Three Roots Capital Valued Partner Spotlight

J.C. Egnew, Outdoor Venture Corporation

J.C. Egnew is the Chairman and Chief Executive Officer of Outdoor Venture Corporation (OVC) and a valued partner of Three Roots Capital. As a former NASA engineer turned serial entrepreneur, Egnew is responsible for creating five manufacturing facilities and more than 1,000 jobs in McCreary County, a rural and historically economically distressed region of southeastern Kentucky.

Egnew hasn’t always wanted to be an entrepreneur. Growing up in southwestern Indiana, he graduated college with a degree in mechanical engineering. During his schooling, he was able to “get in on the ground floor” of NASA through his university’s co-op program. In 1963, he took a full-time job with the agency, first working as a rocket test engineer in Huntsville, Alabama, and later at the NASA Stennis Space Center in Mississippi.

In 1968, he decided to pursue a graduate degree in industrial management at the University of Tennessee, Knoxville, where he researched growth patterns of small businesses, featuring a local recreational camping business in his thesis work. After returning to NASA briefly upon graduation, he came back to Knoxville to serve as a vice president of manufacturing at the company he had studied during his graduate career.

After “working hard and not making any money” for a couple of years, Egnew decided it was time to start his own business. With the help of a couple of friends, he founded OVC in 1972. He began his operations in a previously abandoned building given to him by the president of the local lumber company in Stearns.

In addition to his entrepreneurial activities, Egnew is passionate about revitalizing his community. Over the years, he has actively worked to improve the wellbeing of the county, including helping bring a public library to the area, serving as the first McCreary County Chamber of Commerce President, and donating a building, which was restored and transformed into a Depot for the Big South Fork Scenic Railway. For Egnew, giving back to his community is personal.

“We’re all put on the world to make a difference for others and in a small community, it gets really personal,” he said. “It’s not like writing a check to an entity that you aren’t personally involved with. It feels good to see your neighbors and friends do better and have a better life. It’s very rewarding.”

Egnew first met Grady Vanderhoofven, Three Roots Capital President and Chief Executive Officer, more than fifteen years ago.  Ray Moncrief introduced Vanderhoofven to Egnew.  At the time, Moncrief and Vanderhoofven were partners in two venture capital funds focused on Appalachia, and Moncrief had been friends with Egnew for years and was very familiar with OVC.

“To me, J.C. is the epitome of what a successful entrepreneur can mean to a community,” Vanderhoofven said. “His economic and social impact in that county cannot be overstated. Because he chose to live in southeastern Kentucky, the entire community reaps the benefits of what he has accomplished there.  Three Roots Capital strives to support entrepreneurs and companies that positively impact their communities.”

Supporting A Rural Manufacturing Company

Outdoor Venture Corporation

Three Roots Capital supports rural entrepreneurs and companies that are dedicated to having positive economic impacts on their communities. One of our borrowers, Outdoor Venture Corporation (OVC), has a decades-long history of successful operations, job creation, and philanthropic work in McCreary County, Kentucky.

OVC is based in Stearns, Kentucky, within McCreary County. Over its 48-year history, OVC has pivoted its operations many times to meet changing consumer demands or in response to overseas competition. Originally founded as a recreational tent business in 1972, OVC is now a leading and prime supplier of critical next-generation military modular tent systems, base camp components, and military accessories.

“You have to diversify to have a long-term, sustainable business,” remarked J.C. Egnew, Chairman and CEO of OVC. “Everything has a life cycle. We diversified over the years and now have four main, different segments of our business. Rarely are they all going up or down at the same time, which gives us a lot more stability.”

Currently, OVC is collaborating with Fibrotex USA on a 10-year, $480 million contract to supply next-generation camouflage to the United States Army. As the strategic subcontractor, OVC helped Fibrotex USA establish a new manufacturing location in Stearns, which is expected to create up to 350 full-time jobs and represents a $12.1 million total investment.

“It’s not just a big deal business-wise, it’s a big deal community-wise,” Egnew explained. “If we were in a bigger city like Lexington or Knoxville, a company employing 300 people would hardly make the business page, but here, it’s very important to the community.”

Access to capital in rural regions can be complicated. Frequently, traditional lenders are less willing to make loans to businesses outside of larger cities.

“You’re looked upon as a much greater risk from a lender’s point of view,” Egnew said. “You find over time there are certain lenders that are friendly to you and that type of environment. Three Roots Capital is one of them.”

