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2018 OUTLOOK PART 2: Thoughts on technology hotspots

2018 Outlook 3We continue our series where Angel and Venture Capitalists in East Tennessee share their thoughts about the past year and their thoughts on the year ahead.

Part #2: Most articles that we see looking at “tech hot spots” consistently list two sectors – augmented and virtual reality (AR/VR) and machine learning. What sectors most interest you and how well-positioned do you see the Volunteer State regarding these and other sectors?

  • Eric Dobson, Chief Executive Officer, Angel Capital Group: We still feel advanced materials will be a major wave of innovation, investing, and economic productivity heading into the next ten years. We are seeing a good number of VR applications as well as machine learning. But, machine learning is now becoming commoditized. It is certainly being demystified. Programming languages and machine learning classes abound. That should mean two things. First, these ventures have been largely confined to a few hot-spots of innovation. That should change. As the technology becomes more accessible, it should work its way into the Heartland. But, second, as it becomes commoditized, the luster will wear off the market. So, valuations should reach realistic levels. There are lots of businesses using machine learning techniques. The question is whether or not such technology is critical or just a buzz word to draw funding.
  • Tony Lettich, Managing Director, The Angel Roundtable: ART’s primary interests are in the cloud software/SaaS, big data/AI, medical device, FinTech, EdTech, clean tech/clean energy, life sciences (excluding pharma), and specialty chemicals areas. Supported by organizations such as the Oak Ridge National Laboratory, Launch Tennessee, Life Science Tennessee and the Tennessee Advanced Energy Business Council, we believe the State of Tennessee has a strong foundation in these areas.
  • Jack Studer, General Partner, and Courtney Watson, Partner, Chattanooga Renaissance Fund: This can be a dangerous but often time unavoidable situation, especially as media outlets continue to reduce entire ecosystems to five-word headlines. However, as clusters form (either organically or due to externalities of good fortune, such as the gigabit fiber infrastructure of EPB in Chattanooga), investors would be smart to embrace and nurture those clusters. If clusters hit critical mass, they can become hugely beneficial in recruiting and retaining talent. The 3D printing micro-cluster in Chattanooga holds some of the most promising companies in town. Collider, Branch, Feetz, etc. all came either directly or indirectly out of the “GIGTANK” 3D printing edition efforts.
  • Kristina Montague, Managing Partner, The JumpFund: Machine learning is key to growth in the tech sector. Several companies in our portfolio have added AI capacity to their existing platforms for greater efficiency and to meet customer demand. We have not invested yet in AR/VR and have not seen women leading in this space, though our first portfolio exit was in visualization technology which Amazon and others are rapidly acquiring.
  • John Morris, Fund Manager, The Lighthouse Fund: I think both hot topic areas have limited starts and limited capital in the state of Tennessee. AR is getting more traction than VR. Until the phone is powerful enough to handle large data sets and VR viewers (like Google Cardboard) become ubiquitous, VR companies will have a hard time gaining traction. Companies that facilitate “transitions” to AR/VR will be in demand
  • Grady Vanderhoofven, President and Chief Executive Officer, Three Roots Capital, and Managing Partner, Meritus Capital Management: Based on observations of companies and their industries I have seen at venture-related events and within our own portfolios, I believe any list of “hot sectors” should include simulation/modeling (which probably is akin to, but not the same as, virtual reality), Internet of Things (IoT), and machine vision coupled with data analytics (which probably is akin to machine learning). We recently sold a Tennessee-based company (Tricycle) to Shaw Industries (largest carpet manufacturer in the world and wholly-owned subsidiary of Berkshire Hathaway), and our company’s solution (simulation of textiles and surfaces) was recognized as ascendant within its industry. However, I believe our company was unique and not broadly representative of the Volunteer State. We have what I believe is a budding Rockstar IoT company (Zipit Wireless) in our portfolio, but it isn’t located in Tennessee, and I don’t perceive Tennessee has a strong cadre of companies in that space in general. With respect to machine vision and data analytics, I do believe Tennessee is well-positioned, not only in terms of companies, but also in terms of people and research institutions that have compelling strengths. One of our companies (GRIDSMART Technologies) is in Knoxville and is exceptionally strong using machine vision and data analytics in the intelligent transportation arena. I have said many times previously, I believe East Tennessee has a unique combination of assets, resources, capabilities, experience, institutions, and companies focused on various aspects of intelligent transportation. This combination of strengths could position the region exceptionally well as the transition toward intelligent and autonomous vehicles continues.
  • Ken Woody, President of Innova Memphis: We have a number of great founders and companies exploring opportunities in AR, VR, AI, and machine learning. All show promise and all are looking for their “true home,” a real practical application where customers will pay for the value. I expect we will see more of this. I also see more top-notch talent spending time in BlockChain development as both cryptocurrencies ramp-up and the real value of BlockChain development becomes more real.

Tom Ballard

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

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