Tax Credits Prime Venture Capital Pump

News Sentinel, October 1, 2012 | Go to article overview

Tax Credits Prime Venture Capital Pump


Entrepreneurial Imperative

What: Conference for entrepreneurs, investors and those from public and private sector who work with them

When: Nov. 12, 13

Where: Marriott, downtown Knoxville

Host sponsors: Tech 2020, LaunchTN, Y-12 Nuclear Security Complex

Keynote speakers: Dr. Rob Adams, entrepreneurship professor at the University of Texas-Austin and author of "If You Build It Will They Come?," and Eric Donsky, who has successfully commercialized and exited (IPO) four technologies.

More information: http://www.ei2012.org

Entrepreneurs rarely set out to create jobs.

"That's a side effect of creating a company," says Eric Dobson, founder of TrakLok, the shipping container company often cited as a recent high-tech startup success story in East Tennessee.

TrakLok has raised more than $4 million in venture capital within the last four years, and was one of the first companies to receive money through the state-backed TNInvestco program. The company in 2010 merged with Telesensors, a Knoxville developer of wireless sensors.

Dobson recently relinquished day-to-day management of TrakLok to former Telesensor CEO Tom Mann, and moved to the Angel Capital Group, where he vets deals for early-stage and seed investments by a consortium of investors.

TrakLok employs about seven people. While it used Oak Ridge firm Prototemp to develop a prototype, manufacturing is and will likely continue to be outsourced, Dodson says.

Because of the nature of many technology-based startups, huge numbers of jobs shouldn't be expected, but the new jobs "are usually professional jobs, good jobs with good wages," he says.

Another economic development component, he notes, is the "creation of wealth. If we have a constant pipeline of these startups it sort of perpetuates itself."

He and others -- particularly in state and local economic development circles -- are intent on creating a self-perpetuating entrepreneurial system.

A large component of that system is capital, and lots of those dollars are being transferred from the public sector through private funds to startup businesses.

The Nashville Business Journal recently analyzed the 2011 report of the state's TNInvestco program, which seeded 10 venture capital funds with $200 million raised through the sale of state tax credits, and found the private dollars leveraged dropped by 30 percent over the prior year.

The funds deployed about $55.3 million to 76 firms, attracting $1.76 in private capital for each $1 invested by a TNInvestco- backed fund, according to Nashville Venture Connections, which produces an online newsletter.

Those investments resulted in the creation and retention of 751 jobs in 2011.

Tennessee Economic and Development Commissioner Bill Hagerty has asked the state's comptroller to conduct a standard audit of processes and controls around the program, and some Republican lawmakers have questioned its success as a job-generating vehicle, according to the Nashville Business Journal. …

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