TECHIE
‘There are now more betterquality opportunities’ The Nashville Capital Network’s Sid Chambless takes stock after his team’s 50th investment
he Nashville Capital Network this summer hit a notable milestone: Some 17 years after being launched to pool growth capital for early-stage ventures in and near Middle Tennessee, it invested in its 50th company, Atlanta-based healthy food venture ModifyHealth. The organization has put to work about $81 million since 2003 and its portfolio companies have combined to subsequently raise more than $980 million from other investors. Executive Director and Managing Partner Sid Chambless, who has been there from the beginning, spoke to Post Editor Geert De Lombaerde about the state of affairs in venture capital and what’s next for the NCN.
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How has the NCN evolved most notably over the past 17 years? Our core strategy is still the same. We’re in a unique market where there are a large number of very successful entrepreneurs who have an appetite to invest in the next generation and the NCN can do the administrative work of pulling together deals. We refer to what we do as the acceleration round. We’re not going to mash our foot to the floor but what if we hire two more salespeople? Can we grow revenues more quickly? Early on, it was mostly one lead individual saying, “This is going to be the price and the structure of this deal” and others followed or
didn’t. Now we have so much more data about terms, about the pricing of follow-up rounds and so on. We’re helping our individual investors better price the risk. There was a lot of chatter in the mid2000s about the dearth of early-stage capital in the region. Has that narrative changed? I wouldn’t say that was ever the core issue. Yes, it was harder then to identify investors who knew how to invest and to help businesses grow. But with each of our funds, we’ve expanded around the edges. The biggest change has been that there are now more better-quality opportunities. More people are coming out of large organizations with great ideas and strong networks and we have more seasoned executives in both software and health IT to help them grow. And then you look at some of the organizations that have attracted national private equity players. They have put Nashville on the radar for Google Ventures and other large investors. The VC arms of Humana, UnitedHealth and Cigna have all invested with us. How is COVID changing what you do? So much of what we do comes down to “Do we believe this team can do what they’re saying they can do?” So COVID has changed how we do our due diligence. We’re doing more background checks, taking a little more time
Sid Chambless
to get comfortable with things. But the ModifyHealth deal, for example, looks very much like it would’ve pre-COVID. Deal flow the last two years had already been a bit slower. A lot of private equity has been raised and invested and recapitalizations are tying up management teams for a few years. So we’re having to wait a little, maybe track people a little longer and look for others who have ideas that are keeping them them up at night. The best thing for us to do is to stay in constant contact with our people. But what used to be breakfast, lunch or drinks is now Zoom, Zoom and Zoom. The way we fish off our pier has changed. Does that also impact plans for your next fund? Not so much. The biggest difference for us versus five years ago will be that we’ll be able to point to some pretty meaningful exits. Trilliant Health from our Partners Fund produced an outstanding return for us in less than 24 months and before that, we had Aspire Health and Emma. We have other companies on great trajectories — XOi Technologies, Groups360, Contessa Health, AxiaMed and more. For our next fundraise, we can point to a lot of follow-up transactions and exits. We’ve invested in eight companies from our most recent fund and we have two more in the queue before the end of the year. In 2021, I’m confident we’ll raise another fund. We’re not going upmarket and we’ll still focus on the capital gap. But we could cut bigger checks — our typical deal has been an average investment of $4 million with the NCN taking half — and still do the same number of deals.
NASHVILLEPOST.COM | FALL 2020
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