Home Feature Tennessee secures $70 million to invest in early-stage startup & newly-formed funds

Tennessee secures $70 million to invest in early-stage startup & newly-formed funds

by Maija Ehlinger

Tennessee startups have a new local investment pool to tap into thanks to LaunchTN and funding secured through the American Rescue Plan. 

The state was one of four across the country to receive additional State Small Business Credit Initiative (SSBCI) funding under the American Rescue Plan, according to a statement from the US Department of Treasury last week. Such funds have been distributed to states across the country over the last several months, with Georgia and Florida finalizing their funding programs in December. 

The State of Tennessee received $116.9 million to operate four programs. The largest chunk, $70 million, will be used for direct equity investments into early-stage startups and “fund-of-funds strategy investing in emerging venture capital fund managers.” The rest of the $46.9 million will be allocated to a loan program with Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs). 

The SSBCI funds are designed to “promote equitable economic growth across the country,” said Secretary of the Treasury Janet Yellen.  

The SSBCI funds will be housed under The Fund Tennessee initiative and LaunchTN, the state’s public-private partnership focused on startups, will administer the equity investments.

Fund Tennessee includes three unique verticals – InvestTN, LendTN and AssistTN – all designed to grow the state’s entrepreneurial ecosystem. 

This will help LaunchTN hit its primary focus on “expanding access to capital for Tennessee entrepreneurs,” said LaunchTN Chief Investment Officer Monique Villa

“We are investing in venture capital funds as an anchor LP in their first closing of a newly forming fund. We see an opportunity to make $1M to $3M capital commitments into venture capital funds to grow the number of active funds across the state,” Villa told Hypepotamus. 

How will Tennessee Startup’s Benefit 

InvestTN’s funding will look to deploy capital into pre-seed, seed, Series A, and Series B companies. It is particularly looking to invest in startups in verticals such as SaaS, AI, Health Tech, FinTech, BioTech, Mobility, Climate Tech, and Advanced Materials that are growing across the state. 

The funds will also go into venture capital funds as limited partners “as an anchor investor in their first close of a new fund,” said Villa. 

Putting funds into the next generation of local VC funds is crucial as the State looks to cement itself as the most startup friendly state.

“Tennessee’s ecosystem has grown significantly through COVID, welcoming newcomers from across the U.S. and globally,” added Villa. “As companies reach growth-stage and approach exits, Tennessee will benefit from the future flywheel effect of operational talent and investment dollars re-circulating through the tech ecosystem.” 

Startups aren’t just coming out of Nashville, a town known for its strong health and medical. Teams in Memphis, Chattanooga, and Knoxville have secured venture funding in HRTech, biotechnologies, analytics, and the wider SaaS space. 

Want to get in on the action? 

The LaunchTN team is hitting the road over the next several weeks to answer questions and share the news about the new funding opportunities available for entrepreneurs. While hitting every corner of the state during the roadshow, the digital sign up sheet is now live here

If you want to plug in more with the Tennessee ecosystem, you’re also in luck. The state-wide Innovation Week is set for March 27 – 31, 2023 as a way to showcase the“innovation, advocacy and connection” across the state. Registration and more information can be found here.

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