Nashville startups lead state in venture capital

NASHVILLE — Nashville startups dominated venture-capital investment statewide during the most lucrative period ever for technology ventures in Tennessee and in the nation.

The streak is driven by a handful of companies collecting hundreds of millions of dollars from investment firms, according to a “Moneytree” report released this week from leading industry analysts Pricewaterhousecoopers and CB Insights.

“I don’t think it’s surprising that, overall in the U.S., the growth is in internet and health care companies,” said John Nee, partner at PWC. “That reflects very similarly to Tennessee.”

Nationally, electronic cigarette company Juul has attracted the most venture-backed investment with $50 billion in its coffers. Other leading U.S. startups are driverless car company Cruise Automation, Uber and Doordash food delivery service.

Venture investment in 35 Nashville companies reached $733 million last year — the most ever in a single year by far. That amount is nearly double the second-largest year ever of Nashville venture investment, which was $411 million in 2016.

Tennessee companies outside Nashville raised $86 million in venture funding last year, making the total statewide $819 million.

In comparison, Georgia received $782 million and Florida raised $1.1 billion with the help of augmented reality developer Magic Leap.

Nashville-based Smiledirectclub’s direct-to-consumer teeth-straightening startup was largely responsible for Nashville’s jump in startup financing last year.

It attracted $380 million at the end of 2018, and the company hopes to double that investment this year.

Oneoncology cancer care network followed with $200 million last year.

Solar energy provider Silicon Ranch Corp., founded by former Tennessee Gov. Phil Bredesen and headquartered in Nashville, topped Tennessee startup funding so far this year. It raised $60 million in April.

Built Technologies construction financing platform attracted $30,000, the second-largest amount this year.

Health care software platform Bridge Connector garnered $10 million this year from Axioma Ventures, which also contributed $10 million last year.

A handful of other Nashville health care, music and internet software and services companies drew investments of several million dollars this year.

Vocap Investment Partners gave $4 million to three-year-old Soundstripe, which provides a catalog of royalty-free music to filmmakers.

Fifteen Nashville startups raised $123 million in venture capital in the first six months of this year. Tennessee companies outside the Nashville area received just $25 million.

But venture funding in the second half of the year could increase exponentially, Nee said. Venture investments typically accelerate at the end of the year in Tennessee.

“The indicators are that 2019 could be similar to 2018 in investment dollars in Tennessee and the U.S., which has led to a strong economy overall,” Nee said.

“The amount of investment is certainly an indicator of job growth and opportunity.”

Nee said that “mega deals” of more than $100 million are dominating this period of venture investment and creating the largest pots of private seed funding ever for young companies.