One of Chattanooga's first angel funds that helped propel the city's entrepreneurial economy has sold its interest in a second successful startup, helping the fund to recapture more of its initial $3.1 million of investments in local and regional startups.
Chattanooga Renaissance Fund (CRF), which was started in 2010 to help provide seed capital for new businesses, said it has sold its interest in the Nashville-based Inova Payroll for an undisclosed amount.
Inova Payroll, an award-winning payroll and human resources service provider that was on the Inc. 5000 list of America's fastest growing companies for each of the past two years, agreed last month to merge with Atlanta-based Payroll Strategies as part of a recapitalization with the private equity firm of Tritium Partners.
"This transaction brings together two complementary businesses, along with a significant capital investment to fund our expanding services and national footprint," said Farsheed Ferdowsi, Inova Payroll's founder and CEO.
David Belitz
Farsheed FerdowsiPart of Inova's initial growth came through its 2012 acquisition of Computerized Payroll Services (CPS) in Chattanooga, where the company still maintains an office.
David Belitz, managing partner for the Chattanooga Renaissance Fund, said the sale of the fund's stake in Inova Payroll marks the second successful exit following the $11.5 million purchase of Quickcue by OpenTable in 2013.
The initial $3.1 million fund created by about 15 investors in the Chattanooga Renaissance Fund in 2010 has returned about 10 percent of the initial investment back to its founders from the sale of Inova, Quickcue and other businesses. The fund continues to gain from the harvesting and repayment of the dozen or so businesses still in its portfolio. Belitz said.
The Chattanooga Renaissance Fund created a second seed capital fund in 2014 with another $7.6 million of investment and that fund continues to make investments in startup companies in the region, Belitz said.
Belitz said the seed fund was established in 2010 as one of the first angel funds in Chattanooga, although the Jump Fund, Dynamo and others have since been added in the city.
The Chattanooga Renaissance Fund was created at the same time that EPB introduced the fastest citywide internet service in the Western Hemisphere and proclaimed Chattanooga as "Gig City." In 2015, Mayor Andy Berke designated 140 acres in the central city as an "Innovation District" to capitalize on EPB's Gig service, a number of business incubators and venture funds and research efforts by the Oak Ridge National Laboratory and the University of Tennessee at Chattanooga.
Chattanooga also is home to one of the state's first business accelerators, The Company Lab in the Edney Building, and the state's biggest business incubator, the Chattanooga Business Development Center on the North Shore.
"We really got started with CoLab and GigTank and all of those creative endeavors in 2010 and we've spun out a lot of companies that have had a chance to establish themselves and grow," Belitz said. "Over the next few years , we hope if the cycle continues as it should we'll see even more companies begin to scale into profitable companies on their own or they sell to other companies as part of strategic acquisitions."
Belitz said the Chattanooga Renaissance Fund has worked with other angel and venture funds across Tennessee, including a joint share in Inova with the Tennessee Angel Fund (TAF) which Tritium Partners just acquired.
TAF is a statewide angel co-investment fund and is part of the TNInvestco Program. Founded in 2009, TNInvestco is a state government-based fund aimed to create jobs by increasing the flow of capital to innovative, early-stage Tennessee-based companies through its relationships with a cross section of venture capital funds in Tennessee.
"These relationships across the state are critical," said Belitz, who also serves as CEO of The Lupton Co., in Chattanooga. "Working with other TN-based venture groups like TAF and Nashville Capital Network has bolstered CRF's ability to better identify, engage, and exit early-stage companies and thus, drive stronger returns for investors."
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.