By Tom Ballard, Director of Innovation and Entrepreneurial Initiatives, Pershing Yoakley & Associates, P.C.
Access to capital is one of the key priorities of Tech 20/20, the Knoxville-Oak Ridge region’s oldest venture development organization that will soon celebrate its 20th anniversary.
Recognizing that a significant gap existed in this region for early stage funding, the organization has led the creation of something called The Lighthouse Fund.
“It is an angel fund and not a network of angels,” John Morris, Tech 20/20’s President and Chief Executive Officer (CEO), told us in describing the new initiative that is capitalized at nearly $1 million. The overall goal is to reach $3 to $3.5 million.
“The Lighthouse Fund will increase deal flow and total investment in the region,” Morris says. “It is for high growth ventures . . . those that plan to grow at least 50 percent annually.”
As the Tech 20/20 CEO worked to pull together the fund, he drew on his own experience as a serial entrepreneur and tapped a handful of people in the region who shared similar experiences. They are what he calls the “core group.” This group will function as the partners would in a traditional venture capital firm, except that they will recommend deals to the membership instead of make the final decision.
Geoff Robson, a Tech 20/20 alum and Founder of 3 Degrees LLC, is integrally involved with Morris in running The Lighthouse Fund.
Although it is an early stage fund, Morris quickly notes that the new initiative is focused on existing start-ups “that have made progress and assumed risk.” This translates into having a prototype or actual product and/or having a third party validation such as sales.
“This is not a fund for a scientist or professor out of an institution to found a company,” Morris emphasizes.
Those who know Tech 20/20 frequently associate the non-profit with technology-based initiatives.
“Tech is not the focus of the fund,” Morris says. “It’s not tech per se, but tech is included.”
The Lighthouse Fund will typically invest $100,000 to $150,000 as one of several participants in a syndicated deal valued at about $500,000.
“I’ve talked to a significant number of people about participating,” Morris explained. Each member of the LLC commits a minimum of $50,000 for a unit. The maximum units that any investor can hold is five.
Unlike angel networks where members can make their own investment decisions, Morris says The Lighthouse Fund will operate by a majority vote of the member units. The core group named above would review opportunities.
“I cannot imagine submitting something to the members without the unanimous approval of the core group,” he says in describing how the fund will operate.
In addition to investing, Morris hopes that members of the fund will also be interested in serving as mentors of portfolio companies.
Angel funds exist all around Tech 20/20 – Chattanooga Renaissance Fund to the south, Nashville Capital Network to the west, Blue Grass Angels to the north, and Inception Micro Angel Fund to the east. Morris is working with angel networks in the region, such as the Angel Capital Group and the Angel Roundtable. The Lighthouse Fund has also had numerous discussions with Chattanooga Renaissance Fund about syndicating or co-investing.
“The Lighthouse Fund is the logical next step for the private sector to a make a positive impact, providing capital and mentors to the next generation of innovative companies in our region,” Morris believes.