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Venture Notes - June 18, 2021
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Sen. Bill Hagerty
Marsha Blackburn

TENNESSEE's U.S. Senators, Marsha Blackburn and Bill Hagerty, on June 8, 2021, both voted against Senate Bill 1260, the American Innovation and Competitiveness Act, aka The Endless Frontier Act, hereafter AICI. The proposed law, which is designed to bring new innovation, R&D and related hubs and resources to states and multi-stage regions, was nonetheless passed with a majority of Senate votes. A month ago, Sen. Hagerty signaled his displeasure with the the bill, issuing a press release detailing his concerns, a number of which related to confronting the People's Republic of China and its Chinese Communist Party. Sen. Hagerty, of course, is former U.S. Ambassador to Japan and a former commissioner of Tennessee Economic & Community Development. Sen. Blackburn has issued no statement on her Nay vote on AICI. A year ago, Sen. Blackburn issued an extensive white paper on U.S.-China relations that included more than 120 recommendations. This morning, Hagerty and Blackburn announced they have joined with Republican senators from Arkansas and South Carolina in introducing the Foreign Funding Accountability Act, calling for changes in the existing federal Higher Education Act, for purposes of controlling "malign influence" of other nations -- particularly via efforts they associate with the Chinese Communist Party -- on U.S. postsecondary research and education. The bill is apparently not yet enrolled (search). Other members of the House and Senate have previously submitted bills regarding such issues. Earlier this week, VNC had queried Vanderbilt University regarding its views of the Senate's bill and received these comments from Christina West, VU's associate vice chancellor for federal relations: "We strongly believe that we must significantly increase our federal investments in science, engineering, and technology in order to outcompete our global competitors. We believe a bold, aggressive competitiveness and innovation strategy to counter our global adversaries is necessary. Universities such as Vanderbilt can and should play a key role in developing the 'industries of the future' and advancing the key technology areas that will be critical to maintaining our position as a global innovation leader. Such an investment in our federal research agencies will improve our innovation ecosystem and we believe that Vanderbilt and Tennessee are well-situated to benefit from these proposals." Earlier Blackburn coverage here. Earlier Hagerty coverage here.

Fawn Weaver

UNCLE NEAREST DISTILLERY re-opens tomorrow, on Juneteenth, July 19, 2021. The working facility and farm at Shelbyville, Tenn., has drawn global attention and consumption as what Uncle Nearest Inc. The nearly 5-year-old company's Founder and CEO Fawn Weaver and others have dubbed the fastest-growing whiskey brand in history, with its premium products regularly garnering awards. The company also recently launched the $50MM Uncle Nearest Venture Fund, with a mission of helping minority-owned spirits businesses grow, and guided by directors and advisors. Weaver is also founder and CEO of Grant Sidney Inc., an investment firm, according to her LinkedIn. More on Uncle Nearest's progress during the pandemic here.

VC: DAVID ADAIR MD-led Solas BioVentures affiliate Solas BioVentures Fund II, in Chattanooga, completed a $27.7MM capital raise. A year ago, the fund has raised just over $5MM. SEC filings here. Solas is an investor in early-stage biopharmaceutical, medical device, diagnostic, and related companies. Adair's LinkedIn here. Solas BioVentures portfolio page shows more than 40 targets under Fund II, Fund I (Closed), or in the form of sidecar funds or portfolio management team special pupose vehicles. Adair's LinkedIn here.

LEGACY Ventures LLC (dba Vesalio) in Nashville, which is advancing its NeVa offering designed to enable physical removal of stroke-related clots (mechanical thrombectomy), seems to be approaching the $20MM mark in total raise since inception. Its filing earlier this week showed about $6.7MM, and David Adair MD of Chattanooga is newly associated with the filing here. See previous VNC notes on Legacy Ventures here.

JUMPSTART Foundry in Nashville announced June 11 that it picked 17 health and healthtech companies for its 1H21 cohort of startups. VNC's review of Crunchbase entries for members of the new cohort indicate that none of the startups originated in Tennessee. Previous JSF coverage here.

