack Studer, Managing Director, and Courtney Watson, Partner, both with the Chattanooga Renaissance Fund – Studer: TN will continue to be most poised for success where technology is proven, but its deployment has been delayed or just hasn’t started yet. Agriculture, robotics, additive manufacturing are among those areas, but understanding how to successfully deploy these burgeoning technologies to our existing industries will continue to require patience and a willingness to experiment and partner.  Watson: Tennessee has made significant strides in supporting and investing in healthcare technology. This is one sector in which there is greater collaboration to help advance and deploy such technologies while leveraging the healthcare infrastructure and reputation of the state. This needs to be replicated in other sectors and also integrated more within the universities settings. Vanderbilt is trying to make an impact here as their strategic plan includes an innovation component and is being realized in the new Innovation Pavilion called The Wond’ry.

Grady Vanderhoofven, Fund Manager of Meritus Ventures and President and CEO of Three Roots Capital – We are generalists, seeking opportunities that are not limited to a particular industry or technology focus. With that said, we think a list of interesting sectors in Tennessee and the surrounding region includes manufacturing, healthcare, energy, and agriculture. We also are interested in intelligent transportation and logistics, and we believe Tennessee is well-positioned in all of these areas.

Ken Woody, Partner in Innova Memphis – Agricultural technology plays are very intriguing right now. The U.S. is well-positioned to apply technology that has worked in other sectors to improving efficiency and quality in ag. Most are well-aware of the coming challenge to feed 10 billion people as the world’s population continues to grow. Tennessee can be a leader through our research institutions and strong rural ag communities to lead this effort.  Related technologies like bio-based chemicals and products have strong growth opportunities and are just coming to the forefront.

Eric Dobson, Chief Executive Officer (CEO) of Angel Capital Group – We see a renaissance happening across the Heartland redefining “tech.” Most investors are of the opinion there are enough apps. They are tired of trying to depend on a seemingly whimsical Millennial market that refuses to pay for anything. In the Heartland, we are seeing a renewed focus on specialty chemicals, advanced materials, and advanced manufacturing technologies in addition to the ones listed above. I would clarify that investors are looking to invest in products that go “thud” when you drop them. They have tangible value.  Marketplaces, ecommerce, apps, and SaaS deals that do not dramatically increase productivity are not going to continue to be investable from our perspective. We feel Tennessee is well-positioned for auto, advanced manufacturing, and advanced materials. We are seeing deals for VR applications forming, which are not typically investable, but not many fundamental VR tech deals in the state. We see many AI-oriented companies in the broad market and some of consequence in Tennessee. That is a sector that we would expect to grow. Outside the state, we have a VR tech company and a robotics company in our portfolio. The robotics company is planning an IPO in the spring of 2017. So, these are both market sectors we watch and have great interest.


Tom Ballard

By Tom Ballard, Chief Alliance Officer,
Pershing Yoakley & Associates. P.C.

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