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February 06, 2020 | Tom Ballard

PART 2: Panelists compare 2010 and 2019 on availability of early and later stage capital

(EDITOR’S NOTE: We continue our annual “Investor Outlook” series by asking our panelists to make two more “then” and “now” assessments related to the entrepreneurial ecosystem.)

How would you characterize the availability of early stage capital in Tennessee now versus in 2010 (1 = less; 2 = about the same; 3 = slightly higher; 4 = much more)?

  • Eric Dobson, Chief Executive Officer, Angel Capital Group. There is capital readily available for deals in town in 2019. 2010 – 5; 2019 – 8.
  • Tony Lettich, Managing Director, The Angel Roundtable. While it appears to be improving, the competition for funding is also growing stronger. Additionally, other geographies are simultaneously improving as well, making any separation from the pack difficult!
  • Partner Charlie Brock, Chattanooga Renaissance Fund. 1 – Much less now due to the influx of TNInvestco dollars in 2009-2010.
  • Brandon Bruce, Entrepreneur-in-Residence with Greater Sum Ventures. 3 – There is more early stage capital available via local and regional angels and funds than there was in 2010.
  • Ken Woody, President and Partner, Innova Memphis. I’d rate it a 3. New angels have come to town, and angel groups are here now. We are getting more outside capital interested in East Tennessee but still not a lot of investments. So, interest is up, investments are slightly up.
  • Kristina Montague, Managing Partner, The JumpFund. 2 – Many of the early funds are not re-investing/continuing though several new are coming into the market.
  • John Morris and Geoff Robson, Fund Managers, The Lighthouse Fund. Early stage capital was at a peak in 2010. The TNInvestco program was set and just starting to flow. Companies still had to go outside the region find capital. 2019 – 3. The TNInvestco program is gone, but the region has organized angel funding (Chattanooga, Knoxville and Tri-Cities) as well as several successful entrepreneurs that have started funds for growth stage investing.
  • John Bruck, Knoxville-based Member, and Scott Jacobs, Executive Director, Queen City Angels. We grade this 4, much more now versus 2010. In general, it’s been our experience that well-prepared start-ups can currently find the capital for their developmental and growth requirements. The more investor-ready start-ups are the faster, and they’ll more completely fill their rounds. But, 10 years ago, neither start-ups nor investors were as well informed and connected as they are today.
  • Grady Vanderhoofven, Founder, President and Chief Executive Officer, Three Roots Capital.

How would you rate the availability of later stage capital for your portfolio companies now versus in 2010 (1 = less; 2 = about the same; 3 = slightly higher; 4 = much more)?

  • Dobson for the Angel Capital Group. We still lack larger, traditional venture capital in the region, but it is easier to bring it into the state. 2010 – 5; 2010 – 6.
  • Lettich for The Angel Roundtable.
  • Brock for the Chattanooga Renaissance Fund. 4 – Much more now due to the awareness with many coastal investors who didn’t know us nine years ago, unless they were healthcare investors looking in Nashville. With later stage fundings in Chattanooga and with some of the exits in Knoxville, we’re not a one trick/city pony anymore.
  • Bruce for Greater Sum Ventures. 4 – There is exponentially more later stage capital available today versus 2010.
  • Woody for Innova Memphis. Later stage capital is very challenging to obtain. I would rate it a 2. Investors of all types want to see an experienced team with a history of execution. They are more willing to take a risk on a small investment, which lends itself to earlier stage companies. For a later stage deal, it’s more pricey, higher dollar commitments but should have a corresponding lower risk due to more milestones being achieved by that stage. Nevertheless, later stage investors tend to go where they’re comfortable, and we just haven’t established those relationships and enough successful companies yet in East Tennessee.
  • Montague for The JumpFund. 3 – The Southeast is getting increased attention as an “untapped market.”
  • Bruck and Jacobs for Queen City Angels. Availability of later stage capital in 2019 versus 2010 is much greater, so we’d give this a grade of 4. In 2010, the macro-economic environment in the U.S. was still chaotic following the 2008 recession. Additionally, investors today are more patient and have a stronger understanding of the process and do not “fatigue” as easily as 10 years ago. There is also more available capital in the overall system – since 2010, the Dow Jones Industrial Average has grown over 165 percent, and more recently the growth trend in the economy continues to bolster the availability of capital at all levels.
  • Vanderhoofven for Three Roots Capital.

NEXT: How do you factor age of founders into your funding decisions?

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