(EDITOR’S NOTE: This is the final article in a two-part series sharing the story of how a Knoxville-based start-up has gone from no paying customers to being on the verge of its “hockey stick” moment thanks to persistence, patience and some help along the way.)
By Tom Ballard, Chief Alliance Officer, PYA
Like almost any enterprise, SmartRIA Inc. felt the effects of COVID-19.
“2020 was our flattest year in history,” said Mac Bartine, Chief Executive Officer (CEO). Still, the start-up grew monthly recurring revenue by 70 percent as it utilized two federal pandemic-related initiatives – the U.S. Small Business Administration’s “Paycheck Protection Program” and “COVID-19 Economic Injury Disaster Loan” program.
“It was really good timing for us,” Bartine says of the two initiatives that allowed SmartRIA to defer a capital raise in 2020. Now, the company is positioned to capitalize on five years of fine tuning its product that serves the compliance needs of Registered Investment Advisors.
“We can now argue that we have the best solution in our industry,” Bartine says, adding, “Companies that were not previously interest in talking with us are now very interested.” One example is an investment firm that could become a $400,000 annual source of revenue.
For Founder Roger Kiger, it’s the proverbial light at the end of the tunnel and a goal that he had when he conceived SmartRIA as a tool to support his internal needs at Visionary Horizons Wealth Management.
“Our goal has always been to be a technology platform in an industry that has been characterized by billable hours,” Kiger says. “We’ve created an industry that didn’t exist before. Every step . . . every year . . . capital was absolutely essential to get us to the next month or next year.”
One of SmartRIA’s supporters through its journey has been Grady Vanderhoofven, President and CEO of Three Roots Capital, and his team. He’s a long-time player in the local start-up scene through his roles as Co-Founder and Fund Manager of Meritus Ventures and Co-Founder and Co-Fund Manager of the Southern Appalachian Fund.
“Three Roots first became acquainted with SmartRIA in 2016, and we entered into a consulting engagement with SmartRIA in 2016 or 2017,” he explained. “At that time, Three Roots did not have as much capital to lend and invest as we have today, and we were investing relatively more time in technical and operational assistance and coaching/counseling engagements. Roger Kiger asked us to help SmartRIA think about how best to finance the company, which we did.”
Now, with the start-up poised for significant growth, Vanderhoofven believes it is important to share SmartRIA’s story as a journey for others to understand.
“It is possible for worthy companies (like SmartRIA) to scrape together the funds they need to progress (albeit more slowly than they prefer) to the point where they can attract larger amounts of capital,” he says. “A combination of Three Roots, insiders, angels, and Pathway Lending funded SmartRIA to the point where the company had accomplished enough to become attractive to a large, strategic investor. A company that was less well managed, or less fiscally responsible, or less tenacious might not have survived to this point. It is possible to do in Knoxville what SmartRIA has done. Other companies and entrepreneurs need to know that.”
Sharing Knoxville start-up success stories like SmartRIA’s was one of the recommendations made in the “Assessment of the Entrepreneurship Ecosystem of the Greater Knoxville Metropolitan Area” that Techstars conducted in the latter part of 2020 and released in early 2021. Another issue identified was access to capital, and the Knoxville Chamber of Commerce released a report in August titled “Capital Access Redefined.”
For Vanderhoofven who has been involved in the funding issue for a several decades, there’s no easy solution. “Some companies in our region don’t get funded at all, and some don’t get enough capital, and some don’t get it when they initially want or need it,” he says. “Three Roots has invested a lot of time and effort to create pools of capital to support companies like SmartRIA because banks and institutions in this region generally don’t support companies at the stage where SmartRIA has been.”
What’s the solution? Most agree it is the business and institutional community being much more supportive in pooling resources to help advance the ecosystem.
Meanwhile, for a company and team that Bartine describes as “scrappy,” SmartRIA has reached a key point. “It is possible that we are at the hockey stick moment. Our goal is 100 percent growth each of the next five years.”