PHOSPHORUS Cybersecurity -- which enables security for Internet of Things (IoT) devices -- announced it will HQ in Nashville's Gulch and aims to raise $20MM fresh capital by EOY21. Press release here. The company has a total team of about 8 FTE, three of whom are cofounders, according to Crunchbase, which also says D.C. area-based Angel Josh Lospinoso participated in Phosphorus' $5MM Seed in 2017. Lospinoso's Shift5 site mentions his experience in uniformed U.S. Army roles related to cyberintelligence. Phosphorus CoFounders: CEO Chris Rouland, CTO Rebecca Rouland, and CTO Early Ady. (Lospinoso role corrected 22 Feb. 2022.)

Matt Yezerski DDM

FAST ASLEEP LLC, founded a year ago in Franklin by Reid Wylie and inventor Matt Yezerski DDM recently won the Crowd Favorite award during the Nashville Entrepreneur Center's Pitch for Good: Healthcare event held three weeks ago. VNC research indicates the company offers a "Nasal Intubation Patient Safety Hat", which is a combination anesthesia circuit holder and patient protection device. U.S. patent records indicate Yazerski assigned his interest to Tennessee Dental Anesthesia Supplies (TDAS). The patent application was apparently granted Feb. 9, with attorneys at local Lodestone Legal Group shown as correspondent. Yazerski founded Nashville Office-based Anesthesia (NOBA), in 2012. Tennessee records online show TDAS and NOBA registered at the same address in Franklin. The TDAS registration agent is shown as Erica Yezerski, the inventor's spouse. The other five winners in the NEC's PfG contest: CaringWire, Magnolia Family Medicine, Major Care, PottyCap, and Yumlish. NOTE: All these startups are currently considered likely to attempt to take their offerings to markets beyond Middle Tennessee, according to NEC Program Manager Jeremy Raley.

Brian Cox

MEMPHIS FINTECH Blockchain entrant SurgePays Inc. of Bartlett amended its S-1 filing today, showing that it continues to trade in the OTCQB Marketplace as SURG and continues to pursue Nasdaq Capital Marketplace listing. Its contemplated total public offering is priced at about $30MM. The company has several facets, including offering an e-commerce solution for merchants who deal in wireless/mobile services and wholesaling a range of products. (It recently announced signing to wholesale "1606", a hemp/CBD brand owned by Phoenix-based tech and investment company SinglePoint Inc.) The 4-year-old company speaks of serving the "underbanked" population, with corner stores its major channel. It says its 2020 cost of customer acquisition was greater than 100% due to flat-lining of sales due to the impact of COVID19 pandemic. It currently supports about 8K stores within its lead-base of 34,000 retailers. See our February 2021 note here for further details. Its obligatory S-1A legal proceedings overview includes a matter in Chancery Court in Chattanooga and a shareholder complaint in a Nevada court. CEO: Brian Cox, age 45. S-1 advisor: Maxim Group. The company was fka Surge Holdings Inc. Stay abreast of SEC filings here. SurgePays' S-1 went effective Nov. 1, 2021, filings here. Nasdaq charts real-time here.

DITTO Music, the UK firm that once had presence in Nashville, has gone bigger than we previously reported on a capraise for spinup Opulous, which offers a blockchain-powered financial platform for entertainment-sector artists, went bigger on the capraise we first reported in March: now $6.5MM. It's also had a taste of NFTs. CoFounder: Lee Parsons. See our updates here.

RIVER Associates Investments (Chattanooga) portfolio company Pelco Products (Oklahoma) gained additional investment from Minneapolis-based Northstar Capital. Pelco's a traffic and utility services hardware manufacturer and supplier. Press release here. Earlier River Associates notes here.

SOUTHPOINT Bancshares Inc. of Birmingham (OTC BB:SOUB), parent of SouthPoint Bank, led by Founder-CEO and largest shareholder Steve Smith, reported it completed a $30MM raise, with Performance Trust Capital Partners, Chicago, earning $525K in commission. Recent FDIC reporting showed SouthPoint with more than $600MM assets, and a shareholder briefing available on the site had late-pandemic metrics pointing northward. Full-year 2020 earnings here.

