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March 25, 2012 | Tom Ballard

TNInvestcos offer advice at LifeSciTN meeting in Oak Ridge

Representatives of four of the state’s TNInvestcos had a consistent message at Friday’s Life Science Tennessee regional meeting in Oak Ridge – take time to know our interests, contact us as early as possible, and maintain frequent communication.

The lunch event at Tech 20/20 drew more than 30 people who had the chance to ask questions of the venture capital panel and interact one-on-one with representatives of the four TNInvestcos that are most active in the life sciences sector.

Those participating on the panel were Gary Stevenson, Managing Partner of MB Venture Partners in Memphis; Christopher Rand, Partner in TriStar Technology Ventures in Nashville; Charlie Crawford, Senior Analyst with Innova in Memphis; and Andy Patton, Associate with Mountain Group Capital in Nashville. The hour-long discussion was moderated by the author of this article.

Crawford probably voiced the communication message best when he advised the attendees to “reach out early and often” in responding to the question of how best to ensure success in this region. Patton said that “geography has an impact,” acknowledging the unasked question about the absence of a TNInvestco based in East Tennessee. He emphasized the importance of spending time to understand the investment focus of any venture capital firm, not just the TNInvestcos, and targeting the ones that best match your start-up idea.

All agreed with the message voiced by Stevenson that “there’s never been a better time to be a start-up entrepreneur in Tennessee,” and he praised State Senator Doug Overbey of Maryville for his leadership in sponsoring the legislation. Stevenson noted that the TNInvestco program has enabled $150 million to be available for early stage investments, an unprecedented amount in his venture capital career.

He added that it is important to realize the multiplier effect that is created by using the TNInvestco funds to leverage investments from venture firms located outside Tennessee. “This allows the $150 million to turn into something even bigger than that,” Stevenson said. He also emphasized that there is a statutory mandate to invest the dollars by a specified date or the underperforming TNInvestco will be assessed a penalty.

TNInvestco was described by one of the panelists as “a capital efficient model.” The attendees were also advised that the maximum investment in a single opportunity by a TNInvestco firm is $2 million. And, it was clear from their comments that all of the panelists assess deal opportunities in a way that makes sure the TNInvestco can add value, not just make an investment.

The importance of having strong, experienced leadership in place was emphasized by each panelist. “If we’re right about the management team, we can work through other challenges,” Patton said.

Crawford underscored the interest that TNInvestcos have in the region by saying that the March 23 visit was his third to East Tennessee since the first of the year. It was also noted that at least two of the other firms have made investments in companies in the area.

Rand told the attendees that there were skeptics in the early days about the validity of the TNInvestco program and the likelihood of sufficient deal flow. In his view, this has not been a problem. “The net has been that there has been a lot of good deal flow right here in Tennessee,” he said. Patton added that the TNInvestco program “has allowed deals to come out of the woodwork” that most likely would not have become known without the program.

Stevenson agreed, saying that “I’ve been pleasantly pleased with the quality of the deal flow we’ve seen since the TNInvestco was launched. We’ve already made six investments. It’s becoming harder and harder (to make the choices) because of the quality of the deals that we are seeing.”

Crawford said that the TNInvestco program has also raised our state’s profile. “Tennessee has become a destination for good ideas,” he said. “There is increasing interest from outside the state in what Tennessee is doing.”

The East Tennessee meeting was organized by Abby Trotter of Hall Strategies in Nashville. She serves as the staff director for Life Science Tennessee.

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