Tennessee midyear venture report 2026

By: Logan Leatherwood, Launch Tennessee Venture Fellow

Editor’s note: This report provides an overview of the venture landscape across the United States, the Southeast, and Tennessee. It’s meant to serve as a tool for founders and investors across the state. All data was sourced from PitchBook as of July 14, 2026. There’s a glossary at the end for added context on the terms used throughout. *H1 means the first half of the year.

Executive summary

Tennessee’s venture market remained healthy in H1 2026, with a stable early-stage pipeline and larger financings becoming more common. Although fewer deals were closed this half compared to last year, more capital was invested, a combination mainly driven by a handful of larger rounds. Q1 accounted for an unusually large share of H1 investment activity, while Q2 returned to a level more consistent with recent quarterly trends, reinforcing that quarterly capital totals are still heavily influenced by the timing of a few large financings.

• Fewer deals, more capital — Tennessee completed 87 venture deals in H1 2026, down approximately 18% from H1 2025, while total capital invested increased by approximately 33% to $972.3M. The combination of fewer deals and higher capital reflects a few larger rounds rather than a broad increase in investment activity.
• Capital deployment concentrated in Q1 — Q1 recorded $683.4M in invested capital, the highest quarterly total of the comparison period for Tennessee, driven by a small number of large financings. Q2 totaled $288.9M, bringing quarterly investment activity back in line with recent historical levels, highlighting the influence of a few large deals on quarterly capital deployment.
• Early-stage investment remained a significant source of capital — Pre-Seed/Seed funding increased from $9.9M in Q1 to $53.6M in Q2, while Early VC (Series A/B) represented nearly two-thirds of all capital invested during H1. The rebound in Pre-Seed/Seed funding suggests Tennessee’s early-stage pipeline remains active, while the state’s comparatively small number of later-stage financings continues to make quarterly capital totals more sensitive to individual large rounds.
• Sector activity remained concentrated while showing signs of broadening — Information Technology recorded 28 deals during H1, the highest of any sector. Business Products & Services increased from 7 deals in Q1 to 12 in Q2, finishing the half level with Healthcare at 19 deals, suggesting venture activity is beginning to broaden beyond Tennessee’s traditional sector concentrations.
• State-backed investors remained active alongside competitive exit activity — LaunchTN’s InvestTN fund participated in the largest number of financings during H1 2026. Tennessee also recorded 20 acquisition exits over the comparison period, comparable with several larger peer states despite maintaining the smallest median deal size among the regional peer group, highlighting that smaller typical financing sizes have not limited acquisition activity in the state.

 

H1 2026 venture market context – United States

Key takeaway: The national venture market remained healthy and active in H1 2026, with deal count remaining steady, but investment totals continue to be swayed by a few exceptionally large deals. With the median U.S. pre-money valuation increasing by over $25M between Q1 2025 and Q2 2026, it’s clear that investors continued concentrating more capital into fewer, larger companies.

• U.S. venture investment reached $268.4B in Q1 2026, the highest quarterly total during the period analyzed, before declining to $146.4B in Q2. Much of the Q1 increase was concentrated in Venture Growth financings, indicating that investment totals reflected a limited number of large transactions rather than broad-based increases in deal activity.
• Deal count changed only modestly from 3,886 transactions in Q1 to 3,821 in Q2, suggesting that quarterly fluctuations in capital invested were driven primarily by changes in financing size rather than overall market participation.
• Median U.S. pre-money valuations increased from $30.0M in Q1 2025 to $56.6M in Q2 2026, reflecting sustained pricing strength even as aggregate investment moderated. For Tennessee companies raising capital in H2 2026, the national market continues to support higher valuations while remaining selective.

 

H1 2026 venture market context – Southeast region

Key takeaway: The Southeast market was stable during H1 2026, with deal count holding steady despite fluctuations in capital deployment. The region experienced a spike in capital invested in Q2, mainly concentrated in Later VC deals. Tennessee’s venture activity remained mostly aligned, but the state’s Later VC market is comparatively limited, explaining the lack of a similar Q2 spike in the broader region.

• The Southeast recorded 794 deals in H1 2026 (408 in Q1 and 386 in Q2), which is broadly flat against 784 in H1 2025 (+1.3%). Deal count has stayed between roughly 340 and 440 in each of the past six quarters, indicating stable regional activity despite fluctuations in capital deployment.
• Southeast venture investment rose from $3.5B in Q1 to $5.5B in Q2, concentrated in Later VC financings. Tennessee followed a different quarterly pattern, recording its highest capital deployment in Q1 before returning to a more typical level in Q2. The difference reflects that regional capital totals move with large later-stage rounds, a stage in which Tennessee records comparatively few financings.

