Swift Wing Ventures quietly preps for massive investment campaign in Chattanooga

Swift Wing Ventures quietly preps for massive investment campaign in Chattanooga

June 8th, 2014 by Ellis Smith in Business Around the Region

The Fleetwood building on 11th Street.

Photo by Erin O. Smith/Times Free Press.

The Woople building features murals on the outside and a zany, creative vibe on the inside.

Photo by Erin O. Smith/Times Free Press.

John Foy

Photo by Contributed Photo/Times Free Press.

Todd Philips, CEO, Noon Management, president, Wealth Preservation Advisors and Founding Partner, SwiftWing Ventures

Photo by Contributed Photo/Times Free Press.

Paul Cummings

Photo by Dan Henry/Times Free Press.

Ben Brown

Photo by Contributed Photo/Times Free Press.

SwiftWing support companies

• DevStudio42

• DevLabs42

• FiveWows

• TechTown

• Dizzy Stripes

• Creative Insomniacs

• SwiftWing Accelerator

• SwiftWing Fund I, L.P.

Source: SwiftWing Ventures

Who's Who

John Foy

Chairman, Noon Management

Founding Partner, SwiftWing Ventures

Todd Philips

CEO, Noon Management

President, Wealth Preservation Advisors

Founding Partner, SwiftWing Ventures

Paul Cummings

Owner / CEO, Paul Cummings Worldwide

Founding Partner, SwiftWing Ventures

Ben Brown

CEO, SwiftWing Ventures

Source: SwiftWing Ventures

A fresh group of venture capitalists are poised to explode onto Chattanooga's budding entrepreneurial scene, seeding millions of dollars across a portfolio of 10 to 15 new businesses and challenging existing investors in what could become a competition for talent.

The group is anchored by partners John Foy, the financial whiz who helped build malls for publicly-traded CBL across the U.S., and Paul Cummings, the fast-talking guru behind Woople and a management sage hired by a who's who of Fortune 500 companies to train their staff.

Foy and Cummings come from different worlds, but they've got the same mantra when it comes to building Chattanooga's entrepreneurial class. They call their firm SwiftWing Ventures, and they're moving quickly to pull together an enterprise that could become the largest investing entity in the Scenic City.

"We're pretty wide open, we're looking for anybody who has a crazy idea," said Cummings, founding partner of SwiftWing.

The group has already secured the Fleetwood Building on 11th Street, where they will eventually move much of their talent as they bring a handful of support businesses on line. Those businesses will both seek outside contracts as well as support internal efforts to assist young companies as they grow, upping the ante by adding marketing and sales support now often available in traditional accelerator programs.

THE MODEL

Their model borrows elements from both the Chattanooga-based Lamp Post Group, a venture incubator, as well as from traditional investment funds, like the Chattanooga Renaissance Fund. SwiftWings as currently planned, will aim to make so-called "series A" investments in the $1 million range for more mature startups who have graduated from previous incubator programs and are ready to vastly increase their scale in a short period.

"It's more of a post-graduate program," said Foy, who is also investing in new ventures separately through his entity, Noon Management.

When companies come out of accelerator programs, they're no longer looking for $50,000 or $100,000 investments, said Foy. They need big dollars to hire a large marketing and sales staff and mass produce their product. Instead of companies seeking $1 million or $2 million investments in New York or Silicon Valley, Cummings and Foy hope that businesses can find the dollars they need in Chattanooga.

"The way I've always thought about it is you've built one version of your product, now you need to hit the copy button and do it on a much larger scale," said Ben Brown, CEO of SwiftWing. "There are nine state accelerator programs. What we want is to be a next step for companies who have been through those."

That said, SwiftWings is agnostic when it comes to where a company resides. One company they plan to grow works out of Kansas City. They wouldn't have a problem investing in an Atlanta-based business. The key, in this case, is to make smart investments that yield a good return, bringing more capital back to Chattanooga where it can be reinvested.

"We think if we do this well, naturally this will attract companies to Chattanooga, this will be a byproduct, but we're not going to force that because we don't think that's the best way to operate," Brown said.

SwiftWing is far from the first company in Chattanooga targeted at growing jobs by incubating startups or making investments, but its ascent could kick off a new era for the Scenic City, which until recent years didn't have a reputation as a haven for entrepreneurs.

