By Dave Flessner
Chattanooga Times Free Press, Tenn.
WWR Article Summary (tl;dr) I knew that Tennessee was becoming a hotbed of entrepreneurial activity over the past couple of years just by the sheer number of news articles out of Nashville and Chattanooga regarding startups and funding. I just did not realize HOW significant. This week, “Launch Tennessee” the state-funded vc fund announced that private investment in early stage companies based in TN has surpassed $1 billion in the past four years. Yes that is billion with a “B”. For women in business with an eye on female business ownership, the volunteer state may be a spot for support, funding and mentorship.
Chattanooga Times Free Press, Tenn.
The Tennessee Valley may be a long ways from Silicon Valley, but Tennessee is attracting more of the investments in startup businesses that have fueled the growth of California’s computer industry and other tech centers around the country.
Launch Tennessee, the state-funded venture capital fund and agency that tries to promote and seed more business startups in the Volunteer State, announced Tuesday that private investment in early stage companies based in Tennessee has surpassed $1 billion in the past four years. The billion-dollar milestone was reached well ahead of the 2017 goal that LaunchTN set when it was formed in 2012.
Although Tennessee’s biggest cities have captured a majority of the seed capital and venture funding, Chattanooga has added or started four new venture funds since 2012 which collectively plan to pump more than $20 million into startup ventures.
“We’ve got a perfect storm that combines organic benefits like low cost of living and an extremely talented workforce produced from our world class universities, with a significantly enhanced early stage capital scene and a commitment from the highest levels of state government to make Tennessee the best place to start a new business,” said Charlie Brock, CEO of LaunchTN and a former managing partner for FourBridges Capital in Chattanooga. “Our seven publicly funded entrepreneur centers offer in-depth industry knowledge in specific sectors like music, logistics, healthcare, 3-D printing and media, which broadens the scope of ideas and ingenuity that can find success here.”
LaunchTN, which grew out of the Tennessee Technology Development Corp., created 18 years ago, is a nonprofit agent of the Tennessee Department of Economic and Community Development. The state-administered TNInvestco and INCITE were seeded by monetizing a state insurance premium tax credit and and have combined with a growing number of private funds to top the billion-dollar funding level for startup companies.
LaunchTN officials attributed much of the local startup success to partnerships that had been cultivated with established organizations to offer mentorship at its accelerators.
“Domain expertise from the music industry in Nashville and companies like FedEx in Memphis and Scripps in Knoxville gives our entrepreneurs real advantages in succeeding in those sectors,” Courtney Corlew, director of communications for LaunchTN, said in a statement Tuesday.
Chattanooga doesn’t have the dominant corporate or educational facilities to foster the innovation and tech startups that manh other cities boast about. But with EPB’s high-speed Internet, Chattanooga has adopted the “Gig City” label and The Company Laborator — aided by Brock before he joined LaunchTN — piloted the first accelerator program that Tennessee has since spread to a dozen other communities across the state.
Both the National League of Cities and the Kauffman Foundation also have touted Chattanooga’s entrepreneurial ecosystem and the city’s new downtown Innovation District as examples of what cities can do to boost their tech and startup business climate.
Chattanooga also is trying to capitalize on its trucking and logistics tradition with a new $12 million venture capital fund being organized by the founders of Access America, who merged their company with Coyote Logistics which was acquired by UPS last year for $1.8 billion. The new fund, known as Dynamo, is hosting 10 logistics startups in Chattanooga this summer to help the startups grow and gain seed capital.
“Transportation and logistics is a blue-collar industry–still relying on aging technology and infrastructure–that has been overlooked by venture capital for decades, which presents Dynamo with the perfect storm,” said Ted Alling, managing director of Dynamo. “More freight passes through Chattanooga every day than any other metropolitan area in America. As a result, Chattanooga has become a major logistics hub for the eastern United States, with large-scale shippers, carriers, warehousers, barge operators and rail yards in our backyard.”
Dynamo is the latest and biggest of the venture funds that have been added in Chattanooga. But a number of angel financiers and funds have been added in Chattanooga in recent years, hoping to replicate the success of companies like Access America or
Quickcue, a Chattanooga startup backed by Blank Slate Ventures that was sold in 2013 for $11.5 million to Open Table.
David Belitz, chief financial officer of the Lupton Co., and a partner in the Chattanooga Renaissance Fund, said Chattanooga and other cities in the Southeast are investing more in early stage businesses in the region.
“When we started looking at the whole environment in 2009, I would say that angel capital was largely nonexistent,” Belitz said. “Since then, however, that has changed dramatically and there are now a whole group of active angel investors after seeing the results of what is happening with CoLab, GigTank, the LampPost Group and what we’re doing with the Enterprise Center now. It’s not just here, it’s happening across all of the Southeast. But there is still plenty of room to grow.”