TPG's The RISE Fund (SF, London) announced investing $100MM in Louisville- and Raleigh-based Climavision, the year-old climate technology and weather solutions company. Co-Founder CEO: Chris Goode. Release here.


APPLY: THE TECHSTARS Industries of the Future Accelerator at OakRidge-Knoxville window for applications opens July 19, 2021, and closes Oct. 6, 2021. According to its website, the new equity-based program wants to work with "startups focused on emerging technologies across industries including artificial intelligence, advanced manufacturing, quantum information science, 5G/advanced wireless technology, biotechnology, and clean energy technology." Partnering with Techstars are Tennessee Valley Authority and the University of Tennessee. Techstars' June 3 announcement of the IotF Accelerator also emphasized partnerships with Corporations, here. Techstars' is actively launching or revving back up a number of accelerators elsewhere, including Atlanta, Austin and Birmingham. [One hopes Techstars and East TN are thinking ahead to potential synergies with the prospective new programs from the federal government - see our lead item above.-Ed.]

GRANTS: USDA's new "Rural Innovation Stronger Economy" (RISE) programs is offering grants of $500K to $2MM to qualifying consortia of local governments, investors, industry, institutions of higher education, and other public and private entities in rural areas. The funds may be used over a 4-year piod to form job accelerator partnerships and support high-wage job creation, new business formation, business expansion, and economic growth in the rural areas of their region." VNC research shows a roughly $10MM pool for accepted proposals. Grants are now being accepting via Grants.gov (search keyword: stronger). A live webinar for potential applicants is set for June 22, 2021, 10:30 a.m. CDST (11:30 a.m. EDST). Current closing date for apps is Aug. 2, 2021. Application and webinar instructions here. RISE program page here.

APPLY: Apply now for 100Knoxville's 5x5x5 program for Black entrepreneurs. Next cohort begins July 12, 2021. Update on the inaugural cohort here, at Teknovation. Register for the summer 2021 cohort, immediately here (scroll down on arrival).

EVENTS: CHATTANOOGA's mobility and logistics-oriented VC Dynamo's event and FreightWaves Future of Freight Festival (F3) will operate side-by-side this year, with both Dynamo's Founders Camp and F3 going full-tilt Nov. 8-10.

EVENTS: NASHVILLE's 12-year-old Concert Genetics and allies announced they've scheduled the 4th Genetic Health Information Network Summit Oct. 25-27, 2021, in Music City. The event focuses on the intersection of genetics, technology, and healthcare, with an eye toward solving data and digital infrastructure challenges facing those in precision medicine. Concert also announced it secured a patent for new methods of automating genetic test coverage and payment accuracy. Other Concert Genetics (fka NextGxDx) coverage here.

INNOVATION Crossroads at Oak Ridge National Laboratory (ORNL) announced induction of six science and technology innovators to its 5th Cohort, release here. VNC-VTC articles related to Innovation Crossroads here.

CANDIDATES for Entrepreneur-in-Residence (EIR) roles via Vanderbilt University's Center for Technology Transfer and Commercialization are invited at this page. The VU CTTC EIR administrators -- who include Director of Economic and New Venture Development Peter Rousos JD -- say the CTTC EIRs "conduct a variety of activities in support of launching new ventures. They evaluate technologies for their appropriateness as the basis for a startup company. They develop business plans, financial models, go-to-market strategies, and the like. They advise on management teams, advisory boards, and corporate governance. They mentor Vanderbilt researchers who are exploring potential startup opportunities, and they connect these startups to investors and potential strategic partners..." Note: In 2020, VU CTTC conducted 33 investor pitches, vetted 19 potential startup opportunities, and helped launch nine de novo companies, listed here. [VU's innovation center, The Wond'ry, also invites candidates to serve as EIRs here. VU's Owen Graduate School of management sometimes appoints EIRs, according to its website.]

