(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 is the second article in a six-part series. We thank the participating individuals for their input.)
TODAY’S QUESTION: What is your outlook for investment capital availability in 2016 from two perspectives – as we enter the year and by late in 2016?
- David Belitz, Partner, Chattanooga Renaissance Fund – It still largely remains stage dependent. Going into 2016, I think the availability of angel capital remains robust. I am beginning to be concerned that later next year or maybe in 2017 that East Tennessee will start to see a slowdown in capital. My concern is not deal flow or opportunity, but instead the angel investor. Many angels have consistently invested capital over the last four to five years. Unless we begin to see some substantial exits around the region, many of these angels may be running short on available capital. A successful exit or two would replenish the coffers, and I think drive the next wave of angel investing in the East Tennessee. Other areas that could impact the availability of capital are crowdfunding platforms and corporate involvement. Late 2016 could see both of these areas having an impact on available capital. Angels, VC’s and entrepreneurs will be figuring out the best way to engage with and utilize these platforms. We are seeing them have a regional impact with the opening of a SeedInvest office in Atlanta and the formation of Elite Crowdfunding in Atlanta. Time will tell how these ultimately impact capital, but they will have an impact over the course of the coming years. Additionally, corporations are opening in-house incubators and/or participating in existing programs. If corporations continue to engage at the incubator/accelerator level, we could see an increase in product/service testing, adoption and potentially strategic investment.
- Eric Dobson, Chief Executive Officer, Angel Capital Group – There is concern the Series A crunch will expand in 2016. This could leave many deserving companies high-and-dry looking for capital. We still suffer from lack of BIG exits in the state, and investors will become worn-out if we don’t begin seeing meaningful exits in the next two years from the TNInvestco process of 2010 – 2014. Despite the previous statements, I believe we will continue to see strong offerings and investment in the start-up sector.
- Kristina Montague, Managing Partner, The JumpFund – Having access to new Incite funds has been welcome in our region and spurred more collaboration between investors. New funds are being started which will grow capital available at a variety of stages. For women, regional and national opportunities such as Valor Ventures (Atlanta) and Tory Burch Fellows (New York) offer access to additional funding sources.
- Geoff Robson, President, The Lighthouse Fund – Availability of capital is a non-factor now, and it will remain that way throughout the year. Value-added capital is the more important factor – it is not just about the money. An example is investors that add value to their investment through rolodex and experience.
- Grady Vanderhoofven, Fund Manager, Meritus Ventures – I don’t anticipate a significant change in early 2016 relative to 2015. I will be curious to see what happens in the broader economy if/as interest rates increase and as we move through the next political election cycle. I don’t think those factors will affect availability of capital in 2016, but they could have effects and ramifications beyond 2016.
- Ken Woody, President, Innova Memphis – I continue to see more companies being formed in Tennessee, come to the state for help through the many accelerators, and approach VCs and Angels for funding. I expect that to continue to grow in 2016. Investment capital is available but continues to be sector focused. Tennessee does not historically invest across a wide spectrum of sectors, so early stage companies may struggle if they’re not in the sweet spot.