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January 21, 2015 | Tom Ballard

PART 5: Angel and venture funding outlook for 2015

Dollar Sign(EDITOR’S NOTE: For the third year in a row, we asked angel and venture investors who live in East Tennessee to share their thoughts on 2014 and their predictions for 2015. We were fortunate to have seven individuals provide their insights. Today is the fifth article in the six-part series.)

TODAY’S QUESTION: Will the market be stronger, about the same or weaker as far as early stage, venture, and later stages?

David Belitz, Managing Partner, Chattanooga Renaissance Fund:

I think the market will remain strong for all stages currently. I’m concerned about the number of people that want to be entrepreneurs. It is becoming somewhat faddish. As mentioned previously, burn rates and valuations seem to be rising quickly. I don’t see the market changing drastically though over the next year.

Eric Dobson, Chief Executive Officer, Angel Capital Group:

I believe there is optimism, but apprehension in the market right now. Even the big Wall Street investment houses are recommending clients put five to 10 percent of their investable assets into private equity. But, the market has been weak for the last six years since the 2008 economic downturn. The market seems to be recovering, but tensions have not been released yet. Especially in this state, we need to see a shining example or two of exits that will convince everyone it is safe to go into the water. If we can start to see TNInvestco and other exits occurring, these tensions should be released. We need to celebrate the successes we are seeing, and find a “poster child” for private equity investing in Tennessee.

Tony Lettich, Managing Director, The Angel Roundtable:

It is our opinion that we are in the middle innings of the cycle and we will continue to see the market strengthen. Assuming the overall economy stays on track, we think the bigger risk is that the market gets too hot, too quickly, increasing valuation expectations inappropriately.

Kristina Montague, Managing Partner, The JumpFund:

For women-led companies, the market can only grow as more women-focused funders enter the landscape and women see there are resources for starting or expanding their companies.

Geoff Robson, President, The Lighthouse Fund:

The market will be stronger across early and venture stage. Later stage funding will remain harder to attract and companies need to plan accordingly for this. We will be encouraging all of our portfolio companies to do so.

Grady Vanderhoofven, Co-Founder and Co-Manager, Meritus Ventures and Southern Appalachian Fund:

I would like to see the market remain as strong as it is right now, and continue to strengthen, in terms of company-creation activity and company-supporting activity in this region. I anticipate the current positive trends will continue in 2015. I would like to see more capital and more pools of capital, and some larger pools of capital, aggregated in this region, and I do see potential for that to happen in 2015, so that would be a strengthening with respect to capital access. Relative to the past five years of TNInvestco investment activity, I believe we are now in a weaker environment with respect to early stage and venture capital, and I see that relative weakness continuing in 2015.  I also see a lot of activity that has the potential to reverse that trend. I think the market will be relatively unchanged with respect to later-stage capital.

Ken Woody, President, Innova Memphis:

I believe we will continue to see strong growth in the Tennessee start-up markets. We are seeing more entrepreneurs and more investors. As some of the TNInvestco deals begin to mature and we see exits, this will stimulate the market even further.

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