Investor Outlook 8 | Thoughts on federal funding for small businesses
"These funds are an important opportunity for start-up companies in the state."
Today’s Question: Assuming that the U.S. Department of the Treasury approves the State of Tennessee’s plan for use of funding under the “State Small Business Credit Initiative (SSBCI 2.0),” how do you see those dollars benefitting your portfolio companies and the ecosystems across the Volunteer State?
David Adair, Co-Founder and Managing Partner, Solas BioVentures: Any surprise financial support is always welcomed. The trick is what comes with that funding? First, what is the cost, as there are no free lunches? What will the specific requirements be – some may be reasonable, others not so much? Wise utilization of funding resources could be a boon for Tennessee, if the state takes into account lessons learned from prior incentive programs. We will wait to see what comes out on the other side of the sausage grinder. We have several Tennessee-based companies that could benefit.
Derren Burrell, Founder, President and General Partner, Veteran Ventures Capital: Depending on how Tennessee’s plan actually executes, we would find some benefit to our portfolio company based in Tennessee (Haven). It would be of greater value to allow a sizable portion of the SSBCI be placed in venture funds based in Tennessee and thus allowing job growth and economic stimulation through the capital they deploy in growth companies across the state and the nation. Distribute dollars to existing managers with the infrastructure, team, deal flow, and processes already in place.
Eric Dobson, Chief Executive Officer, Sheltowee Angel Network: These funds are an important opportunity for start-up companies in the state. I personally think these funds should be distributed to those on the ground making investments in our communities who are closest to the deal flow. However, I also understand that solution was an unlikely outcome given the history of similar capital programs in the state, all of which I believe had a positive impact on the state. Launch Tennessee (LTN) has hired an experienced fund manager, and we anxiously await more information on the process it will use top select investments. LTN has some significant challenges with the requirement for matching funds from private equity. That should lead to a symbiotic relationship with the private equity investors across the entire state. We intend to support and work closely with the LTN team to put that capital to work in deserving companies in this region.
Scott Ewing, Principal Business Analyst, Appalachian Investors Alliance: From our perspective, we expect SSBCI dollars to encourage more private capital to engage in early stage investing across the state, which will ultimately enhance the state’s entrepreneurial ecosystems.
Tony Lettich, Managing Director, The Angel Roundtable: Treasury approval of Tennessee’s Plan under SSBCI 2.0 has the potential to enhance the funding availability for Tennessee start-ups. Such increased funding availability is likely to improve the sustainability of these start-ups during the periods of uncertainty in the next 12 months.
Grady Vanderhoofven, President and Chief Executive Officer, Three Roots Capital: I believe the availability of more capital – both equity and debt – for young and small businesses in Tennessee generally will be good for companies and entrepreneurial ecosystems across the state. I believe SSBCI v2.0 will help spur company creation and financing in Tennessee. I believe the additional capital could create an environment of increasing company valuations in Tennessee. If Tennessee’s plan for utilizing SSBCI funds is a good plan, and if the capital is deployed effectively and productively, the positive impacts of the program should be enduring and sustainable, well beyond the first few years when the capital initially is deployed. Doing this well should produce a compounding positive impact. I would be remiss if I didn’t point out Tennessee failed to accomplish this with SSBIC v1.0 a decade ago. SSBCI v1.0 produced a very positive, but short-term and short-lived, impact that ultimately faded because of shortcomings with how that first opportunity was implemented in Tennessee.
Ken Woody, President and Partner, Innova: Depends on how they are deployed. We can’t peanut butter approach these funds, trying to be egalitarian and giving everyone a little bit. There are real companies here in our state, that have competitive offerings. If we can get behind those and fund them to create good teams with good infrastructure, it will dramatically change the state for years to come.