Requirements, other details explained for the new “Regional Seed Fund”
A total of $28 million, minus administrative expenses, has been allocated for the program that will make pre-seed and seed stage investments in start-ups in all 95 counties of the state.
It was a briefing that Tennessee entrepreneurs had been awaiting for months, and it finally occurred on Friday afternoon when Launch Tennessee (LaunchTN) unveiled the application process for the new “Regional Seed Fund.”
It is one of three components of the “InvestTN” program that the organization is managing. The other two components are a $30 million technology fund and a $12 million multi-funds component. A total of $28 million, minus administrative expenses, has been allocated to the “Regional Seed Fund” which will make pre-seed and seed-stage investments in start-ups in all 95 counties of the state.
The monies come from Tennessee’s $117 million share of the reauthorized and funded federal “State Small Business Credit Initiative” (SSBCI). The overall program is known as “Fund Tennessee,” and LaunchTN is administering $70 million of the total amount.
More than 100 people tuned in to the one-hour virtual session to hear Monique Villa, LaunchTN’s Chief Investment Officer, explain how the “Regional Seed Fund” will operate. “The aim is for the funds to be evenly split” to each of the ECs and to include investments in each of the 95 counties, she said. Those investments will range from $25,000 to $250,000 for overall fundraising rounds of $100,000 to $750,000. There is a minimum of a one-to-one match, and those matching dollars must be in a round that is not yet closed.
Applications are now being accepted through a process that starts with entrepreneurs completing a brief intake form that helps determine if the seed fund or one of the other two components of “InvestTN” will best meet their needs.
Assuming it is the seed fund, the applicant will be directed to the appropriate EC which will have a Capital Coordinator who can help with the application process. Using the person is not a requirement but is intended to be an important resource along with each EC having a Regional Capital Council of volunteers to provide further assistance.
“The ECs source and support companies during the application process,” Villa said, having earlier explained that she expects about 120 investments to be made from the “Regional Seed Fund” pool of dollars.
A standard application, regardless of location, is submitted online which triggers a due diligence process that ranges from the completeness of the application to the disclosure of all current investors to avoid any conflicts of interest (COI).
There are several other steps in the process ahead of a four-member LaunchTN staff committee that will meet weekly and vote on proposed investments. “It takes at least three out of four members to approve any investment,” Villa said. “If only two approve, it fails.”
Once an investment has been approved, there will be the execution of an “InvestTN” side letter and other documents before funds are wired.
Villa stressed on several occasions that individuals should carefully review the Frequently Asked Questions (FAQ) portion of the “InvestTN” website. Among the “must haves” for an applicant are the following:
- A fully completed application;
- Qualified as Tennessee based (see definition on FAQ);
- A scalable technology or distribution; and
- No issues with SSBCI COI rules.
“We don’t participate in any transaction of $20 million or more,” Villa said, citing SSBCI rules.
During a rapid-fire Q&A session, she answered a number of questions, concluding with two points. “If you are raising money or starting to raise capital, you should complete the intake form,” she said. Also, those seeking funding from the seed fund must apply directly through one of the ECs.
For those who could not participate in the session, LaunchTN has posted a copy at this link.