Techstars findings about Knoxville innovation and entrepreneurial ecosystem revealed in town hall event

(Originally posted on Teknovation.biz)

By Tom Ballard

The final report, including gaps and recommendations that were identified in the recently completed Techstars assessment of the Knoxville area innovation and entrepreneurial ecosystem, is now pubic, and the hard work is just beginning to ensure the region capitalizes on the effort.

As TVA Chief Executive Officer (CEO) Jeff Lyash told the slightly more than 100 attendees at yesterday morning’s virtual town hall, “It’s our job to take this Techstars assessment and operationalize it.” The full report can be downloaded at this link. If you were not able to view the town hall, you can watch it here (page down to “Report Out” section).

In a rapid-fire overview of the report, Rhett Morris, a Consultant who talked with many in the community on one or more occasions, outlined the regional strengths that the Techstars assessment identified and the gaps that need to be addressed.

“I heard that this was a unique moment for the Knoxville community,” Morris said, adding that he concluded the community was performing “far below its actual potential.” Those comments echoed opening remarks by Jeff Smith, Deputy Director for Operations at Oak Ridge National Laboratory, who said it this way: “The region punches below its weight in innovation.”

For those who are intimately involved in the local innovation and entrepreneurial ecosystem, none of the findings that Morris outlined should be surprising nor should the proposed recommendations. They are as follows:

  • Strengths – the vibrant research community, regional quality of life, low cost of living, deep technology talent, and existing support organizations for start-ups.
  • Gaps – perception of the region, locally and more broadly; funding for start-ups, frequently referred to as access to capital; insufficient support in ways such as mentoring; easier access to the bigger public and private enterprises; lower levels of participation by minorities; and absence of defined goals with appropriate metrics and regular reporting.

After Morris’ presentation, representatives of the Innov865 Alliance discussed how the Alliance, as a group, and also as individual members will take leadership responsibility for addressing the gaps and specific ways in which that will occur.

  • Grady Vanderhoofven, President and CEO of Three Roots Capital, said his firm will lead “a shared initiative to address capital” that includes: (1) expanding on efforts such as the TennesSeed Fund launched in 2019; and (2) working closely with the Knoxville Chamber on the latter’s access to capital initiative that is a component of its broader “Path to Prosperity” plan.
  • Jim Biggs, Executive Director of the Knoxville Entrepreneur Center (KEC), spotlighted activities that cover several of the gaps through: (1) its “Made for Knoxville” initiative; (2) a collaboration with the City of Knoxville to launch a Mayor’s Entrepreneurship Council patterned after the well-established Mayor’s Maker Council; (3) the recently revamped and renamed “Inflection Point” initiative; and (4) new efforts focused on underrepresented populations like the upcoming “100Knoxville Launch Event.”
  • I had the privilege of addressing three topics – perception, access and measurement. The points that I made included: (1) the Alliance will create and coordinate an ongoing, integrated public relations and marketing campaign to showcase our regional successes, both historical and current, as well as assets that will focus locally, regionally and nationally; (2) PYA, the power behind teknovation.biz, has added an additional writer with part of her role being to help expand on what we are already doing to tell the community story; (3) Alliance members will continue their individual regional promotional efforts in various ways such as KEC’s “Made for Knoxville” initiative and the “Startup Knox” podcast series that will feature Randy Boyd as of today; (4) the Alliance will take leadership for developing a set of metrics to show our progress and produce a report card that will be routinely updated and spotlighted in teknovation.biz; and (5) the Alliance will work to identify and/or recruit “Navigators” to help facilitate access to and connectivity between entrepreneurs and the region’s assets – from big enterprises like ORNL, TVA and University of Tennessee (UT) to private companies like PYA and others that can and should help local entrepreneurs.

The 90-minute session also featured the leaders of the three sponsoring organizations – UT President Randy Boyd; Thomas Zacharia, Director of Oak Ridge National Laboratory (ORNL); and Lyash – along with their key representatives on the Techstars Steering Committee – Joe Hoagland, TVA’s Vice President of Enterprise Relations and Innovation; Stacey Patterson, UT’s Vice President for Research, Economic Development and Outreach; and ORNL’s Smith.