 

Tennessee deal activity

H1 2026 deal volume & capital

Key takeaway: Tennessee deployed much more capital in H1 2026 despite a lower deal count, highlighting the fact that investment growth was primarily driven by larger rounds rather than increased deal activity across the state. Q1 data further showcases this dependency on the timing of a few large deals, with a significantly higher amount of capital invested as well as a greater median pre-money valuation, compared to Q2.

• Tennessee completed 87 venture deals in H1 2026 (44 in Q1, 43 in Q2), compared with 106 in H1 2025 (–18% YoY), while total capital invested increased from $728.1M to $972.3M (+33% YoY). The combination of fewer financings and higher total capital reflects a small number of larger financings rather than a decline in investment activity.
• Tennessee invested $683.4M during Q1, more than double the 2025 quarterly average of $317.2M, while the median deal size declined to $0.7M, the lowest in the comparison period. The combination of record aggregate capital and a low median deal size indicates that quarterly investment was influenced by a small number of large transactions alongside a broad base of smaller financings. Q2 returned to a more typical capital profile, with $288.9M invested and a median deal size of $2.4M.
• Tennessee recorded $972.3M in venture investment during the first half of 2026, equivalent to approximately 77% of the $1.27B invested during all of 2025. Quarterly capital deployment remains dependent on the timing of a few large financings.

Capital invested by stage – H1 2026

Key takeaway: Early VC was Tennessee’s largest stage by capital invested through H1 2026. Pre-Seed/Seed’s rebound in Q2 reinforces that the state’s early-stage pipeline remains healthy and active, while its relatively small number of Later VC deals continues to create volatility in quarterly investment totals.

• Early VC totaled $626M during H1 2026, accounting for approximately 64% of all capital invested. Investment declined from $432.4M in Q1 to $193.7M in Q2 but remained the largest financing stage in both quarters.
• Later VC investment declined from $240.9M in Q1 to $34.9M in Q2, accounting for much of the quarter-over-quarter change in total capital deployed. Because Tennessee records relatively few Later VC financings, the timing of individual large rounds can have a significant effect on quarterly investment totals.
• Pre-Seed/Seed investment rose from $9.9M in Q1 to $53.6M in Q2, its highest quarterly level since Q2 2025. The rebound suggests that Q1’s lower seed investment reflected quarterly timing rather than a sustained change in early-stage financing activity.

Deal size distribution

Key takeaway: The typical round size in Tennessee remained relatively small, with just a handful of large deals accounting for a significant share of the total capital invested in H1 2026, evident in the large gap between median and top-decile deal sizes. This gap further highlights the theme of a few large deals influencing quarterly capital invested.

Sector distribution & trends (2025-Q2 2026)

Key takeaway: Although Tennessee’s venture activity stayed concentrated in its largest industries, Information Technology and Healthcare, H1 2026 also showed encouraging signs that the state is becoming increasingly active across additional industries. Business Products & Services saw the largest increase in deal activity during the half and finished level with Healthcare at 19 deals, suggesting Tennessee’s venture ecosystem is broadening beyond its traditional sectors.

• Information Technology led with 28 deals in H1, followed by Healthcare and Business Products & Services with 19 each. This aligns with national venture trends, where software-related companies account for the largest share of deal activity.
• Business Products & Services accounted for the half’s most notable shift, rising from 7 deals in Q1 to 12 in Q2 and matching IT as the most active sector in Q2. 

Investor activity

Top active investors, deal count

Key takeaway: Investor participation in Tennessee during H1 2026 included a mix of recurring and new investors and, while InvestTN (LaunchTN) remained the state’s most active investor by deal count, the largest capital commitments came from a small number of institutional investors. Syndicate size stayed around 2-2.5 throughout the half, meaning most Tennessee financings involved relatively small groups of roughly two to three investors per deal.

