VOL. 128 | NO. 20 | Wednesday, January 30, 2013
Michael Graber & Jocelyn Atkinson
Growth Capital Wasteland
By Michael Graber & Jocelyn Atkinson
Capital makes the world go round – or at least it used to before the recession and our new economic reality took hold. Enacting growth strategies is difficult without capital to invest. This is certainly true for early stage companies that need enough runway to get the business off the ground and then gain momentum to cash flow the business.
It is also true of mature companies where revenue has flat lined but market opportunities exist for new revenue streams. We see many companies in this position – sizable growth opportunities are just out of reach due capital constraints. Many have experienced firsthand that going to the bank for debt financing is not like it used to be. At the Studio, we often advise some of our mid-market clients to consider a private equity partner as a source of growth capital. This can work well when existing owners are looking to cash out as part of succession planning.
Unfortunately, Memphis is a bit of a capital wasteland. We have a handful of local private equity groups, family investment offices, venture capital firms and an underground angel network. When we say a handful, we mean less than 10 in total. While the TNInvestco legislation designed to increase the flow of capital to innovative new companies in Tennessee in the early stages of development has helped to stimulate some investment activity in Memphis, the majority of activity is elsewhere in the state. The Memphis VC firms have very narrow industry and sector focus, primarily biotech and medical device, which limits the number of deals funded. Companies outside of biotech and med device leave Memphis in search of capital.
However, in this capital wasteland there is a burgeoning start-up community that is succeeding despite inhospitable conditions and there is something awesome happening in Memphis Feb. 10-12. Thanks to the work of Kyle Sandler, a start-up tech blogger and our incubator, EmergeMemphis and the city of Memphis is hosting “Everywhere Else, The Start-Up Conference,” the national conference for startups and entrepreneurial activity outside of Silicon Valley. Early stage companies and venture capitalists from all over the country are coming to Memphis to participate in pitch competitions and panels.
More Memphians should be aware of this conference. The first time we heard about it was at Ernst and Young’s Forum for Strategic Growth this fall in Palm Springs. Scott Case, Startup America CEO and founding CTO of Priceline, gave a shout-out to Memphis during a lunchtime panel for hosting the conference. When he asked if there was anyone in the room from Memphis, our hands were alone in the crowd.
Join us in celebrating the milestone this conference represents for our city; the entrepreneurial community solutes the conference organizers. The city of Memphis thanks you too, for bringing life to the Memphis Cook Convention Center.
Jocelyn Atkinson and Michael Graber run the Southern Growth Studio, a strategic growth firm based in Memphis. Visit www.southerngrowthstudio.com to learn more.