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The Q2 2022 Tennessee VC Deal Report

Launch Tennessee periodically publishes essays written by entrepreneurs, investors, and supporters of the startup ecosystem here in Tennessee and across the southeast region, sharing thoughtful and unique observations and perspectives on the business landscape and the challenges they’re encountering. Today on the blog, we are joined by Launch Tennessee’s very own Capital Analyst.

Post By: Evan Prislovsky, Capital Analyst at Launch Tennessee

We are excited to share our first Tennessee Deal Report, encompassing all venture capital funding raised by Tennessee startups in the second quarter.

In the past few quarters, our capital team has been following national data on funding trends across different ecosystems. This quarter, Tennessee appears to be somewhat insulated from the national slowdown of funding activity, as we saw a slightly higher total round volume. In Q2, we saw 52 TN companies raise $342M in funding, a 37% increase from Q1. However, YoY has shown a 26% tumble in Q2, despite the decrease in deal size from last year. Both quarters in Q1 and Q2 have shown increased funding, reflecting continued growth in the ecosystem this year.

Over the past few quarters, we noted that the number of deals has appeared steady, but the average deal size has increased. We also noticed investors have been pouring more money into later-stage companies as it attracted ~70% of all the investments in Q2 compared to the previous quarters.

Where we saw some shifts this quarter was in industries receiving funding. Continuing on several quarters, most funding went to healthcare companies; an industry well-represented historically across the state. However, we saw significantly more funding to blockchain companies as well – a category that has seen robust growth since the latest TN DAO legislation. We believe this is an area to watch in the years ahead. Several blockchain-based companies that raised rounds this past quarter also act as builders of Web3, laying the critical infrastructure for the southeast.

Below are a few key trends from TN deal activity in Q2:

  • Quarterly funding was up ~37% from Q1 this year. Going against most ecosystems as we saw a retraction in funding on a national scale. Numbers remain down on a YoY basis.
  • Q2 saw an increased volume of deals in Technology, Media, and Telecom (TMT) and Fintech categories on a QoQ basis. Middle Tennessee, including Nashville, is attracting most of the investment activity.
  • The increase was driven primarily by volume and larger deals, with 52 companies raising rounds compared to Q1’s 57 as the average check size increased by ~24%.
  • Slight uptick in financing in West Tennessee (QoQ)

To view or download the full report, click here. If you’d like to receive future Tennessee Deal Reports from Launch Tennessee, sign up for our newsletter, The Pitch.

For any questions or to share data you would like to see in the next report, contact Evan at evan@launchtn.org.

Evan Prislovsky is a Knoxville native and graduate of Appalachian State University where he studied Finance and Banking. He currently serves as Launch Tennessee Capital Analyst. His prior experience includes working with nonprofits in Southeast Asia and apprenticing at a financial advisory firm that helped people spend, save and invest better. When not working, you will find Evan running, traveling or building a passive income.

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