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January 10, 2016 | Tom Ballard

PART 1: Review of angel and venture sectors in 2015

2016 Outlook(EDITOR’S NOTE: For past three years, we have asked individual fund managers in our East Tennessee region to share with us their thoughts on the year that just ended and the year ahead. This begins the first article in a six-part series. We thank the participating individuals for their input.)

TODAY’S QUESTION: Compared to the last couple of years, how would you describe the angel and/or venture market nationally, in Tennessee and in this region in 2015?

  • David Belitz, Partner, Chattanooga Renaissance Fund – I don’t know that the local/regional market has changed substantially. There still seems to be an appetite for investing in startups throughout Tennessee and the Southeast. Venture remains difficult in the Southeast. If you are in the medical space, there are a number of options, but outside of that, active venture investing is slim. We see a number of funds that want to see demonstrated market traction and roughly $1 million of annual revenue before they will consider investing. I would classify this as growth capital personally. Thus, angel rounds are still working, but the Series A remains difficult. The national view to me is summarized by the following: the coasts still drive the market, valuations still tend toward the high side, and talk of a bubble continues.
  • Eric Dobson, Chief Executive Officer, Angel Capital Group – It’s been a good year with significant growth in the angel sector, new funds in the Series A sector, growth in the Series B sector, and a change in the attitude of the populace with regard to start-ups – they are cool now.
  • Kristina Montague, Managing Partner, The JumpFund – Our last two years have been phenomenal with deal flow/activity and a greater presence of strong, female-led companies seeking capital nationwide. In Tennessee, we still have significant room to grow, but it has been great to see more women-led companies in “The TENN” and other accelerators around the region. Memphis really knocked it out with six women pitching at their “Demo Day” this year.
  • Geoff Robson, President, The Lighthouse Fund – The venture market nationally/regionally is very active. Deal flow continues to improve although there remains some concern about valuations getting a little high. Locally, the same is also true although valuations remain more reasonable as one would expect with a lower cost of living and the opportunity to grow companies in a more capital efficient manner in East Tennessee.
  • Grady Vanderhoofven, Fund Manager, Meritus Ventures – I believe the angel market in Tennessee and the broader region is as good as I have seen in recent memory. I believe the angel market is healthy nationally. The venture market in Tennessee has slowed recently, relative to the peak of the TNInvestco activity. Nationally and regionally, I perceive the venture market to be very robust.
  • Ken Woody, President, Innova Memphis – The angel and VC market in Tennessee is maturing in 2015. Some of the larger players have dropped off a bit with TNInvestco coming to an end. It doesn’t necessarily mean they have gone away, it’s just that they are no longer so focused just on Tennessee companies. On the other hand, more angels are coming to the table, and their appetite for early stage investing is strong. Tennessee is certainly stronger than other states in the region and continues to grow in stature nationally. The LaunchTN conference and other conferences across the state help advance our cause.

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