Three Roots Capital made its first loan to OVC in December 2016 and a second loan in January 2020. Both loans provided working capital to the business, and the second loan in particular helped make it possible for OVC to work with Fibrotex USA and scale up its operations.  Three Roots has had preliminary discussions with OVC about the prospect of financing the continuing growth of the business and potential additional expansion.

“As a small business, you have to have good strategic partners that can work with you in an effective way,” Egnew said.

Other industries and businesses have been hit hard by the pandemic, but Egnew shared OVC has been extremely “fortunate” to be “able to keep things going, full speed ahead” during this time.

“We’ve done everything we can to stay on our feet and move forward,” Egnew explained. “We’ve actually had three of the best months in the history of our company because of the types of essential products we happen to be making.”

For Egnew, moving to a small, rural community nearly 50 years ago was “a good decision.”

“Some people in bigger cities might ask, ‘How could you do anything in Stearns, Kentucky?’ This might not be a place for General Motors, but you need to find the right place for your business,” he said. “You have to feel good about where you are and what you’re doing. We’re very lucky. If you’ve got that, you’re great.”

Partner Spotlight: Bryan Crosby

Three Roots Capital Valued Partner Spotlight: Bryan Crosby, Southeastern Packaging Technologies

Bryan Crosby is the Chief Executive Officer of Southeastern Packaging Technologies (SPT) and a valued partner of Three Roots Capital. SPT was a local startup that has grown and matured to offer turnkey solutions for brand managers and retail partners to seamlessly transition consumer packaged goods (CPG) in automotive and household chemicals into eco-friendly packaging.

The company’s patent portfolio includes FunLPro Closure Technologies, a high-end dispensing system for CPG fluid containers, and proprietary Bag-in-Box and Stand-up-Pouch systems that reduce plastic waste by up to 85 percent and maximize storage space.

A Maryville native, Crosby was drafted to play for the Milwaukee Brewers out of high school. In 2009, he returned to Tennessee to attend Middle Tennessee State University and then worked in financial services for a few years. He returned to Knoxville in 2014 to start his MBA program at the University of Tennessee (UTK) as an Entrepreneur Fellow and to develop a business plan for commercializing the FunLPro, a unique pouring device invented by his father and business partner.

At UTK, the Anderson Center for Entrepreneurship and Innovation named Crosby one of four student-led startup company winners in the fall 2014 Boyd Venture Challenge, where he received $7,500 to finance his growing company. It was during this “Shark Tank-style” challenge that Crosby met Chris Miller, before he became Chief Financial Officer at Three Roots Capital. The two stayed in touch, and Miller connected him with the rest of the Three Roots team after Miller joined Three Roots.

“I always enjoy working with Three Roots because they know their space better than anyone,” emphasized Crosby. “It’s been an absolute pleasure working with them over the years. They are filling a very big and meaningful void in the funding market for East Tennessee.”

Despite his company’s growth, Crosby remarked that it is challenging to gain access to traditional financing as a small business in a rural area. In 2018, Three Roots provided SPT with a loan through their Rural Microentrepreneur Assistance Program (RMAP).

“We got it closed very quickly,” said Crosby. “We used the $50,000 RMAP loan to buy tooling for an injection mold machine that manufacturers our mechanisms for flexible packaging.”

At the moment, Crosby said the SPT team is working diligently to transition or “cross the chasm” from startup mode to a more traditional business model. The Three Roots staff has been an invaluable source of expertise during this process, explained Crosby.

“If we have an idea about what we need, we can lay it out in a general way to them and they can tell us what to do in about 10 minutes,” said Crosby. “It’s an extremely advantageous relationship because we don’t have to spend hours or months identifying exactly what lending sources to pursue.”

To read more news: https://3rootscapital.org/news/

Rural Microentrepreneur Assistance Program

Three Roots Capital is helping promote rural economic growth in the region through microloans and business assistance made possible by the U.S. Department of Agriculture’s (USDA) Rural Microentrepreneur Assistance Program (RMAP).

Small businesses are the backbone of rural communities, yet rural entrepreneurs often struggle to find easy access to capital and business training. Through the RMAP program, Three Roots strives to address this gap by providing loans and technical assistance directly to rural entrepreneurs and small businesses across East Tennessee. Even now, the global pandemic presents yet another economic obstacle for these companies to overcome.

