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January 31, 2023 | Tom Ballard

Investor Outlook 5 | Quality of deals

Are area investors seeing more deals? Fewer? And of what quality? Our seven featured investors weigh in.

Today’s Question: How would you characterize the quality of the deals that you have seen in the past 12 months? Are the opportunities of a higher quality, about the same, or of a lower quality?

Tony Lettich, Managing Director, The Angel Roundtable: The quality of the deals that we experienced during 2022 increased over those in the last couple of years. We believe this has been the result of the continued growth in the ecosystems in the State of Tennessee and across the Northeast Tennessee region as well.

Grady Vanderhoofven, President and Chief Executive Officer, Three Roots Capital: We have seen some good deals, and we have deployed capital (equity and debt) to multiple small and young companies in the past 12 months. With that said, I don’t perceive a large volume of super high-quality deals in the market right now. For years, I have perceived increasing deal quality in our geographic region. I wouldn’t say deal quality is deteriorating, but I don’t perceive the same increasing deal quality right now. It’s important to note that we look for deals in a relatively limited geography.

Ken Woody, President and Partner, Innova: First, we continue to see a LOT of deals, more than ever actually. Maybe that’s because there is a shortage of investable dollars, or more competitive, I’m not sure. But many deals are crossing my desk. Quality seems about the same, but since we have not been actively engaging with new companies, I can’t fairly compare to what we have seen in the past.

David Adair, Co-Founder and Managing Partner, Solas BioVentures: We continue to see lots of entrepreneurial ventures. We remained focused on our operating thesis: investing in life science companies focused on producing significant positive impact for patients while generating good returns for investors. This discipline has resulted in several unique offerings of best-in-class technology. Overall, I believe we have seen an increase in high-quality companies and deals over the past 12 months.

Derren Burrell, Founder, President and General Partner, Veteran Ventures Capital: We have seen the quality of deals grow over the past year, largely due to the partnerships and relationships developed across the alternative capital industry. While cold-call deals can sometimes deliver a great opportunity, we find referrals from trusted partners to be far more effective in finding the best deals, and those relationships have really blossomed in the past 12 months.

Eric Dobson, Chief Executive Officer, Sheltowee Angel Network: I thought 2021 was great and 2022 was better. The challenge we had was too many good deals overlapping which generally leads to smaller individual investments even if we have higher aggregate investment. The current deal flow opportunities remain outstanding even in the “off season.”  So, I anticipate the quality of deal flow will persist in 2023.

Scott Ewing, Principal Business Analyst, Appalachian Investors Alliance: We’re seeing deals across our region, but our investors have turned down quite a few opportunities in the past year. Deal flow following COVID was unimpressive, which may mean that we’re due to see a pick-up in opportunities now as we move past all the COVID disruption.

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