LaunchTN Regional Seed Fund eyes startup investments in 82 of 95 TN counties

By Milt Capps

Published January 23, 2025

Investment requests from TN regions other than Nashville have priority
Impact of preferences for 82 counties' startups to be assessed by early April
Nashville opportunity bulge could mean more startup knocks on $$ doors in TN + beyond
Grassroots response from substate economic regions TBD

LAUNCH TENNESSEE management recently announced that its InvestTN Regional Seed Fund (RSF) has begun assigning administrative priority to evaluating RSF investment requests from startups based in 82 of Tennessee's 95 counties, a group exclusive of the 13 counties in the Nashville cluster.

To be clear, LaunchTN still welcomes RSF applications from the 13 Nashville Cluster counties: Cheatham, Davidson, Dickson, Stewart, Houston, Humphreys, Sumner, Trousdale, Montgomery, Robertson, Rutherford, Williamson and Wilson Counties.

However, in a statement Jan. 17, LaunchTN Chief Investment Officer Eller Kelliher said, in part, "InvestTN's Regional Seed Fund investment strategy, which makes commitments of less than $250K [each], is going to focus on companies outside of the Nashville region over the next quarter in an effort to meet the programmatic goal of getting early-stage, catalytic checks out to founders within all regions of the state."

"This does not mean we will not invest in Nashville/Middle-TN startups this quarter," Kelliher continued. "We are temporarily prioritizing other regions since many Nashville-based startups have received funding from InvestTN's Regional Seed Fund to-date."

The shift of emphasis away from the Nashville region may or may not prove temporary. Founders may begin applying for the RSF via InvestTN here.

CIO Kelliher said a decision about whether or not to extend the new protocol is likely to be made in early April.

That's the month which begins the final quarter of Fiscal Year 2025 for both Tennessee Technology Development Corporation dba Launch Tennessee and its de facto parent, Tennessee Economic and Community Development (TNECD).

Kelliher and others emphasized that Nashville Cluster founders seeking RSF funding will be advised upon the intake of their applications to be prepared for potentially slower examination, vetting, completion or rejection of their applications.

Further, all founders should remember that the magnitude of any RSF investments committed is likely to vary considerably under the existing $250K ceiling.

Eller M. Kelliher

Asked whether LaunchTN should pursue additional state funding for the RSF program, Kelliher said, "LaunchTN and the InvestTN program are operating successfully within the bounds of our current operating budget. Certainly, with additional resources, we would be able to do 'more'. Our focus is to be responsible and effective managers of the InvestTN program and funds."

CEO Lindsey Cox told VNC that the decision to prioritize non-Nashville-area RSF applications was made entirely at the staff level as a basic operational decision, with no need for engagement on the matter with the LaunchTN board of directors or sponsor TNECD.

Among factors leading to non-priority handling of RSF applicants from the Nashville Cluster, RSF administrators have said they have found that, once Nashville-area candidates are accepted for RSF consideration, they are often able to complete RSV's vetting process and satisfy the concomitant requirement to recruit additional outside investment capital faster than can founders from state regions that have fewer active Seed-stage investors.

NUMBERS

VNC requested and was provided RSF metrics covering 1H FY2025 (July 1, 2024 - Dec. 31, 2024).

Five of the six regional entrepreneur centers shown in the lists below reside in the 82-county group counties that are accorded priority by LaunchTN RSF. Only the Nashville Entrepreneur Center is based in the lower-priority 13-county Nashville cluster (see regional map at top-right of this story). Note: Each regional EC earns some revenue via contract(s) to provide services within LaunchTN programs.

INTAKE Forms submitted to InvestTN: 184 Total.

The Company Lab, Co.LAB - 22
Epicenter (Vibrant Memphis) - 27
Knoxville Entrepreneur Center - 23
Nashville Entrepreneur Center - 87
theCO (Jackson) - 17
The Biz Foundry (Cookeville) - 3
Sync Space (Kingsport) - 5

COMPLETED RSF Applications submitted to InvestTN. 21 Total.

The Company Lab, Co.LAB (Chattanooga) - 6
Epicenter (Vibrant Memphis) - 2
Knoxville Entrepreneur Center - 2
Nashville Entrepreneur Center - 10
theCO (Jackson) - 1
Biz Foundry (Cookeville) - 0
Sync Space (Kingsport) - 0

DEAL COUNT / "RSF Investments Completed": 11 Total.