• Of the 47 disclosed investors that participated in Q2 deals, 5 had also participated in Q1, including InvestTN (LaunchTN), while 42 did not. A large share of Q2 investors were first-time participants for the year, while state programs such as InvestTN (LaunchTN) were among the few active in both quarters.
• Among deals that disclosed investors, syndicate size averaged 2.45 per deal in Q1 and 2.00 in Q2, meaning Tennessee rounds are typically one to three investors rather than large groups. The Q2 decline reflects a handful of deals and thinner disclosure rather than a broader trend.
• InvestTN (LaunchTN), the most active investor by deal count, had a median disclosed check of about $0.4M in H1 2026, while Andreessen Horowitz’s single Tennessee financing into Standard Nuclear during the period was $140M. The comparison illustrates that investor participation and capital deployment are not always aligned, as a relatively small number of large financings can materially influence quarterly investment totals.

Geographic concentration of deals

Key takeaway: Nashville remained Tennessee’s largest and most active venture hub during H1 2026, but we are starting to see venture activity become increasingly distributed across the state. Nearly three-quarters of Q2 deals occurred outside of Nashville, suggesting that venture growth is no longer concentrated in a single market and is gaining momentum across multiple different regions.

• While Nashville remained Tennessee’s primary venture hub, accounting for the largest share of statewide activity, venture activity showed signs of expanding across markets including Knoxville, Chattanooga, Memphis, Murfreesboro, Smyrna, Jackson, Oak Ridge, and Johnson City.
• In Q2, 32 of 43 deals (~74%) occurred outside Nashville, highlighting meaningful participation from communities beyond the state’s largest startup ecosystem.
• The geographic distribution of venture activity suggests Tennessee’s startup ecosystem continues to develop across multiple regional markets rather than being concentrated in a single city.

Notable Tennessee deals

• Honest Health (Nashville) – $140.0M, healthcare practice management
• Standard Nuclear (Oak Ridge) – $140.0M, alternative energy equipment
• Type One Energy (Knoxville) – $100.0M, alternative energy equipment
• Connect Music (Memphis) – $80.0M, music and entertainment
• Firebird Music (Nashville) – $71.2M, media and information services
• LIS Technologies (Oak Ridge) – $64.1M, electronic equipment and instruments
• Indigo (Nashville) – $50.0M, commercial/professional insurance
• Recap Financial Ventures (Franklin) – $31.6M, commercial products
• Bentkey (Nashville) – $30.0M, entertainment software
• Trillium Renewable Chemicals (Knoxville) – $29.0M, multi-line chemicals (Source: PitchBook as of 7/14/2026)

Peer comparison & exit activity

Key takeaway: Although Tennessee had the smallest median deal size among its peers in the Southeast region, the state produced 20 acquisition exits in H1 2026, ahead of all peer states except North Carolina. We view this contrast as a reflection of the state’s earlier-stage market, rather than poorer company quality or reduced exit opportunities.

• Tennessee’s $2.2M median deal size trailed North Carolina ($3.8M), Virginia ($3.6M), Georgia ($3.0M), and Florida ($2.5M). Because median size in part reflects stage mix, the gap suggests Tennessee’s venture market is weighted toward earlier-stage financings rather than indicating differences in company quality or access to capital.
• Tennessee recorded 20 acquisition exits, level with North Carolina and ahead of Georgia and Virginia (18 each), despite having the smallest median deal size of the group. North Carolina matched Tennessee’s acquisition total despite a median deal size approximately 70% higher, highlighting the fact that acquisition activity is not solely a function of typical financing size.
• Tennessee recorded no IPO exits, alongside Georgia, while Florida, North Carolina, and Virginia recorded 4, 2, and 1. With only seven across four peers combined, Tennessee’s absence was consistent with broader regional conditions. Among Tennessee acquisitions, Tennessee-based buyers accounted for the largest share, with the remainder spread across nine states, indicating acquisition interest extended beyond a single regional market.

Outlook: what to watch in H2 2026

United States

• Watch whether Q2’s pullback holds. U.S. Capital is unlikely to repeat Q1’s $268.4B, and a drift back toward the $70-90B range would confirm those large late-stage rounds as a one-time concentration. However, H2 quarters holding above $140B would suggest a structurally higher baseline.
• Valuation trends and exit activity will remain key market indicators. Whether the public-market exit window reopens in H2 is the most consequential national variable for Tennessee’s later-stage companies, since it governs both exit paths and late-stage pricing.

Southeast

• Regional capital deployment will be an area to monitor following Q2’s increase. The region’s $5.5B Q2 rested on a few larger later-stage rounds, so H2 will separate signal from noise. Sustained capital across more financings would mark genuine regional deepening, while a return toward its 2025 range would confirm Q2 as a single-quarter concentration.
• Regional deal count has held between roughly 340 and 440 for six quarters, and that stability is the baseline to watch. A move outside of that band in either direction would be the first real break and a leading signal that regional conditions are shifting beneath the noisier capital totals.

