'Group think' among local VCs?

It was perhaps the most compelling question posed by moderator Nancy Falls to a panel of health care venture capitalists yesterday at an event sponsored by the Nashville Health Care Council and Nashville Capital Network. The Tatum managing partner — having heard one panelist’s anecdote about an entrepreneur’s off-handed comments getting cycled quickly through the local venture capital community — asked whether Nashville’s close-knit nature could create a group think environment that would make it difficult for an entrepreneur to secure funding if one or two VCs first turned him down. Of course, the unanimous response was “no.” Local panelists Grant Jackson of Council Ventures, Hal Andrews of The Martin Cos. and Harry Jacobson of TriStar Technology Ventures all agreed that group think isn’t a real danger for any VC firm that's really doing its job. If one company turns down an idea, that creates an opportunity for another VC, Jackson said, not only a chance to see something in the deal that others haven’t, but also to get a better valuation. Andrews explained that the differences among local companies' expertise and investment strategies mean that when one VC turns down a deal, it may be because it's simply better suited for another firm, and that local firms often refer deals back and forth. Jacobson was most succinct: “I think there’s a finite risk in that. Any finance group that’s using group think is not going to have a next fund.”

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