Out-Of-State Investment In Local Tech Startups Is Booming, But Tennessee Investors Lag Behind

Jun 8, 2017

Local tech startups are more popular than ever — with investors outside of Tennessee, that is.

Data that tracks capital investment trends in the last five years show a steady rise in funding from out-of-state backers. But funding from investors in Tennessee hasn’t seen the same growth. 

Last year, investors from places like New York and Boston gave over $420 million to Tennessee-based startups. That amount more than doubled from five years prior.

But in-state backers haven't kept pace. During the same time, the amount of money provided by in-state firms made up only of Tennessee investors has declined by 70 percent.

John Lanahan is the Director of Capital Formation at LaunchTN, an organization partially funded by the state government that supports entrepreneurship and helps local startups find funding opportunities. Their national tech conference 36|86, now in its fifth year, brings together entrepreneurs and investors for workshops, panels and networking.

He says local investors are important because they traditionally provide seed money for new companies so they can begin developing their product and attract the interest of bigger funders.

“A lot of the New York investors that I was talking to are extremely excited about what’s happening in Tennessee," said Lanahan. "What they told me was that they need that local investor champion on the ground in order for them to say, ‘ok, now I'll take a look.”

They might be drawn to a startup like Jammber, a mobile app that helps working musicians manage their business. Marcus Cobb is the company’s CEO and co-founder. He says that, so far, his company has received funding only from Tennessee investors.

Now that his company is past the seed stage and looking to expand, Cobb attended 36|86 this week hoping to meet other potential investors.

“We are going to need more capital to grow this thing to where it actually can be, and bring on amazing people to help us do that," he said. "And we want more of that strategic capital to come from Nashville and Tennessee at large. “

But until more local backers are ready to embrace the technology sector, young companies like Jammber may need to keep courting investors across state lines.

LaunchTN says they are trying to encourage people with money in Nashville, many who’ve made their fortunes in healthcare or real estate, to invest in the next generation of technology startups.