It Takes a Village…To Fund in Nashville

As winter’s chill begins to tiptoe into the Northeast, Williamstown, Mass.-based Village Ventures is heading to Nashville to launch its latest fund.

The vehicle, tentatively named Titan Ventures, was still awaiting trademark confirmation at press time. It is the ninth fund the firm has conceived since its January inception, and one of four scheduled to open this fall. In addition to Nashville, Village Ventures recently launched funds in Boise, Idaho, Charlottesville, Va., and Providence, R.I., extending its reach to seven states.

The Nashville-based offering is Village Ventures’ first to focus primarily on early-stage companies located in Tennessee and throughout the Southeast. But it wasn’t the city’s vibrant music culture that lured the firm to set up shop there. Manager Tuff Yen said the area is vastly under-served for start-ups seeking initial venture backing.

“We generally look at cities with a high quality of human capital, good educational institutions and strong community wealth and capital base,” Yen said. “Nashville has all of these things, and there is a desperate need for early-stage capital, which makes it an attractive place to set up a venture capital operation.”

Yen declined to divulge the participating LPs or the fund’s exact target capitalization, but he did reveal that it will probably be similar in size to previous vehicles. According to a firm press release, typical Village Ventures funds are capitalized at $10 million to $15 million.

Over the next three to four years, the Nashville vehicle will invest in eight to 12 technology companies, with a specific focus on health care, information technology and life science.

It’s likely to receive a warm reception. With Vanderbilt University and educational think-tanks like The Oak Ridge National Laboratory – a science and technology research institution managed by the U.S. Department of Energy – pumping entrepreneurs and new technologies into the greater Nashville area at a rapid clip, the early-stage market in those sectors is booming.

Still, most of the VC firms on the ground there deal primarily with later-stage companies and make larger investments than Village Ventures is planning.

Indeed, although it doesn’t have any hard and fast investment criteria, the firm will generally steer clear of companies with valuations of more than $50 million. As with its other vehicles, Village Ventures plans to take 10% to majority ownership positions in its portfolio companies and make investments between $500,000 and $2 million.

“The size of the investment and the stake we hold will depend on the quality of a company’s management team, its position in the marketplace and the potential market opportunity for its products and services,” Yen said.

Under the fund’s strategy, the firm will take a lead investor role in a majority of its investments, contribute the first institutional money and take seats on the companies’ boards.

PlanetWe, a Nashville-based company Yen founded to provide corporate services such as human resources, finance and information technology to small and medium-sized companies, will also play a significant role in helping the start-ups get off the ground.

“We’ve built a good support system for these companies in an area where there has been a lack of a concerted effort to do so before,” he noted.

The fund is already looking at two investments, but Yen declined to give any details, saying it was still too early in the process.

New England Village Gets Banked

In related news, Portland, Maine-based Banknorth Group, New England’s third-largest banking and financial services company, has agreed to invest $7 million in several of Village Ventures’ offerings in that region. The investments will be made locally by Banknorth’s subsidiary banks located in the market areas of each vehicle.

Under the arrangement, Village Ventures will become a distribution outlet for venture capital investments made by the bank, said Matt Harris, the firm’s chief executive, in a prepared statement.

And, as part of the deal, Banknorth will be able to invest in new companies in markets where it already has a strong presence.