THE PROCESS

Here's how it works:

Disruptive ideas lead to new jobs. But to fund those jobs, entrepreneurs need investors who can fuel a business from inception to success. And for years, Chattanooga has suffered from a shortage of venture capitalists willing and able to support young companies.

Many of Chattanooga's moneyed elite were scared away by the public meltdown in 2002 of st3, a Chattanooga-based streaming media firm that was ahead of its time. YouTube wasn't founded until 2005, and st3 lost $30 million in investments.

In 2006, a grassroots movement called CreateHere was founded to revitalize the city's ailing Main Street and Southside corridors by encouraging artists and entrepreneurs to call Chattanooga home. The Company Lab, now called CoLab, was one of these efforts.

In the years since, spurred in part by the work of former CoLab executive director Sheldon Grizzle, a number of funds in the city have appeared, including the Chattanooga Renaissance Fund, the JumpFund, Spartan Ventures and Blank Slate Ventures.

But businesses don't just need money and mentors, they also need space. The Lamp Post Group, founded by the former owners of logistics company Access America, provides companies with space to work, as well as accounting and human resources support.

Jack Studer, a partner at Lamp Post, said the arrival of a competitor of sorts will boost the fortunes of investors with disruptive ideas that need support to get off the ground.

"It's a potential bar raiser, and everyone who enters and potentially raises the bar is a good thing," Studer said.

But the real measure of success isn't necessarily the arrival of new entrants in the investing scene, it's the successful exits that count, when investors sell their companies for a profit. Studer estimates that following the successful sales by Chattanooga investors of Quickcue to OpenTable for $11.5 million, and Access America to Chicago-based Coyote Transport for hundreds of millions of dollars, it will take the city's venture community another five years to hit full speed.

"We started out so far behind the 8-ball it's hard to tell if we've caught up, but really we're not going to be able to tell until we see exits, that's the only finish line in this game that exists," he said. "The only way it works is when you have one win, and turn it into two wins, and turn it into three, and then you're a slugger and hit home runs."

Lamp Post also encourages companies to provide services to each other, and provides back-office help to its entrepreneurs so they can focus on creating a product. For instance, creative agency Fancy Rhino may create a marketing video for Bellhops, a moving company, and the Lamp Post accounting department can take care of bookkeeping.

Support companies

SwiftWing is in the process of building out its support companies, many of which already exist in some form.

"These days, it's kind of the ante to play the game to have back office support services, and we want to go beyond that to have creative services," Cummings said.

Creative Insomniacs, a creative agency, is already working out of the Woople offices on the north shore. There's also DevStudio 42, a development studio for businesses' programming needs, a human resources department, a legal team, accounting, sales, and even marketing and finance support in the works.

"With the support companies, we want to make sure they're self sustaining and profitable on their own, we also want to make sure they have the ability to support the companies we're going to invest in," Cummings said. "What's usually lacking the most in startup companies is sales discipline and support discipline. You usually have a very bright product guy who doesn't know how to capitalize the company. That's where we want to be involved, and we think our collective skill sets will make us a good support for those companies."

The eye-catching design of the Woople building, which features murals on the outside and a zany, creative vibe on the inside, could make its way to the five-floor Fleetwood building once Cummings gets his hands on it. There, on a traditionally quiet block of 11th Street, SwiftWings plans to take the first step in a series of planned moves to bolster Chattanooga's reputation as a good place to start a company.

Cummings also sees tech education as a need. If companies are to hire the developers and designers they require, it's helpful to have those skills here in Chattanooga.

That's why he's separately developing TechTown, a learning center for 400 children aged 7 to 18 that will appear in Chattanooga in the next six months, he said. Though the location of the building isn't yet announced, Cummings' plan is to help children learn the skills they'll need to fuel Chattanooga's technology growth, while developing a portfolio of work they can use to get into the college of their choice.

"Increasingly companies are built on software rather than a tangible product," Brown said. "The developers are the key to this."

SwiftWing is still working to pick up additional investors who will support its efforts, and thus the size of the venture fund isn't yet clear. Though the firm has yet to fund a business, they've already had meetings with several prospects, officials said. Until the Fleetwood building is complete, the various companies will remain housed in the Volunteer Building and Woople offices.

Contact staff writer Ellis Smith at 423-757-6315 or esmith@timesfreepress.com with tips and documents.