Finalists named for state's $120M venture pool

Out-of-state players get short end of TNInvestco shortlist

Email | Print By E. Thomas Wood

Tennessee's Departments of Revenue and Economic and Community Development have announced ten finalists in the competition among venture capitalists for shares of the new TNInvestco program, which will funnel $120 million in state-backed funding into entrepreneurial enterprises.

The shortlisted firms are:

Council & Enhanced Tennessee Fund LLC
Innova Fund II LP
Limestone Fund LLC
Memphis Biomed Ventures Tennessee I LLC
NEST-TN LLC
Solidus-TNInvestco LLC
Tennessee Angel Fund
Tennessee Community Ventures Fund LLC
Tri-Star Technology Fund LLC
XMi High Growth Development Fund LLC

Details on the finalists are at this link. They were chosen from among 25 applicants that submitted their plans for deploying the investment capital to the state prior to an October 1 deadline.

Only one finalist is affiliated with a so-called "Capco company," a specialist in obtaining state-sponsored venture funding: Council & Enhanced Tennessee Fund, led by former First American National Bank CEO Denny Bottorff's Council Ventures and New York City-based Capco firm Enhanced Capital Partners.

Ventures including the other two leading Capco firms, Advantage Capital Partners and Stonehenge Capital Co., failed to make the cut.

The Capcos lobbied for the creation of a state-funded venture program in Tennessee last year, but legislators and state officials eventually settled on a model quite different from those used in other states. Capco programs in Florida, Colorado, the District of Columbia and other jurisdictions had come under heavy criticism for enriching the out-of-state Capcos while doing little to jump-start early-stage entrepreneurship.

Still, some observers raised concerns about the extent of possible Capco influence over the selection process in Tennessee. Today's results would appear likely to allay such fears.

Seven of the ten firms are based in the Nashville area, with two others in Memphis and one in Tullahoma. Mark Drury, assistant commissioner at ECD, had said last month that "TNInvestco is a statewide program that should have a statewide benefit." Yet with only one of the 25 applicants coming in from East Tennessee, diversity of location was unlikely from the start.

"The commissioners had indicated earlier that geography was not important, and, in fact, it wasn’t on the scoring matrix," noted Gary Stevenson, managing partner of finalist Memphis Biomed Ventures. "Instead, the targeted industry was included," he said, and he felt his firm's experience in medical devices and biotechnology investment across all three of the state's grand divisions aided its case.

"I think our portfolio choices demonstrate that where our primary office is located is less important than the industry we target," Stevenson said.