ORNL and the University of Tennessee are plainly the Knoxville area’s two biggest economic assets. Not only are they among the area’s largest employers of the present, but they’re also the source of inventions and technologies that hold potential for spurring its future economic growth.
Indeed, fostering the emergence of a host of high-tech ventures that harness this potential has become the holy grail of economic development in the area that’s dubbed itself Innovation Valley. And it would appear to be a more promising strategy than the traditional quest to get big employers to locate plants or other facilities here.
Yet while there have been some notable successes, the goal has been a somewhat elusive one. New technologies may abound, but they are only one ingredient in the mix needed for building successful enterprises that create lots of high-paying jobs. What’s also needed are the entrepreneurial and managerial skills to take them from conception to fruition, and the venture capital needed to fund their efforts through what’s often a lengthy gestation period.
Pulling all of the ingredients together in what the Knoxville Chamber’s Executive Vice President Rhonda Rice calls an “ecosystem” is a big part of the mission of Innovation Valley, Inc., a consortium of economic development agencies in Knoxville’s five-county metropolitan area. And they are partnering as well with organizations such as Tech2020 in Oak Ridge and UT’s Research Foundation.
No fewer than four business incubators in the area offer low-cost space and support to fledgling enterprises until they reach a stage of readiness to start producing and selling product from a larger quarters of their own. The Center for Entrepreneurial Growth, an arm of Tech2020, has long provided mentoring to these and other start-ups to help dress them for success. And UT has recently created an Anderson Center for Entrepreneurship and Innovation with a similar mission. Beyond that, Rice stresses that the “ecosystem” also brings together informal networks of individuals with specialized technical, financial, and managerial skills and a readiness to share their expertise.
What seems to be most lacking is sources of funding to sustain these fledgling enterprises. For a time, about five years ago, it appeared as if a significant influx of venture capital was headed to Innovation Valley. A group of local investors (of whom Jim Clayton, Jim Haslam, and Rodney Lawler were the most prominent) put $35 million into a fund that was designed to co-invest with a venture capital arm of Battelle, the firm that partners with UT in the management of ORNL. Innovation Valley Partners, as the fund is known, had a resident partner, Glenn Kline, who was expected to work closely with ORNL’s tech transfer team. But the only local start-up that emerged, Ampulse, soon took its promising technology for making photovoltaic solar panels and relocated to the Denver area. And Kline himself has since moved to Singapore, leaving IV Partners with no one on the ground here.
Two other venture funds co-managed by Oak Ridger Grady Vanderhoofen garnered $50 million in mostly federal funding, but with the stipulation that most of it had to be invested in rural Southern Appalachia. So only two Knoxville-area start-ups, Protein Discovery and Aldis, got any of that money.
At the depth of the recession in 2009, then-Gov. Phil Bredesen took a bold step to generate more venture funds throughout the state. A program known as TNInvestco allocated up to $200 million in state tax credits for investment in Tennessee-based start-ups. But of the 10 firms selected to manage these funds, all but one were based in Memphis and Nashville, with none in East Tennessee. While the state Department of Economic and Community Development has insisted that these managers would be investing on a statewide basis, of the $30 million invested in 53 companies that’s been reported to date, only two investments totalling $650,000 have come to the Knoxville area.
One of these is $500,000 in TrakLok, the brainchild of UT graduate Eric Dobson, which is gearing up to make security and tracking systems for shipping containers. The other, which got $150,000, is Media Voices Heard, a social media enterprise launched by former UT football standout Will Overstreet that has recently moved out of a UT incubator and now has 15 employees in office space on Sutherland Avenue.
TrakLok is also one of a very short list of companies that have obtained ORNL-licensed technology anytime recently. Another is LED North America, which has licensed a graphite foam for cooling LEDs and thereby extending their life. The company’s founder, Andy Wilhelm, is presently domiciled in an Oak Ridge incubator but envisions ramping up production and moving to larger quarters with 20 to 25 employees by next year.
No doubt there are many other start-ups in prospect, but for Innovation Valley to truly make its mark, what’s needed is for some of them to grow to the proportions of the area’s singular high-tech success story, CTI Molecular Imaging. When CTI, with 650 Knoxville employees, sold out to the German giant Siemens in 2005, two of its co-founders Ron Nutt and Terry Douglass collected much of the $1 billion sale price. Fortunately for the area, both of them have turned entrepreneurial once again. Nutt has launched a firm, ABT Molecular Imaging, which is up to 12 employees and growing in Topside Business Park. Douglass is the prime mover behind a multi-faceted outpatient health care complex that’s emerging on a 120-acre site he acquired off Middlebrook Pike.
If only there were more Ron Nutts and Terry Douglasses in prospect.