INVESTOR OUTLOOK PART 9: Potential impact of strategies at the federal level
(EDITOR’S NOTE: This is the ninth article in a 10-part series capturing the thoughts of Angel and Venture Capitalists who invest in East Tennessee as they look back on 2020 and ahead as we begin 2021.)
On the federal scene, do you expect any significant initiatives that would impact the investment community?
- Tony Lettich, Managing Director, The Angel Roundtable. We believe COVID-19 has had a significant disruptive impact on several areas, including and especially in the retail, supply chain, artificial intelligence and medical segments. Potentially, it has also had some positive impact on select regulatory operations such as the U.S. Food and Drug Administration and policy areas related to the strategic needs of the country. Driven by these factors, we expect multiple initiatives which could positively affect innovation. However, due to the current political uncertainty, the specific initiatives are difficult to forecast. Ultimately, this will be dependent upon the new administration and Congress and the philosophies of the cabinet members and policymakers appointed by the new administration.
- Kristina Montague, Managing Partner, The JumpFund. Yes! Several initiatives on the federal level have already been launched that should gain more traction with democratic leadership. Senator Amy Klobuchar introduced the “New Business Preservation Act” last Spring that would help support investment in new companies outside of the coasts (click here for more information). One of our Founders – Kayla Rodriguez Graff of Sweetbio – participated in a roundtable discussion last Fall with Sen. Klobuchar and other women in DC as she was working on this initiative. There is also likely more funding that will be released to help struggling businesses into this new year to bolster what has already been provided through the CARES (Coronavirus Aid, Relief, and Economic Security) Despite the pandemic, most investors have fared very well with their total investment portfolios, so there will be cash on the sidelines that could be leveraged if government matching grants are made available through the Small Business Innovation Research program or other channels.
- Grady Vanderhoofven, Founder, President and Chief Executive Officer, Three Roots Capital. On the positive side, I think a big federal initiative focused on infrastructure improvement, upgrade, development, etc., would attract a lot of private capital alongside federal (taxpayer) dollars. On the negative side, I think a dramatic increase in the way investors are taxed – for example, long-term capital gains – will have a detrimental impact on the amount of capital available for private investment in general.
- Ken Woody, President and Partner, Innova Memphis. Not necessarily by the federal government, but there has been a strong focus/awakening that Minority/Female Founders have not been receiving the same access to capital that more traditional Founders have. There is significant interest/focus in changing that. I think that trend will continue. I think the trend to shift money away from the coasts will continue. If Venture Capitalists are no longer working out of their offices, what’s the difference between investing in a Sand Hill company you can’t visit, and a Knoxville company you can’t visit. Talent will more and more be distributed rather than just located in Boston and Silicon Valley. All these trends are good for the flyover states and new Founders.
- David Belitz, Charlie Brock and Courtney Watson, Partners, Chattanooga Renaissance Fund. The pandemic has reminded the country, and indeed the world, of the need and value of public investment locking arms with private industry to address some of our biggest challenges. The vaccines which will soon be making their way into a majority (we hope!) of Americans are a result of platforms which have been developed over many years and involved significant public-private investment and partnerships. We have also seen how public dollars have buffered many of our small businesses from suffering even greater debilitating effects from COVID. So, beyond the crisis-induced public spending, we may see a greater focus on capital incentive programs such as Opportunity Zones or Amy Klobuchar’s “New Business Preservation Act” that attempt to drive greater investment outside of the “Big 3” of Silicon Valley, New York City and Boston.
- Eric Dobson, Chief Executive Officer, Sheltowee Angel Network. I think it is reasonable to expect a significant investment in the “heartland” to address the rural/urban divide and recovery . . . areas that had not fully recovered from the 2008 Great Recession. And, I believe we will see a massive push to bring broadband to rural communities.
