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January 24, 2022 | Tom Ballard

OUTLOOK SERIES QUESTION #1, PART B: 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 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 final four individuals alphabetically today following the initial responses in yesterday’s first article in the series.

  • Scott Ewing, Co-Founder and Principal Business Analyst, Appalachian Investors Alliance (AIA). Since our founding in 2018, AIA has grown steadily. Now we serve nearly 280 accredited investors organized into 12 member funds covering 11 states. Seven more AIA funds are in various stages of development. Our angel investors have leveraged $18 million in 51 entrepreneurial companies, attracting more than $630 million in matching and follow-on investments. Approximately 95 percent of our investments have been made in Appalachian communities; however, that’s changing as we work increasingly with investors outside of Appalachia. We’re now in Massachusetts, New Jersey, Minnesota – and we’re in planning with a group in Canada. Throughout the Coronavirus pandemic and economic downturn, not a single AIA-backed company failed. And despite the worldwide disruptions, our Tri-State (Ohio-Kentucky-West Virginia) investors, in particular, were gratified by two significant liquidity events: (1) BioLife Solutions, Inc. acquired portfolio company Global Cooling, Inc., operating as Stirling Ultracold, a manufacturer of ultra-low temperature mechanical freezers; and (2) PureCycle Technologies, which located its first plant in Ironton, OH, went public earlier this year via SPAC. PureCycle is commercializing a cost-efficient and environmentally sustainable recycling technology for restoring waste polypropylene into virgin-like resin that had been developed by Procter & Gamble. Our thesis for our members is to be opportunistic in working with quality entrepreneurs. AIA doesn’t impose an investing strategy on our affiliated funds with respect to industry focus, deal stage, geography . . . other than to say that most of our deals are early stage and locally sourced. Over the last two years, we’ve invested in 27 different industry verticals that ranged from hospitality to advanced materials. What we steer away from are long lead-time investments, such as in drug discovery, that are better suited to specialist investors. So, in terms of positioning, we support what our regional market has to offer, which is a mix of high-growth and Main Street businesses that need debt, equity and revenue share financing. And we are flexible in offering deal terms that suit the types of businesses we want to see grow and stay in our Heartland economy.
  • Tony Lettich, Managing Director, The Angel Roundtable (ART). We believe ART has solid momentum as we enter 2022. During 2021, we spent time expanding our opportunity sourcing network and membership. Additionally, operations and activities began to normalize as compared to 2020. Our current pipeline includes a robust portfolio of investment options, and we are optimistic that 2022 will be an outstanding year for our group. 2021 would have to be characterized as a year of accomplishment against milestones for most of our portfolio companies. All were in solid financial positions coming into the year, and several met revenue milestones while others met technology milestones such as development of new features/applications, obtaining patents or FDA (U.S. Food and Drug Administration) approvals. A few of our portfolio companies completed successful financing rounds in 2021 and others hope to leverage 2021 traction to support follow-on rounds of their own. We expect all to make progress toward their growth milestones during 2022.
  • Grady Vanderhoofven, President and Chief Executive Officer, Three Roots Capital. The last 12 months have been exceptional for each of our various investment vehicles. From a fundraising and investment perspective, I would characterize the last 12 months as almost hyper-active, successful, and momentum-building as we enter 2022. Literally all of the key companies in our various portfolios (equity and debt) are as strong as, or stronger than, they were at the beginning of 2021. 2021 has been a good year, and a reassuring year, for the companies in our portfolio. Frankly, on the heels of the multi-faceted uncertainty of 2020, while we were hopeful for 2021, we weren’t entirely confident about what would happen in 2021. COVID has created a variety of horrible scenarios on a global scale, but our companies all have weathered that storm successfully to this point, and many have capitalized on opportunities that have been presented. Entering 2022, we feel confident and optimistic about our active companies and investments. We anticipate multiple successful exits in our debt and equity portfolios.
  • Ken Woody, President of Innova Memphis. Innova enjoyed some tremendous growth from numerous portfolio companies in 2021, after most of them pulling back and refocusing during the COVID crisis of 2020. We also pulled back, refocused on areas of opportunity, and planned our next funds launch. We were recently awarded our second Rural Business Investment Company designation by the U.S. Department of Agriculture and will be launching a second AgTech focused fund in 2022. Most of our portfolio companies are in much better shape. For some, the COVID lockdown, and associated supply chain issues, just accelerated already existing issues in their business model and those companies ended-up shutting down. For others, they saved capital, talked to customers, were able to better address emerging needs, and have become more stable stronger companies. We’re very pleased with our current portfolio growth. Many of our companies took in additional money in 2021 to fuel their growth and are positioned very well for their best year yet in 2022.

Previous Articles in the Series:

  • Part 1A – A review of the past two years as well as a look into the future.

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