Boyd, Lyash and Zacharia separately noted the significance of the region’s largest employers coming together to collaborate on the Techstars effort and the potential benefits that will derive from it.

Zacharia talked about likely new federal initiatives in the R&D/innovation space and said that East Tennessee is “positioned perfectly” for significant investment. In the case of Boyd, one of the region’s most recognized and very successful entrepreneurs, the emphasis was on what he called “an historic partnership” and an important message for those who are starting or those who are supporting entrepreneurs who are starting new businesses.

“Entrepreneurship is not a zero-sum game,” he said. “There is a catalytic or compounding effect” that comes from working collaboratively.

TennesSeed Fund, a new evergreen, seed-stage venture capital fund, seeks to invest in Tennessee startups

The TennesSeed Fund, an evergreen, seed-stage, proof of concept venture capital fund has launched to invest in companies throughout Tennessee. The Fund is managed by TennesSeed Partners, which is a collaboration of Three Roots Capital, Meritus Capital, and Innova Memphis, Inc. To date, the Fund has made three investments in Active Energy Systems (Oak Ridge), Entac Medical (Memphis) and SmartRIA (Knoxville).

The Fund’s unique model — consisting of for-profit (“TennesSeed Partners, LLC”) and nonprofit (“TennesSeed Funders 501(c)3”) entities — allows it to operate as an evergreen investor to sustain ongoing investment activity and lasting economic impact within the state. Grady Vanderhoofven, the founder, president and chief executive officer of Three Roots Capital, and Ken Woody, the president, partner and founder of Innova Memphis, serve as the Fund’s co-managers, directors and investment team members.

With more than 18 years of investment experience in the state and region, Vanderhoofven and Woody formed the TennesSeed Fund to address a growing need for seed-stage capital in the region. In addition to forming and partially capitalizing the Fund, the duo have engaged several noteworthy and successful Tennessee entrepreneurs to serve as mentors for TennesSeed portfoliocompanies; Bill Malkes, co-founder and former CEO of GRIDSMART Technologies, Chad Seaver, founder and CEO of Arkis Biosciences, and Brandon Bruce, co-founder and former COO of Cirrus Insight. Each of the executives recently led his respective company through a successful acquisition by a larger company.

“Tennessee is home to world-renowned technology resources and research institutions, as well as numerous entrepreneurs who have created businesses in their basements and garages,” said Vanderhoofven. “In our early research and planning to launch the TennesSeed Fund, we surveyed stakeholders statewide and confirmed a dire and chronic need for more capital to support young, small, and start-up companies. TennesSeed Fund is an answer to the question of how do we increase entrepreneurial activity and capital attraction in the state.” 

“Our evergreen structure allows for the permanent, ongoing cycle of fundraising, investments, and successful investment outcomes, which hopefully will have direct and lasting economic benefits throughout the state,” said Woody. He added, “Anyone who wants to support entrepreneurship, technology commercialization, and access to capital for young companies in Tennessee should find the TennesSeed model innovative and compelling.”

The Fund does not have a specific industry or technology focus, allowing it to invest in a variety of Tennessee-based companies and help them achieve specific, well-defined milestones to substantially de-risk future investment and increase the value of the company.

“Our relationship with the TennesSeed Fund has been great timing for us. They provided the right advice at the right time and funds just when we needed them to secure our intellectual property claims,” said Active Energy Systems Co-Founder Mitchell Ishmael. “This investment and relationship has been immensely valuable for us.”

“As a startup in Tennessee, we’re delighted that they put the TennesSeed Fund together for Tennessee startups because access to capital is our primary issue in the region,” said Chief Executive Officer and Founder of Entac Medical Buddy Lyons. “There are great ideas and technology here, but it’s all about finding access to the right capital to move companies forward. The TennesSeed Fund is going to be part of the solution.”

“There has been a lack of capital in the Knoxville region for software companies like ours, which is why the TennesSeed Fund coming in and being willing to provide capital is a pretty big deal,”said SmartRIA CEO Mac Bartine. “The entire team at the TennesSeed Fund was excellent and easy to work with. The capital they provided was a large part of the growth capital that we have used this year, and we’ve used it to grow almost 10 percent month over month so far.”