Marcia Dawood

ANGEL Investors with interest in Seed and Early Growth companies are less plentiful in Tennessee than some might think, given the state's population, business environment and numbers of households with at least one person who is, or is qualified to become an Angel investor. While probably trending upward, the ranks of active Tennessee Angels -- particularly, Angels who are willing and able to LEAD a round -- has waxed and waned through successive business cycles, with many of investors still focused solely on wealth management via investment in traditional assets, e.g., public equities and real estate. It's not for everyone, but there are surely many more qualifiable Angels in Tennessee, some of them needing just a personal invitation to the party. VNC reached out to two very astute observers: First, Marcia Dawood, whose LinkedIn says she is an investor in more than 200 early-stage companies, and she has held both corporate and entrepreneurial leadership roles. In addition to her roles with Golden Seeds, MindShift Capital and others, Dawood is vice chair and soon-to-be chair of the board of the Angel Capital Association. We also reached out to John Bruck, a successful serial entrepreneur from Ohio who is now, among other hats, senior business advisor at UT Research Park at Cherokee Farm, in Knoxville. Both Bruck and Dawood suggested Queen City Angels, Cincinnati, as a great example of an Angel group that conducts a sustained grassroots outreach program to enlist more Angels. Bruck has been active in QCAngels for decades, btw. We'll be looking into QCA's programs more closely. If you have thoughts to share on this and related matters, please see contact info here.

NASHVILLE's standing in LinkedIn's successive rankings of metro areas with net gains in Tech employment seemed to rise sharply between a report in December 2020 and a more Bullish report this month. Though the net-value of such metrics is debatable, it remains to be seen whether or not Nashville will overtake Austin, or whether Nashville will, itself, be overtaken by Charlotte and other contenders. Also unanswered: What all this will mean for Nashville's affordable-housing supply, salary levels and quality of life, etc.

See previous editions of Venture Notes here ... and all stories in reverse-chron order here. VNC

.last edited 0750 22 February 2022

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Tags: 100Knoxville, accelerators, agriculture, American Innovation and Competitiveness Act, anesthesia, Angel Capital Association, Angel investors, Angels, Bill Hagerty, Blacks, blockchain, breweries, Brian Cox, CaringWire, Center for Technology Transfer and Commercialization, China, Chris Rouland, Christina West, ClimaVision, David Adair, Department of Agriculture, distilleries, distributed ledger technology, Ditto Music, diversity, Early Ady, economic development, employment, Endless Frontier Act, entrepreneurs in residence, Fast Asleep, Fawn Weaver, Golden Seeds, government relations, Grant Sidney, Industries of the Future Accelerator, Innovation Crossroads, Jeremy Raley, jobs, John Bruck, Josh Lospinoso, Jumpstart Foundry, Lee Parsons, Legacy Ventures, legislation, liquor, Lodestone Legal Group, Magnolia Family Medicine, Major Care, Marcia Dawood, Marsha Blackburn, Matt Yezerski, Maxim Group, medical devices, Mindshift Capital, Nashille Entrepreneur Center, Nashville Office Based Anesthesia, NextGxDx, Northstar Capital, Oak Ridge National Laboratory, Opulous, ORNL, Owen Graduate School of Management, payments, Pelco Products, Performance Trust Capital Partners, Peter Rousos, Phosphorus, Phosphorus Cybersecurity, Pitch for Good, politics, PottyCap, precision medicine, quality of life, Queen City Angels, rankings, Rebecca Rouland, Reid Wylie, RISE Fund, River Associates Investments, rural, SinglePoint, Solas BioVentures, SouthPoint Bancshares, SouthPoint Bank, Steve Smith, SurgePays, technology transfer, Techstars, Tennessee Dental Anesthesia Supplies, The Wondry, TPG, Uncle Nearest Distillery, Uncle Nearest Venture Fund, USDA, Vanderbilt University, venture capital, Venture Notes, Vesalio, Yumlish

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