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5312-5320 Maryland Way
Brentwood, TN, 37027
United States

615 320 3070

is an investment firm that is passionate about building businesses

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Clayton Associates is an investment firm passionate about building businesses. Here are our latest news and updates.

Tennessee is a hotbed for investable companies

Andrew Bouldin

Investment activity in Tennessee has been an interesting topic of discussion lately throughout our state. With our Southland conference just a few weeks away, this topic will become even more popular as investors from all over gather in Music City to see which innovative, early-stage companies could be investment-worthy. Given the timeliness of the topic at hand, I felt it appropriate to dig in a little deeper on Tennessee’s investment activity.

Tennessee early-stage companies have secured more than $430 million in capital investment over the past two years. This represents a nice growth curve over prior years and has really been a product of several factors: public funding initiatives such as TNInvestco and INCITE, more activity from in-state venture capital firms, the development of more angel funds throughout the state and, finally, more investment from out-of-state venture capital firms. With the myriad activities supporting entrepreneurship and innovation statewide, our entrepreneurs are gaining an increasingly high profile from investors across the state, region and country.

While the TNInvestco program has garnered some recent positive press, another public program that has contributed significantly to the state’s capital numbers is the co-investment fund run by Launch Tennessee, the INCITE fund. This fund, which was developed from the federal State Small Business Credit Initiative program, has invested $20.4 million in 32 Tennessee companies since March 2012. These investments have leveraged another $57 million from private capital sources, equaling a total of $77 million investment in these Tennessee-based companies. This has been a tremendous boon to the state’s investment landscape and we are hopeful that as these companies mature and achieve success through liquidity events such as M&A and IPOs, invested capital plus profits will be returned to the INCITE fund for investment in more Tennessee companies.

To the left are some of the funds that have been active in Tennessee. 

Another exciting development has been the recent formation of more in-state angel funds. As we graduate more quality companies through our unique statewide accelerator network, it’s crucial that we have more seed and angel investors ready to help support these businesses. Over the past six months, we have finalized more than $40 million in angel fund commitments. These funds provide crucial early funding rounds (seed and angel rounds are typically $50,000 to $500,000 in size) as the companies are still searching for their product-market fit. We also have a strong pool of in-state private venture firms providing the typical “A” round investments ($1 to $3 million is average in Tennessee) that allow companies to build their teams and expand sales, marketing and product development.

For recruitment efforts targeted at out-of-state investors, it is important to shine a light on some of the factors that make Tennessee a worthy and investable state. The Volunteer State has several appealing qualities that are attracting investors from all over.

At Launch Tennessee, we are pushing our accelerators to shift their program design to be more sector-focused. The first cohort medical device accelerator, Zero to 510, is in Memphis. One of only a handful of automotive accelerators in the country, AutoXLR8R, is in Tullahoma/Spring Hill. We have one of the few agriculture-focused accelerators in the country in Martin, Tenn. Other accelerators concentrate on health care (Nashville), 3D printing and smart grid (Chattanooga) and digital media (Knoxville).

In addition, having cutting-edge access to one-gigabit Internet in cities such as Chattanooga, Jackson, Tullahoma, Clarksville, Bristol and potentially Nashville sets Tennessee apart as one of the most connected states in the country. This shows increasing innovation across a statewide level, as well as extreme value to entrepreneurs who are looking to build potentially disruptive technologies in a high-bandwidth environment.

Another attractive quality is valuation. The Southeast experiences the lowest pre-money valuations of any region in the U.S., with exit values in line with the national average. Tennessee also is home to some of the most well developed ecosystems for health care (500-plus health care companies spun off of HCA), logistics (FedEx world headquarters) and energy (Oak Ridge National Laboratory research lab accounts for $2 billion-plus in annual spending).

Lastly, Tennessee is place that is attractive and affordable in terms of living. We have a business-friendly governor and legislature who are implementing low taxes and also are putting through smart regulations to encourage statewide development and growth. Just last month, Forbes magazine ranked Nashville No. 6 in the country for job growth and Site Selection ranked Tennessee the second most competitive state in the U.S. for economic development. Business Facilities magazine, a national economic development publication, named Tennessee the 2013 State of the Year. These are just a few of the accolades that should show investors how attractive Tennessee is for both living and working.

 

Charlie Brock is CEO of Launch Tennessee (www.launchtn.org), a public-private partnership focused on supporting the development of high-growth companies in Tennessee with the ultimate goal of fostering job creation and economic growth.