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November 02, 2023 | Tom Ballard

LaunchTN capital team hosts “Ask Me Anything” session on regional seed fund

Session covers the $28 million component of "InvestTN."

Thursday’s “Ask Me Anything” session on the regional seed fund component of the “InvestTN” program was full of useful information for those who have applied or are contemplating applying for funding.

A total of $28 million, less administrative expenses, has been allocated for the program that, in turn, has budgeted about $4 million to each of Launch Tennessee’s (LaunchTN) seven regional entrepreneur centers. The regional seed fund will make investments of $25,000 to $250,000 in rounds where the apply start-up is seeking to raise anywhere between $100,000 and $750,000. It requires a minimum of a one-to-one match with the long-term goal being to leverage as much as a 10-to-1 match as the company grows.

Funded as part of Tennessee’s nearly $117 million allocation under the State Small Business Credit Initiative, “InvestTN” and its three components – the regional seed fund, a $30 million technology fund, and $12 million for venture funds – are intended to help bring more investment capital from the sidelines and across the country.

Four members of LaunchTN’s capital team – outgoing Chief Investment Officer (CIO) Monique Villa, incoming CIO Eller Kelliher, Senior Associate Khrys Hatch, and Capital Coordinator Ziggy Allenlundy – fielded questions after Hatch provided an overview of the regional seed fund program.

What useful information was shared? A lot, but here are the highlights that caught our attention.

  • Hatch said that “we are essentially an industry-agnostic fund.”
  • Those considering the regional seed fund route should talk with the Capital Coordinator at the most applicable entrepreneur center, based on their location, to help prepare the best application possible. “Don’t work in a silo; put your best foot forward,” Kelliher said.
  • Because “InvestTN” is an equity program, grant funding would not qualify as match. Neither would additional funding from founders because, as noted by Villa, the U.S. Department of the Treasury is looking for what she characterized as “cause and results,” namely getting new funding.
  • Timing between executing an agreement and raising the match still appears to be a decision in progress for Treasury, but the LaunchTN team seemed to be reasonably comfortable with two 90-day windows for securing the required match. One would be reaching back up to 90 days before the investment paperwork was executed, while the other would be allowing up to 90 days forward to secure any funding not already committed.
  • If a commitment is made by “InvestTN” and the company subsequently fails to raise all of the matching funds, the agreement would have to be reviewed again.
  • Using crowdfunding as a vehicle is unlikely to qualify due to the requirement that the agreement with “InvestTN” is done on the same terms as those accorded to outside investors.

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