New venture strategy for Nashville

It is not too strong a word to say that entrepreneur Mike Shmerling hates getting as much media coverage as he does, personally. He would rather more attention be given his operating companies and new ventures like "Mayberry's Finest" foods, which is marketed using the leverage of the CBS-controlled franchise of "The Andy Griffith Show." Well, if Mike wants to avoid the spotlight, he's going to have to quit producing such good ideas as the one we report on this morning over at VentureNashville.com. It's a potentially game-changing strategy for spawning startups that are likely, over time, to produce the kind of family tree we're all familiar with in the healthcare sector. Read the full story here.

New man at Owen Entrepreneurship Center

Byron Smith (left), the longtime chief marketing officer of Nashville-based Asurion, will succeed Bruce Lynskey as clinical professor within the Owen Entrepreneurship Center, under Director Germain Boer. Our story this morning provided details of Lynskey's move to a Massachusetts tech startup and Smith's background. We'll be watching this space. If you've missed Bruce's sage observations over the past six months on The VN Blog or over at VentureNashville.com, you might want to peruse them.

Gazelles and Geezers

Bruce Lynskey (right) likes Sen. Diane Black's idea for tax credits for angel-fund contributors. He wrote that by creating some "large-sized serious seed-stage funds, we would certainly attract some interest," adding "...we would also need to attract some very tech savvy folks to manage such funds." Then, commenting on our post on TTDC's creating new working groups to support ventures, he argued nothing will take the place of cash and talent. He next raised questions about two of Tennessee's biggest claims to fame: lifestyle and cost of living. True, he said, Tennessee has a "more mellow, slower paced lifestyle than places like NYC, Silicon Valley, and Boston. [But,] if you are running or are an employee in an early-stage high tech firm, it is hard for me to see how TN's slower lifestyle impacts you. Your competition is not other TN firms; it is firms on the West Coast, in the Northeast, in India, or in China. You need to do whatever it takes to stay ahead of them -- and that determines your lifestyle, regardless of where you are geographically located." It got worse: From his post at Owen GSM, Bruce said he often hears of talented grads getting low-ball compensation offers from local startups. Lynskey insists they could earn much more, even after COL differences, on either coast. He says that just this week, he advised a student negotiating with a local firm to ask for twice what the prospective employer had offered, or "walk away." He said such episodes are so common, "It makes me think that the TN start-up environment is like the sweatshops of the garment industry." FULL STOP. "What if" that employer is factoring-in "quality of life"? And, "what if" that student values Nashville QoL over bigger paychecks? "What if" the dilemma is a false one, spawned mainly by low Angel-VC interest in "lifestyle entrepreneurs" (LEs) -- nothwithstanding the "LE" label worn by Hugh Hefner, among others. Angel/VCs often stress they're after Gazelles or better, not owners looking toward comfortable Geezerdom. There are, of course, significant differences among entrepreneurial types. And, yes, big surges here will require one or more "Big Wins" from among high-growth businesses. However, along the way, Nashville might do well to develop a strategy for aggressively leveraging our "LE seedbed" -- for example, by helping owners scale-up local businesses, possibly averting selling to investors who will relocate jobs and IP to other cities.

Venture Notes

Vic Gatto (at left), a partner in Solidus Company, responded to Bruce Lynskey this morning. Gatto is, as is Lynskey, a participant in the Chamber Entrepreneur Project. He said, "I basically agree with Bruce, with [differing views on] a couple of subtle issues. There is no question that there is a scarcity of Seed/Early stage capital in Nashville. However, zero seems to be inaccurate. Solidus [VC player] invested in seven new companies last year (5 in Nashville) -- that is not zero. What I tell people is that there is not enough capital by a factor of 3-4X. This doesn’t mean that there is 'zero'. It does mean that many exciting companies with strong management teams should get funding, but do not. Additionally, I do not agree that 'it’s a culture thing.' In my opinion, this is inaccurate and wrongly suggests that the city will not be able to foster a strong venture presence. I believe there is a strong culture of entrepreneurship and early stage (angel) investors to finance them. For multiple reasons, these people, successful former start-ups and investment firms have never organized them into a venture community like occurred in Boston and Silicon Valley."

Venture Notes

As posted here in Venture Notes (March 27), Tim Estes' tough-love presentation to the NTC's Innovation Conference March 25 may have raised some eyebrows, but, based on e-mail I've received, Estes is not alone in his thinking. Bruce Lynskey of the VU Owen GSM said, "I completely agree." Lynskey (above) told us he has advised the Chamber's Entrepreneur Project that Nashville has, in his estimation, zero seed-stage VC firms. So, local startups are "most likely to depart and relocate to the source of that seed funding." Lynskey said there's been some discussion in the Entrepreneur task force about "the value of developing a network of non-Nashville seed-stage funding sources." Lynskey acknowledged that tactic comes with some risk the companies will move away toward the source of the funding -- "Well, that is what is happening anyway!" he insisted. Echoing Estes' comments, Lynskey said that in addition to seed-stage cash, itself, "you also need the folks handling the money who are comfortable making seed-stage investments with that money. Nashville does not have this. It's a culture thing." He also said Nashville's lifestyle strengths cannot offset the area's short supply of "highly skilled engineers and scientists...the folks who come up with the original concepts." Nashville, he concluded, is woefully short on capital, workforce and key support firms professionals who understand the startup's "space and market."

IP Commercialization

NIH? Kauffman Foundation VP Lesa Mitchell told me recently she doesn't expect much interest from Nashvillians in KF's "Proof of Concept" model for seed-stage investing and technology commercialization. Seems she's talked with folks here. My own checking at key Vanderbilt listening-posts suggests that, at first blush, she's probably right. The people I spoke with felt said they're doing fine without POC. They have access to IP, University funds, angel-investor networks, advisors and all the rest (although oversight of these activities is concentrated in a tech transfer unit of the administration, rather than in sci-tech research-oriented schools, themselves).