Q&A: Launch Tennessee's first chief investment officer hears a change in tone

See Correction/Clarification at end of article

Monique Villa and her colleagues have $70 million to sprinkle statewide, investing in startups that are striving to scale fast.

Villa is chief investment officer at Launch Tennessee, the state-funded organization charged with boosting entrepreneurs and helping grow early-stage companies across the state. She's helping spearhead how LaunchTN decides to invest $70 million of new federal funding. She expects to back roughly 140 startups statewide with that money, as well as a few venture capital firms.

Villa is a Los Angeles native with a decade in the venture capital industry. She relocated to Nashville five years ago, and later opened a satellite office for California-based Mucker Capital. She joined LaunchTN one year ago as the organization was creating the role of chief investment officer. Villa has noticed a change in tone during her five years here, she said in an interview.

This interview has been edited for clarity and length.

NBJ: What's the biggest change you've seen in Nashville's entrepreneur/startup scene?

Villa: My joke answer is that parking has become a lot more expensive. Really, the biggest change has been the tone. The tone has changed in a way where entrepreneurs are starting to ask more questions of their investors, of the programs and resources available to them, in a very productive way. Those of us in a support position, such as investors or a nonprofit — we might build something and say it's great for entrepreneurs, but we need feedback.

We've also had new blood show up in droves and start to complement the expertise already here. We're still in the beginning stages of people finding one another, the existing and the newcomers. Bring those two together, which you're starting to see now, and you can create something really powerful.

Talk about the timing of this money coming available against the backdrop of what's happening in venture capital across the U.S. Even amid the banking crisis, etc., one thing that's continuing is that more capital is being invested outside of San Francisco than ever before. Even though capital has pulled back as a wait-and-see exercise, we're still seeing companies getting funded. When you read the announcements, they're all over the place, geographically.

We could not be more motivated by the fact that we have $70 million to put to work. This is when great companies can be built, in this kind of economic disruption. And we have a long list of problems that need to be solved by entrepreneurs. The moment Tennessee is having is really the first time it's ever happened in this year, on a national stage.

What's the ultimate aim for how LaunchTN is deploying this money? My personal hope for this is coverage of the state. We want entrepreneurs to be able to access capital no matter where they are building their companies. I was on the road tour that the state [Department of Economic and Community Development] did this spring. There were incredible companies, very much venture-backable, scalable, in some of the smallest markets that we visited. It's empowering entrepreneurs to build companies where they are, and having that coverage of Tennessee that's never been done before. We want to make sure it is a statewide portfolio.

You were hired almost a year ago, for a newly created position at LaunchTN. How and why did that come about? [CEO] Lindsey [Cox] knew there was a lot to be built from scratch. She knew if we brought venture capital experience to the table, we could truly make it an institutional process. Beyond InvestTN, my role is about how we provide a platform of services to our portfolio companies that's best-in-class and puts us up there with [venture capital] firms and their platforms, and how we go beyond Tennessee and activate a broader U.S., coast-to-coast network of capital and access for our companies.

This is the first time Launch is owning the investment decision. We have two existing portfolios, through our Incite Fund and Impact Fund. With Insight, we definitely did not make the decision: If a company came with capital, there was a checklist, and we'd provide matching funds. With Impact, we had a volunteer investment committee, and those were smaller, pre-seed [round] checks.

How is InvestTN different? In the past, companies said: "We have money, so you'll give us money." Now, we are running our independent process, and they must have at least a 1:1 of matching funds from a private source of capital, on the same terms as us.

We’re truly running a process that, by state contract, is fair and equal. This is not, "You're in Nashville, down the street from us, friends with so-and-so and so we'll fast-track you." We'll review applications weekly. We'll set up calls with companies that meet our mandates. If we believe there's a fit, we'll create a short brief on the investment opportunity that is shared during our Tuesday deal meetings with the broader team. They'll decide which ones advance to the due diligence phase … and from there, it's presented for a vote from our internal investment committee. I'm one of four people in that group.

How will you measure whether this is succeeding? [The U.S.] Treasury is focused on a 10:1 leverage calculation, so for every $1 from us, we're hoping to create an additional $10 for those companies [of investment]. So in theory, this generates another $700 million.

We're doing this interview on June 23, one day after the website went live for founders to submit company information and show interest in getting an investment. What's been the initial response? We have 120 intakes already, from across the state … and across a really nice mix of industries. At the front end, we knew we would be dealing with a little bit of a landslide, so we're asking everyone to have faith that we will respond.