OUTLOOK SERIES QUESTION #1, PART A: A review of the past two years as well as a look into the future
(EDITOR’S NOTE: For most of the decade since we launched teknovation.biz in 2012, we have published a multi-part series that begins in mid-January and shares the thoughts of angel and venture investors on the past 12 months and the upcoming year. We are happy to include the thoughts of four individuals who have participated in every series plus three new ones – David Adair, Managing Partner and Co-Founder of Solas BioVentures in Chattanooga; Derren Burrell, President and Founder of Veteran Ventures Capital in Knoxville; and Scott Ewing, Co-Founder and Principal Business Analyst, Appalachian Investors Alliance.)
TODAY’S QUESTION: How would you characterize the last 12 months from three perspectives: (1) Your firm and where it is overall entering 2022? (2) The strength of the key companies in your portfolio relative to where they were at the beginning of 2021. (3) The positioning of those firms as they enter 2022. Due to the multi-part question, we are sharing the responses of the first three individuals alphabetically today and will provide the remaining responses tomorrow.
- David Adair, Managing Partner and Co-Founder of Solas BioVentures. We are poised for an incredible 2022. We suffered a significant loss on one portfolio company in early 2021 as a result of the COVID lockdown of operating rooms and hospitals. We have in our queue two device companies and four pharma plays that all were delayed by COVID, essentially, we lost a year. The device companies, as well as three of our pharma companies, are in Fund I (i.e., vintage 2015). These represent a six-year hold period, still ahead of a typical peer holding of seven years. Solas strives to exit by year five and as such, the delay caused our timeline to drift. Fund II is preparing an IPO (initial public offering) of a novel compound for Eosinophilic Asthma and other eosinophilic disorders. It will conduct a crossover this year and the IPO in the first half of 2022. Our companies on a macro level are more valuable, having undergone cost elimination, savings, and survival during one of the most challenging 18 months. We do have some individual companies that have unique challenges, but all are still alive, not a small feat given the relative unpreparedness and unprecedented 2020 to 2021. Supply chain issues of key ingredients remain manageable with innovative management, but concern is how long will they be able to continue the “two-step” until more definitive restoration. The companies trying to conduct clinical research have had head winds. While supply chain and clinical research challenges are present, the companies remain with their individual thesis intact and stable value. Most importantly, their collective resolve has been testimony to our primary investment thesis, GOAT! (“Greatest of All Time” management teams). They have survived and emerged much stronger. Given the aforementioned monetization events planned for 2022, we remain bullish on our positions, albeit with a one-year delay.
- Derren Burrell, President and Founder of Veteran Ventures Capital (VVC). As an Emerging Fund, VVC has seen both incredible challenges and dynamic opportunities over the past year. Having virtual relationships entering in 2021, many of these relationships solidified into personal relationships that moved our firm forward. The past year has seen our team grow at VVC, strengthened partnerships throughout the military-connected ecosystem, and incredible momentum as we look to double our portfolio companies as we enter into 2022. The portfolio companies within Veteran Fund I primarily have a national security/defense focus, and thus have found strength despite the perturbations of the economic and political landscape over the past year. These firms are built on the underlying strength of the veteran leadership that makes our country great. The defining characteristics the veteran portrays is adaptability and poise under pressure, and we believe they will outperform in 2022.
- Eric Dobson, Chief Executive Officer, Sheltowee Angel Network. I believe we are positioned for significant growth in 2022. 2020 would not start and 2021 won’t quit. We are in the best position we have been for many years. We have experienced significant organic growth. We invested twice our normal annual budget and are closing new deals, all Knoxville deals, in December (EDITOR’S NOTE: Responses received before holidays.) That has never happened before. Knoxville appears to have awakened to the need to expand the angel investing community with the advent of the TechStars Accelerator opening in January. And our Chamber is leading the way with a series of panel discussions on angel investing in January, February, and March – “What is Angel Investing,” “How to Do It,” and “Women Can Be Angels” (featuring the Founder of Women Can Be Angels as a panelist). That is great opportunity for folks who are interested in angel investing to engage. Going back to July of 2020, we began seeing outstanding companies seeking capital. We did not see marginal companies even attempt to raise capital. That trend continued through 2021. The strength of the companies has remained very high in terms of entrepreneurial experience, funding packages/materials, business plans, and revenue. It has been a joy to work with the companies seeking capital over the last year, and four of our 2021 investments are in Knoxville companies. For reference, we invested in eight Knoxville companies between 2014 and 2020. This move signals a significant uptick in the quality of Knoxville start-up companies ready to compete in the open market for capital. We expect to see significant moves by our Knoxville portfolio in 2022 in terms of raising capital and closing client contracts.