(EDITOR’S NOTE: We continue our annual “Investor Outlook” series with another important question for our panelists.)
We read a good deal about the Internet of Things, autonomous vehicles, Blockchain and other financial technologies, artificial intelligence (AI), and AR/VR (augmented reality and virtual reality). Which ones of these, if any, are of interest to you? Which ones do you think offer the most opportunities for start-ups in the East Tennessee region? Are there other emerging technologies that you are following?
- Ken Woody, President and Partner, Innova Memphis. Those are all fascinating technologies, but I would rather focus on sectors where they can best be applied. Technologies are great but only in their specific applications do they have real value. We continue to like med device, agtech and logistics. All have major room for improvements and these new technologies could add a real boost.
- Kristina Montague, Managing Partner, The JumpFund. Tennessee has been making some headway with the Smart City initiatives and new R&D and company development coming out of Oak Ridge. I have not seen us claim any significant market share in any one new tech arena though like Atlanta or Charlotte have done. We are most interested in fintech and have one IoT (Internet of Things) company in our portfolio and several of our companies are working to integrate AI into their platforms for increased service and efficiency.
- John Morris and Geoff Robson, Fund Managers, The Lighthouse Fund. We haven’t invested in companies that are grounded in these disciplines. Technology has changed the world, no doubt. However, technology is a tool used to solve a problem. Companies that use technology tend to be in other verticals, like medical devices, financial services, retail, etc. If they use tech to create a solution, great! (as long as the tech works).
- John Bruck, Knoxville-based Member, and Scott Jacobs, Executive Director, Queen City Angels (QCA). There are obviously pros and cons in each of the verticals here. Blockchain is a solution that needs a problem, so we’re watching closely but steering clear for now. QCA’s sweet spots are digital tech and IoT, particularly in the life science and supply chain management segments. We’re involved in some AI work and expect that segment to grow, along with med-tech, digital health, pharma, fintech and advanced materials. In addition to those, we think there are strong opportunities for start-ups in East Tennessee in autonomous vehicles and AR/VR.
- Grady Vanderhoofven, Founder, President and Chief Executive Officer, Three Roots Capital. We have an IoT portfolio company, and we had an intelligent traffic systems company in our portfolio, so we definitely are interested in that space. I think the transition from where we are today to fully autonomous vehicles will require a lot of incremental development and will create lots of need/opportunity. I think AI is a point of emphasis at ORNL (Oak Ridge National Laboratory), which means there is opportunity in East Tennessee and the region. We like fintech, and we have an East Tennessee fintech company in one of our portfolios.
- Eric Dobson, Chief Executive Officer, Angel Capital Group. IoT sounds like a great place to invest, but there is precious little IP that can be created, and it sounds so esoteric in description. BTW, this is also true of Big Data. Despite interest in these market segments, they just don’t excite investors. Blockchain is a brilliant technology, but it has very narrow uses that actually **require** the technology. Simply building something on a Blockchain platform does not buy you anything in the minds of savvy investors. The same is true of artificial intelligence, which means so many things to so many people (expert systems, machine learning, deep learning, artificial neural networks, etc.) that the AI “brand” has been severely diluted. So, again, as much as these technologies are exciting and sexy, the veil is lifted quickly by savvy investors. Likewise, AR/VR is sexy. However, outside of hardware, there is precious little valuable IP being generated. SaaS companies suffer from this problem as well. The investor must believe in the team, brand, marketing plan, and sales plan first and foremost to consider these market segments because the product is effectively discounted in the mind of the “heartland” investor. Having said all that, we remain interested in all these technologies. We have a very clear set of criteria and expectations when evaluating these technologies in the form of start-up company offerings. But, “heartland” investors still seem to prefer intellectual property and proprietary technology advances over branding exercises. Right or wrong, investors believe that IP (intellectual property) is still an advantage driving large companies to acquire smaller companies rather than compete with them.
- Tony Lettich, Managing Director, The Angel Roundtable (ART). ART has interest in all of these technologies, and we believe that innovation in several of them will, to a great extent, drive the future. However, we only invest in areas in which we have a basic understanding and foundation of knowledge. As a result, our primary investment interests are in the Internet of Things, non-Blockchain financial technologies and artificial intelligence at this time. Based on our regional infrastructure and competencies, we believe that the Internet of Things and artificial intelligence offer the most opportunities for start-ups in the East Tennessee region.
- Partner Jack Studer responded for the Chattanooga Renaissance Fund. Autonomous trucking and delivery are getting closer and closer. There have been massive rounds in this stuff over the past decade or so and some are starting to actually play-out. The region needs to catch up to others (see this recent article about Houston) insofar as being acceptable and easy to work with as test bed communities though.
- Brandon Bruce, Entrepreneur-in-Residence with Greater Sum Ventures. There are no doubt big opportunities in all of these areas today and in the future. However, there are also big opportunities today with entrepreneurs, companies, and industries that aren’t in the spotlight. I think one of the most fun things about meeting entrepreneurs is learning about companies and industries that are thriving but are otherwise hidden in plain sight because they don’t have a buzzword attached.
NEXT: Opportunities and challenges in leveraging the Knoxville region’s two technology generators.