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Q4 2022 Tennessee Deal Report

Q4 2022 Tennessee Deal Report
By Evan Prislovsky, Capital Analyst

In Q4 of 2022, Tennessee startups raised a total of $182 million in venture capital funding, a ~24% decrease from the previous quarter and a ~24% increase from the same quarter the previous year.

Despite the decrease in quarterly funding, the number of deals remained relatively stable for the fifth consecutive quarter, showing only minimal fluctuations.

Find the entire report here.

Zooming out
In 2022, the venture capital industry had quite a rollercoaster ride. Exit activity across the U.S. saw a steep decline in the fourth quarter, falling below $10 billion in quarterly exit value for the first time since 2013. However, fundraising hit a new annual record, exceeding $150 billion for the second consecutive year with a total of $162.6 billion.

Our LaunchTN capital team closely monitors national data on funding trends across different ecosystems to get a better understanding of the current landscape. For more information on Tennessee’s venture capital landscape, be sure to read our Q3 2022 Deal Report.

Now, let’s look at where the money went.
Funding for this quarter was consolidated back to the Nashville area, which accounted for 75 percent of the dollars and resulted in a doubling in the number of Middle Tennessee deals, compared to those in East and West Tennessee combined.

Some of the highlights this quarter were in biotech, with August Bioservices, which raised an impressive $65 million in funding, providing the industry with a much-needed boost. Two larger deals within climate tech occurred in East Tennessee: Johnson City’s Stone Mountain Technologies raised $17.5 million, and Knoxville’s Trillium Renewable Chemicals raised $10.6 million. 

Other notable Tennessee deals

  • East: Krepling (Chattanooga), a no-code e-commerce tooling startup, raised their $1 million seed round
  • Middle: PaintJet (Hendersonville), a construction tech company and LaunchTN portfolio company, raised $3.5 million led by Dynamo Ventures (Chattanooga)
  • West: MiCare Path (Memphis), a remote patient monitoring health tech company, completed their Series A

New funds raised
This quarter, Tennessee celebrated an influx of local venture capital funds raised:

  • Brickyard Ventures (Chattanooga) closing a $17-million fund, recruiting a range of pre-seed and seed-stage startups across industries to Chattanooga
  • Next Play Capital (Nashville and Redwood City) closed an additional $200 million to invest in venture funds and startups
  • Veteran Ventures Capital (Knoxville) announced the closing of their $5 million fund to invest in veteran leaders

Over 2022, Tennessee’s economy has been set to benefit significantly from the establishment of new venture funds.

The growing presence of local venture capital firms will not only support early-stage startups with capital but will also generate job opportunities and stimulate innovation.

It is anticipated that these venture funds will have a positive influence on the state economy, driving new company formation and company recruitment to Tennessee.

Key trends from Tennessee deal activity in Q4:

  • Tennessee saw a slight increase in venture capital (VC) deal volume in the fourth quarter of 2022 with a total of 48 deals compared to 47 deals in Q3.
  • Venture capital funding ($) for Tennessee companies this quarter was the second lowest since Q1 2021 and reached a yearly low of approximately $182 million.
  • Average check size in Q4 was also lower than in Q3, with an average of $3.8 million per deal compared to $5.1 million per deal in Q3. 
  • The software industry saw the most VC activity in Q4, with 8 deals, however, these came with lower check sizes for now.
  • The healthcare industry was the second-most active sector, with 7 deals and $33.94 million in funding.

2022 highlights

  • Despite the economic downturn in 2022, Tennessee had the second-largest year of dollars invested in history, following close behind a record-breaking 2021.
  • 3686 Festival returned in-person as the premiere celebration of Tennessee’s growing startup ecosystem, attracting investors with over $227 billion in assets under management (AUM) from around the U.S. 
  • Ford broke ground in West Tennessee with Blue Oval City, the site of the company’s largest auto manufacturing facility ever. It created an estimated 6,000 jobs. This facility will produce an all-new electric truck and advanced batteries to power future Ford and Lincoln EVs, helping Ford reach its goal of 2 million electric vehicles a year by 2026.
  • Tennessee becomes the second state to pass DAO legislation.

If you found this report helpful, please consider sharing it with anyone who might find it useful. 

Find the entire report here.

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If you have any questions or would like to see any specific data in the next report, please contact Launch Tennessee’s Capital Analyst Evan Prislovsky at evan@launchtn.org.


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