(EDITOR’S NOTE: We continue our annual “Investor Outlook” series with another important question for our panelists.)
Related to the previous question, the East Tennessee region has important scientific assets at its public universities and federal enterprises like Oak Ridge National Laboratory (ORNL) that are generating inventions. Here’s a two-part question. First, what do you see as the greatest opportunities to mine those assets for economic growth in the region? What are the greatest challenges that must be overcome to do so?
- Kristina Montague, Managing Partner, The JumpFund. What I have seen come out of the “Innovation Crossroads” initiative has been exciting and seems to be a great role for Oak Ridge to play as an incubator of new science and tech companies. What we have yet to see is the move from R&D to building strong, investable companies. There may be an opportunity for Oak Ridge and the universities to develop greater partnerships with TechStars or our regional incubators to help these nascent companies understand the “build, manage, sell” side of the equation.
- John Morris and Geoff Robson, Fund Managers, The Lighthouse Fund. The opportunity is enormous! There are world-changing and ground-breaking technologies being developed that could solve enormous problems in the market place. Most of these technologies are a problem looking for a solution. I think the greatest challenge to be overcome is expecting the scientist to be the one to create the company. First, most scientists are not financial risk takers. So, expecting them to leave their job to take risk for their family is rare. Don’t get me wrong, they are needed! But pairing them with the right solution and possibly a person with business acumen and rick tolerance is critical to scaling and keeping most of these ideas here.
- John Bruck, Knoxville-based Member, and Scott Jacobs, Executive Director, Queen City Angels (QCA). The institutional (e.g., University of Tennessee, ORNL, TVA) influence in the East Tennessee region is enormous and, within the first two, there are very active innovation and entrepreneurial programs that get a substantial amount of support for high-growth start-ups. Leveraging these programs to build inclusive, region-wide assets and opportunities in a strategic and customer-targeted (e.g., start-ups) plan is a very real opportunity for the region. One of the greatest opportunities is to collaborate more across the ecosystem with a shared vision and strategy that will benefit all the institutions – “BigCos,” investors and (most importantly) start-ups/entrepreneurs. This will require a focused, cooperative and well-resourced effort with more involvement from the private sector (e.g., “BigCos”) and most especially from innovators and entrepreneurs. To ultimately be successful, the ecosystem needs more entrepreneurial leadership. As an ecosystem, we also need to acquire the talent necessary to drive these start-ups as they grow. Identifying the sources of, recruiting, attracting and retaining this talent will be key to sustaining our objectives for growth. One of the challenges we’ve seen is the need to find better ways to virtually or remotely engage talent to support start-ups without physical re-location.
- Grady Vanderhoofven, Founder, President and Chief Executive Officer, Three Roots Capital. I believe we have almost unequaled opportunities with respect to technology generation from institutions like ORNL and UT, as well as other regional technology generators and utilizers (e.g., TVA, Electric Power Research Institute, other universities, major companies, etc.) Collectively, these institutions are the points of genesis for many potentially transformative developments, and they (companies) can also be validators on the demand side of the equation. Without question, the biggest challenge is converting the technology into a product or service that addresses a validated need in a verified market. That is the secret sauce. Capital is critical as well, but I believe capital can be attracted to compelling opportunities. We’ve spent decades working on access to capital, so we believe in the importance of that variable in the overall equation. The variable that lags the most and requires the most work is the entrepreneurial piece and the recognition that it is a combination of critical factors that can produce success. If any critical element is missing, the process simply won’t work.
- Eric Dobson, Chief Executive Officer, Angel Capital Group. Most communities in which I work around the Appalachian region are drooling over the IP (intellectual property) creation resources of Knoxville. However, these institutions have not produced the kinds of entrepreneurial benefits we all wish was the case. That is not to say they are not doing their jobs or are ignoring clear problems and opportunities. It is to say that bureaucratic organizations tend to have very onerous terms for licensing (at least as far as investors are concerned) and little idea how to perform the kind of market analysis that piques the interest of investors. And, their prototypes rarely meet the standard for real commercialization. That is not their responsibility, but it does represent an opportunity for savvy investors that can tolerate long lead-time technologies . . . assuming the licensing terms are acceptable for the considerable risk investors must assume. Clearly there are a few notable exceptions to my statements above. And, as the ecosystem continues to mature, more technology-focused entrepreneurs should be expected to seek licensing opportunities with eyes-wide-open to the challenges of the process. I know having been through it personally, I would have done several things very, very differently.
- Tony Lettich, Managing Director, The Angel Roundtable. There appears to be multiple “mining” opportunities available based on the infrastructure within the region. Should Eastman Chemical Company and the Oak Ridge National Laboratory be able to define technologies of mutual interest in the applied materials world, it could prove significant not only for those organizations but for the Upper East Tennessee region as well. A potential relationship between East Tennessee State University and Ballad Health in areas such as innovation in rural medicine is another Upper East Tennessee area of opportunity. Finally, as evidenced by the recent success of various start-ups originating out of UT Knoxville, the entrepreneurship program at UT’s Haslam College of Business has increasing influence and is positioned well to make a difference for the region. We are excited about the improving ecosystem we are seeing develop in East Tennessee.
- Partner Jack Studer responded for the Chattanooga Renaissance Fund. To do hard first wave tech, we need better salaries for employees. You can’t mess around with fundamental technology without top tier teams. As an anecdotal data point, undergrad computer science majors at Ivy League schools are getting job offers for NEXT year with salaries in the $150,000 plus range. We are not anywhere close to that. And investors aren’t funding companies in a competitive way to be able to attract that kind of talent. Most investors in this region aren’t comfortable with CTOs (Chief Technology Officers) making much over $200,000, so you do the math. Personally, it’s a bit of a fool’s game to chase fundamental technology in this region because of this. We should focus more on deployment of already proven technology into existing markets. While Oak Ridge is inventing the science, we just don’t have the venture funding nor the talent pipeline to build the teams needed to commercialize that stuff yet.
- Brandon Bruce, Entrepreneur-in-Residence with Greater Sum Ventures. My 2nd grader came home from the first day of school this year and told me about the Power of Yet. His teacher told him and his classmates that they would encounter a lot of material throughout the year that they didn’t know or understand . . . yet. She encouraged them to stay curious and engaged and open to learning. I think the greatest opportunities with renowned research organizations like Oak Ridge National Lab and University of Tennessee are for the community to view new inventions and discoveries as not commercialized . . . yet. We can stay curious and engaged and open to the next blockbuster technology like PET.
- Ken Woody, President and Partner, Innova Memphis. “Innovation Crossroads” is doing a wonderful job of helping tech start-ups work with ORNL and UT. It’s a great start. I would encourage these two institutions to go further and invite in corporations, innovators and entrepreneurs to explore their tech to find new applications. Maybe set aside part of the UT Cherokee Farms Research Park for a start-up/innovation hub. Co-working and collaboration occur best where technology companies are in close proximity.
NEXT: What about Opportunity Zones?