The Company Lab, Co.LAB (Chattanooga) - 0
Epicenter (Vibrant Memphis) -1
Knoxville Entrepreneur Center - 3
Nashville Entrepreneur Center - 6
theCO (Jackson) - 0
Biz Foundry (Cookeville) - 1
Sync Space (Kingsport) - 0

TOTAL RSF Investment Dollars Invested 2H FY2025: $1.09M Total.

The Company Lab, Co.LAB (Chattanooga) - $0
Epicenter (Vibrant Memphis) -$40K
Knoxville Entrepreneur Center - $300K
Nashville Entrepreneur Center - $725K
theCO (Jackson) - $0
Biz Foundry (Cookeville -$25K
Sync Space (Kingsport) - $0

DYNAMISM PROXY?

One widely accepted proxy for state economic dynamism that does seem to reinforce the notion of the Nashville Cluster's entrepreneurial advantage is the formation of LLC's, i.e., limited liability companies.

VNC obtained via the Office of Secretary of State Tre Hargett a list of Domestic LLCs that were created in Tennessee between Jan. 1, 2023 and July 31, 2024, which was the 18-month period VNC requested.

We found an aggregate 89,106 Domestic LLCs were created in Tennessee's 95 counties during that period. We excluded a second list of more than 10,000 Tennessee registrations for Foreign LLCs initiated during the same timeframe by companies in Delaware and other states.

Of that 89K+ Domestic filings, fully 43.3% of the entire state total -- 38,590 LLCs -- were created in the 13-county Nashville cluster.

Filings in Davidson County, standing alone, represented 44.6% of total new LLC filings in the 13-county Nashville cluster and 19.3% of statewide LLC filings for the chosen 18-month period.

Certain other populous counties' individual shares of statewide LLC filings were: Shelby (13%), Knox (10.4%), Williamson (7.4%), and Hamilton (5.8%).

The lists above represents but a snapshot of RSF activity, but could spur thinking about a range of analytics- and marketing-driven experiments designed directly and-or indirectly to commercialize more Tennessee startups.

Hypothetically, some of those experiments could employ "game theory" -- by which some players might be induced to modify their behavior in ways that make it easier, for example, for a "LaunchTN RSF" to harmonize organically its efforts, partnerships and investments, region-by-region.

More to the point, by handicapping Nashville Cluster applicants for RSF funding, startups in the Cluster might direct more effort toward other capital sources, which might advantage all parties, even if it means some businesses now based in Tennessee relocate elsewhere and LaunchTN defers opportunities for increased leverage for investments directly or indirectly funded as a result of the SSBCI 2.0 program.

Particularly given its role as a nonprofit agent of Tennessee Economic and Community Development, LaunchTN's testing of ways to improve equitable and sometimes proportional access to its many programs makes solid sense -- particularly if other players take up any slack.

GRASSROOTS

Sam Davidson

Tennessee's regional entrepreneur centers can point promising startups in their bailiwicks to RSF and other LaunchTN-administered programs, but RSF investment decisions are made by vetted members of the staff of Tennessee Technology Development Corporation dba Launch Tennessee.

Asked by VNC about the RSF operational shift, Nashville Entrepreneur Center CEO Sam Davidson told VNC, "We understand the priorities, given that InvestTN has a statewide reach that is core to its work. We'll continue to resource our entrepreneurs to the most relevant capital for their goals."

Davidson explained that any active founder who approaches and is not a member of the NEC "can get a consult and we'll happily point them in the next best direction."

NOTES

Asked by VNC whether or not LaunchTN management was under pressure from any stakeholders about, for example, Nashville benefiting disproportionately from the RSF, CIO Kelliher told VNC, "As a statewide organization, it has always been our focus to invest in all regions across Tennessee. We have received no outside pressure or complaint. It is our aim to be responsible stewards of the InvestTN funds and uphold this statewide commitment."

Further, LaunchTN CEO Lindsey Cox told VNC that execution of staff plans to exclude the Nashville region from priority RSF screening during the current quarter had not involved the nonprofit's board of directors or any committee, thereof, and the decision had been taken as an operational decision within the scope of LaunchTN staff authority.

This story will be updated, as warranted. Last edited 23 January 2025 1600. VNC