“One of our missions is to bring access to capital for people who live in low-to-moderate income areas, which ends up being rural communities some of the time,” said Dennis Corley, Business Development and Community Relationships Manager at Three Roots. “It just makes sense to offer this tool for entrepreneurs since a lot of our target market is rural.”

In order to qualify for RMAP loans and technical assistance, businesses must be located in a rural census tract, according to USDA mapping, and cannot employ more than 10 people. The maximum loan size is $50,000, and an RMAP loan cannot cover more than 75 percent of total project costs.

Entrepreneurs may use these loans for working capital and debt refinancing, but Corley shared that many small businesses they have helped have used the loan for purchasing equipment or supplies. Two notable RMAP loan recipients include Historic Brushy Mountain State Pen and Southeastern Packaging Technologies.

As featured in a previous newsletter story, Three Roots and other partners helped Brushy Mountain’s Operating Partner Pete Waddington turn the former prison in Morgan County into a popular tourist attraction, distillery, restaurant, music venue and gift shop. RMAP loans helped Waddington buy restaurant equipment and inventory at his restaurant and equipment used at the distillery.

At Southeastern Packaging Technologies, an RMAP loan helped Chief Executive Officer Bryan Crosby buy tooling for their injection molding equipment to help grow his small business.

Three Roots finds eligible businesses for RMAP assistance through prospecting and referrals. Corley referred to this challenging process as “threading a needle” because businesses must be mature enough to repay a loan but not so mature that they have too many employees, among other restrictions.

“Rural businesses that meet these qualifications are candidates to work with Three Roots, and we are seeking companies that can benefit from our help,” explained Corley. “We want more people in our network to not only be aware that this tool is available but to send entrepreneurs our way when they think they might be eligible. We want to use our knowledge and resources to provide as much capital and expertise as we can to rural entrepreneurs.”

To read more news: https://3rootscapital.org/news/

A Time for East TN Entrepreneurship

Knoxville  News Sentinel Opinion article written by Bill Malkes, a co-founder and former CEO of GRIDSMART Technologies, Inc.

To read article click on this link

 

 

Three Roots Capital: A Year in Review

 2019 was an eventful year for Three Roots Capital.

The company forged valued partnerships, tackled new projects, and originated $24 million of new loans. These loans ranged in size from $25,000 to $7.6 million with an average loan size of $2.7 million. At the close of the year, Three Roots had approximately $40 million of funded loans in its loan portfolio.

Three Roots deployed capital in a diverse range of industries throughout the state, including a financial technology (“fintech”) company in Knoxville and an internet-based retail business in Chattanooga. Additionally, Three Roots provided new financing for commercial and retail real estate developments in Knoxville and Johnson City and a mixed-use real estate development in Cookeville. In Knoxville, Three Roots financed a multi-family, residential real estate project in the South Waterfront district.

One of the most significant deals of 2019 was the Model Mill project in Johnson City, which will open sometime in 2020. Three Roots provided bridge financing for the high-profile, high-impact project and then participated as the leverage lender in a New Markets Tax Credit (NMTC) financing for the project.  Three Roots provided capital and advisory services for the $19.5 million project, ultimately funding $10.6 million of the total amount. Recently, Three Roots submitted its second NMTC application, as the company continues to pursue additional sources of capital for companies and projects in the region.

Earlier this year, Three Roots was proud to help launch the TennesSeed Fund, an evergreen, seed-stage, proof of concept venture capital fund dedicated to investing in companies throughout Tennessee. The Fund is managed by TennesSeed Partners, which is a collaboration of Three Roots, Meritus Capital, and Innova Memphis. Grady Vanderhoofven, the founder, president and chief executive officer of Three Roots, serves as the Fund’s co-manager and as an investment committee member. The fund has already made three regional investments to date.

Additionally, Three Roots Capital held an open house and ribbon cutting at its new headquarters in May 2019.

Looking at 2020, Three Roots is enthusiastic to continue working with valued partners and to help new projects come to fruition, such as the Brushy Mountain State Penitentiary transformation into a tourist attraction and event venue. After making two loans to finance the Brushy Mountain transformation in 2018, the Three Roots team helped the project mature and transition to bankability in 2019. Three Roots hopes to help Brushy Mountain in its expansion efforts this year.

Throughout 2019, Three Roots provided advisory and technical assistance to dozens of companies and projects in the state, which included working with a number of individuals and organizations interested in Opportunity Zones. In 2020, Three Roots is looking forward to assisting these companies and projects as they engage in activities in Opportunity Zones and pursue Opportunity Funds in Knoxville, Oak Ridge, and the surrounding region.

