The Landscape of Investment for Middle Tennessee

Regional Capital Market Assessments and Findings

Moderator: John Lanahan, Director of Capital Formation, LaunchTN

Panel: Landon Gibbs, Partner, Clayton Associates; Shawn Glinter, Founder and CEO, Pendant Biosciences; and Amr El-Husseini, CEO, Loadstone Advisory Group.  

‍

Our first Tennessee University-Business Showcase on the Landscape of Investment in Middle Tennessee was a robust success. The program convened leaders from the region's ten R1-R3 research universities, along with venture capitalists and business leaders to review the size, focus, and structure of the capital markets of Middle Tennessee. Having an efficient pipeline of capital is basic for the creation of an innovation economy in a region.

Topics covered in this first session included localization of investment, organization of capital, university-business engagement status, global markets, gaps in capital and innovation services, and strategic recommendations for improvements.

Some key findings and ideas reported at the Showcase include--

Current investments fall into three large categories—

1. 27% software
2. 25% healthcare services
3. 16% health technologies

 Other findings include:

• The pool of capital funds under management in Middle Tennessee increased 141% from $149M in 2012 to $360M in 2016.

• Tennessee ranks 19th in the nation in capital funds with approximately $1.1B VC funds under management; comparable with North Carolina at $1.2B; Georgia with $1.1B;     Ohio with $1.5B; but well behind Texas with $3.3B; Illinois with $4.7B; New York with $45.6B, and California with $181.4B.

• The number of investments decreased 17% during the same period when capital availability increased 141%, indicating greater selectivity and larger investments.

• Major urban areas around the world are developing intentional, large scale investments to create innovation hubs that align local investments, research, and business leadership to create a local innovation economic cluster accelerator.

• There is some geographic bias toward investment in Middle Tennessee, especially by some local investors, but it is not yet a strategy.

 i

• The investment landscape of Middle Tennessee is collaborative, but is not yet an organized supply chain of finance and services designed to advance a local innovation economy; there are gaps in available funding, especially in the angel investment space (stealthy wealthy syndrome, hobby investors, and inexperience hinder this     space).

• Strategic organization of supporting organizations and service sector assets into an “innovation system” is needed locally, in addition to creating a strong capital investment pool     and strong research capacity.  Tech transfer offices may be well-organized, but without the right external systems, they cannot gain traction in the local economy.

• It is important for academic institutions with active research programs to help researchers understand the differences between “publication worthy” translational research, or research with impact, and translational research that also includes a solid, viable business idea that can attract investment.

·       Transformation happens deliberately, not coincidentally. This is what every single example of a city that recreated itself from a traditional economy to become a global innovation leader confirms. The opportunity and need to transform Nashville into a globally renowned innovation hub and magnet for top talent is real and big. Bringing together the leaders from our local and state governments, businesses, education and research institutions, investors, entrepreneurs, and others to share a common vision and execution strategy is what it would take to make it happen.