Collaboration Makes Tennessee’s Startup Ecosystem Thrive

Written by Aia Sarycheva, Analyst, Rise of the Rest Seed Fund

A successful startup ecosystem relies on the contributions of many to create an environment that encourages and supports innovation. How cities outside of places like Silicon Valley and New York can better harness their unique strengths to build those communities was a key theme at the 2018 36|86 Entrepreneurship Festival hosted by Launch Tennessee.

Silicon Valley and New York City benefit from a density of resources that concentrate capital and talent. For local ecosystems to support startups, finding ways to create highly networked and resource-rich environments will allow startups to better access talent, capital, and mentorship important to growth. As noted by Marcus Shaw of CO.LAB, density and connectivity do not occur naturally; we must intentionally engage stakeholders to build a foundation for entrepreneurial activity. Chattanooga, for example, supported critical tech infrastructure by delivering a ten-gigabit fiber network through the Electric Power Board, a municipally-owned utility. The city is further catalyzing the ecosystem through the Chattanooga Innovation District, anchored by the Edney Innovation Center, and providing startups with office and accelerator space.

Startups should also be cognizant of how risk and growth are conceptualized within their ecosystems, as highlighted by Wendy Lea of Cintrifuse, based in Cincinnati, OH. Communities in which bootstrapping — as opposed to taking venture capital investment — is the norm, may take a more conservative approach to risk appetite and growth trajectory than what is expected by venture capital firms. Companies seeking venture capital investment should pick the right investment partners for their business but also understand that venture capital investors are looking to fund high-growth and fast-moving companies. Aligning interests and expectations between startups and venture capital investors is crucial for successful partnerships within ecosystems.

Finally, ecosystem leaders should evangelize about their community and tell stories that speak to their ecosystem’s authentic strengths and innovation capabilities. Startups often face difficulties raising sufficient local capital and are pressured to move to the Valley after gaining early traction. By offering compelling reasons for investors to support local ecosystems, rather than leaving startups with little choice but to move to access capital, ecosystem champions can celebrate and amplify their community’s strengths while creating conditions for talent and startups to thrive within their region. Tennessee’s geographic advantage as a major transportation hub and the fact that the state is home to large transportation and logistics corporations are qualities that have allowed transportation startups to flourish. The state has seen investment into early-stage transportation companies like FreightWaves, which won Rise of the Rest’s pitch competition in Chattanooga last May. Tennessee has also seen a number of successful exits in the transportation and logistics space — in 2014 Access America Transport, a third-party logistics provider, merged with Coyote Logistics, a top freight broker. The new company was later acquired by UPS.

Rise of the Rest is proud to invest in startups across the United States and see the great work organizations like Launch Tennessee are doing in supporting their regional ecosystems. Creating an entrepreneurial ecosystem is a process that must be intentional and can only be achieved when a variety of actors — both public and private — are involved. Entrepreneurial ecosystems that genuinely reflect the strengths and values of the community are best poised to catalyze innovation and provide an environment in which companies looking for capital can find it — and succeed.