Is Chattanooga the sweet spot for early stage medtech innovators?
Much has been made of Chattanooga’s rising prominence as a hub for entrepreneurial innovation across multiple industry sectors. Inc. reported in 2018 Chattanooga created $1.8 billion in startup exits in under five years. The city was also named on a 2018 heavy-hitting list of “16 High-Tech Cities You’ll Want to Call Home,” by Entrepreneur.com.
Led by CEO Paul J. Fitzpatrick, Advanced Catheter Therapies (ACT), relocated from Atlanta to Chattanooga in 2011 and changed its name from Atlanta Catheter Therapies as part of a $2.3 million preferred series A equity round. A number of local Chattanooga based investment funds and angel groups participated including Chattanooga Renaissance Fund (CRF), ACTI Investments, The Maclellan Foundation and Innovate Here.
“When we won a grant opportunity from the Innovate Here group in 2011 we were very appreciative, but we really needed a bigger funding round at the time in order to expand our development efforts and satisfy the program’s relocation requirement,” Paul explained. “Dr. David Adair, Charlie Brock and David Belitz said, once you get here, let’s connect the dots and that’s where the ecosystem really kicked in.”
Given the specific needs for medtech innovators compared to other industries, how does meet Chattanooga them?
“Chattanooga ticks most of the boxes a young medtech company or entrepreneur needs and then some,” Paul told us. “It has lots of other entrepreneurs and business people, incubator and warehousing space, funding sources and Gigabit internet. It has higher education and large health systems like UT and Erlanger, Blue Cross Blue Shield and Unum. It also has allied support services including legal and accounting, an extruder and 3D printing expertise.
“Chattanooga is a small city with a truly supportive entrepreneurial spirit, lots of great restaurants, pubs, activities and entertainment. It also has a growing housing market and plenty of outdoor activity opportunities to help attract talent.”
There’s even a contract medical device manufacturer, Integer Medical, in Dalton Georgia and the Global Center for Medical Innovation (GCMI) is only two hours from Chattanooga – both within reasonable proximity of the city.
A statewide and local funding village
The public sector’s commitment to innovation growth as a whole is strong throughout the state, inclusive of public-private partnerships like Launch Tennessee. That commitment engenders robust local support through the city’s Innovation District, managed by the Enterprise Center. Further support comes from The Chattanooga Chamber through their INCubator startup program and the non-profit startup accelerator CO.LAB.
“In addition to state-supported funding sources, there are a significant number of angel investors, small funds and seasoned medtech investors based here in Chattanooga,” Paul says. “These include Solas BioVentures, the Chattanooga Renaissance Fund and the Maclellan Foundation. When you add all of these elements together, along with a very high quality of life and a wholly supportive entrepreneurial community and network, Chattanooga is hard to beat.
“I can’t express to readers enough how valuable the variety of support types are here in Chattanooga – be they financial, business acumen or space and facilities,” Paul continues. “If you live in the medtech innovation realm, Chattanooga can make a great home, especially for startups.
“When it was time for a series B, every series A investor in ACT re-upped or expanded their investments and it felt as if the State of Tennessee wanted to help.”
ACT added a handful of high net worth Chattanooga and Nashville-based angels, a matching investment from Launch Tennessee’s Incite Fund, Innova Memphis Fund, and a large California licensee in an oversubscribed round that totaled $4.5 million in 2015.
“If ACT decides to move to a commercialization track instead of licensing, we will likely need an eight-figure round next,” Paul says. “We aren’t likely to find that source locally, which means we’ll need to go to the West Coast, Boston or Minneapolis for this capital raise.”
According to Paul, more lab space, series C investors, a larger scale manufacturer, and an organization like GCMI who can provide a one-stop shop for prototyping, regulatory guidance and logistics would be welcome additions to Chattanooga’s burgeoning medtech innovation and startup ecosystem.
“Those assets would be of tremendous value given the requirements of large strategics who are starting to demand their investments or acquisitions take 100% of the risk out of the equation when it comes to
FDA clearance, patents, reimbursement, clinical data, safety, efficacy and adoption, utilization and revenue,” Paul says.
Connect with southeast medtech ecosystem at the 2019 SEMDA Medtech Conference April 8-10 in Alpharetta, Georgia.