Tennessee

• The balance between deal volume and capital deployment will remain a central theme. Tennessee’s quarterly capital will keep hinging on a handful of large rounds until the median deal size stabilizes. Another quarter near Q2’s $2.4M would signal capital spreading across normally-sized rounds, while a return toward Q1’s $0.7M would mean the totals still turn on a few deals.
• Stage and sector composition will be important indicators of market activity. The Business Products & Services jump from 7 to 12 deals and seed’s rebound from $9.9M to $53.6M are the two early-stage threads to follow. A second B2B quarter would confirm broadening beyond IT and Healthcare, and a sustained seed base would be the leading indicator of future early-stage deal flow.
• Later-stage capital is Tennessee’s defining H2 variable, as a rebound from Q2’s $34.9M would frame the state’s Q2 divergence from the Southeast as a matter of timing, while continued weakness would point to a structural later-stage gap that shapes how much of the region’s later-stage capital the state can capture.

Perspectives from InvestTN

• Capital is deepening, not contracting. H1 capital rose about 33% year over year even as deal count fell about 18%. We read this as Tennessee’s market maturing toward larger, more concentrated rounds rather than slowing down, and we expect the more telling signal in H2 to be whether typical round sizes hold up, not whether any single quarter sets a record,
• The early-stage pipeline is doing its job. Seed capital moved from $9.9M in Q1 to $53.6M in Q2, and early-stage rounds carried the majority of the half’s capital. We see a healthy top of the funnel, and our focus for H2 is ensuring the companies raising seed and Series A today have the follow-on capital to graduate to the next stage in Tennessee
• Later-stage depth is the clearest priority. Tennessee’s capital pulled back in Q2 while the broader Southeast reached a record, and the gap sits at the later stages where the state has the fewest financings. Closing that later-stage gap is the single most important thing we can influence to raise the ceiling on what Tennessee’s venture market can support.
• Venture activity is increasingly statewide. In Q2, 32 of 43 Tennessee financings (~74%) occurred outside of Nashville, reaching Knoxville, Chattanooga, Memphis, Oak Ridge, and other smaller communities across the state. Nashville remains our largest hub, but capital is forming well beyond it, and we read that breadth as a durable feature of Tennessee’s market rather than a single-quarter result. 
• Sector activity is broadening beyond its traditional core. Business Products & Services rose from 7 deals in Q1 to 12 in Q2, finishing level with Healthcare at 19. Energy accounts for few financings but some of the state’s largest, including Standard Nuclear ($140M) and Type One Energy ($100M) in East Tennessee. We’re watching whether B2B holds for a second quarter and whether Energy activity continues to build.

Glossary

Capital Deployment: The total dollar amount invested across all completed venture financings during a given period. Throughout this report, “capital deployment” and “capital invested” are used interchangeably.

Early VC: A stage of venture capital financing for companies that have demonstrated a viable business concept and are beginning to scale. Under PitchBook’s methodology, this stage generally includes companies founded fewer than five years before the financing and is typically associated with Series A and Series B rounds.

Institutional Investor: An organization that invests capital on behalf of clients, shareholders, or members. Examples include venture capital firms, private equity firms, pension funds, insurance companies, mutual funds, and family offices.

Later VC: A stage of venture capital financing for more mature startups that have established commercial traction and are scaling operations. Under PitchBook’s methodology, this stage generally includes companies that are at least five years old or financings identified as Series C or later.

Median Deal Size: The midpoint of all venture financing amounts within a given group of deals, where half of financings are larger and half are smaller.

Pre-Money Valuation: The value of a company investors determine before they invest capital.

Pre-Seed/Seed: The earliest stage of venture capital financing, when startups are developing their business concept, product, or initial market traction. Under PitchBook’s methodology, this stage generally includes companies receiving their first institutional investment before progressing to Early VC.

Syndicate: The group of investors participating in a single financing round. A syndicate may consist of one lead investor and multiple co-investors that collectively provide capital to a company.

Top-Decile Deal Size: The deal size at the 90th percentile of a group of venture financings. It represents the largest 10% of financings and is often used to illustrate how exceptionally large deals influence overall investment trends.

Venture Growth: The most mature stage of venture capital financing, when companies have achieved significant scale and are raising capital to accelerate growth ahead of a potential exit or public offering. Under PitchBook’s methodology, this stage generally includes Series E and later financings.