                          

Dr. Marianne Wanamaker

Three Roots Capital Spotlight: Dr. Marianne Wanamaker, Board Member                 

Three Roots Capital is pleased to announce that Dr. Marianne Wanamaker has joined the board of directors. Wanamaker is an associate professor of Economics at the University of Tennessee (UTK), a research associate at the National Bureau of Economic Research, and a research fellow at the Institute of Labor Economics (IZA).

She is a member of the Federal Workforce Policy Advisory Board and previously served as the former chief domestic economist at the White House Council of Economic Advisors, where she also served as the senior labor economist. Among her numerous professional accomplishments, Wanamaker is a recipient of the 2019 Kenneth J. Arrow Award, serves as co-editor of Explorations in Economic History, and has received several college and university-level teaching awards, including UT’s Alexander Prize in 2019.

Wanamaker’s research interests include labor economics and workforce development, education, American economic history, and demography, making her an excellent addition to the board. Speaking about her appointment, Wanamaker expressed that she’s “thrilled about the opportunity” and looking forward to learning from her fellow board members’ experiences.

“It will be fun to bring the perspective of someone who has recently been in Washington D.C., thinks about labor markets all day long, and has a totally different perspective on economic development than they do,” she added. “I believe our expertise and experience will complement each other very well.”

Wanamaker met both Chris Miller, chief financial officer, and Grady Vanderhoofven, president, chief executive officer, and board member, at university-sponsored events several years ago. They remained in touch due to their “shared interest in economic policy and the big picture.”

“The work Three Roots does is incredibly important,” Wanamaker shared. Three Roots’ mission to promote economic development in the region addresses an important gap in development economics research because plenty of “money, time, and effort” in the economics profession today is dedicated to international contexts, rather than “development within U.S. borders,” she said.

“Economists have documented that people in developing countries can improve their standard of living with access to capital. Once you’ve given them capital, economists have also shown that borrowers need coaching and support,” she continued. “International research is good, but it has surprised me — as I am from rural west Tennessee — that a lot of these stories are also true in the U.S. and seem to be completely ignored by the economics profession. We just don’t do research on what works in Appalachia.”

Wanamaker said her time working in Washington D.C. taught her that the federal government understands that access to capital is a real issue for many areas of the country but needs economists to pay attention to “what works and what doesn’t.” She said she is excited to be “on the ground” and have a “firsthand view” of what is going on in the economic development sector through the lens of Three Roots.

Two of Wanamaker’s favorite aspects of her work are the people she encounters and the stories she tells in her research. She expressed that this appointment both fulfills her desire to build more connections and share her expertise with her community.

“A big part of the mission of the University of Tennessee is to be engaged in our community and to take the expertise we use every day and spread it and share it with the people and groups outside of campus,” Wanamaker explained. “I can’t think of a better way to do that than to be on this board. Three Roots is doing so much good. It really is a perfect match.”

Model Mill

Forging valued partnership, connecting a vibrant city, and restoring a historic structure: Model Mill               

Three Roots Capital values its partnerships with skilled developers and financial institutions who support its mission to promote sustainable, meaningful economic development in Eastern Tennessee communities.

This commitment to forging high-quality relationships led Three Roots to connect with Grant Summers, president of Summers-Taylor, Inc., who was seeking financing for the Model Mill project in downtown Johnson City.

Three Roots’ Chief Financial Officer Chris Miller explained how Three Roots was drawn to the Model Mill project because of the Summers family’s commitment to creating value in their community through undertaking such a large-scale, challenging, historic renovation. Due to higher-than-average construction expenses, in addition to other challenges and limitations, Three Roots’ connections, expertise, and access to capital were the right fit for the project’s needs.

Originally built in 1908, the Model Mill operated as a flour mill for nearly 100 years before the property was abandoned in 2003. Over the next few years, many developers and community groups attempted to develop the property without success. By 2014, the Tennessee Preservation Trust had listed the building on its top-10 endangered properties list after it had fallen into disrepair, serving as a barrier to connecting the thriving development efforts in downtown Johnson City and East Tennessee State University’s (ETSU) campus. This problem was further exacerbated when an arsonist set fire to the property in early 2016.

Summers-Taylor, Inc. purchased the property in late 2016, with plans to restore the building and property and transform it into a commercial, mixed-use facility. The facility will provide space for the headquarters of Summers-Taylor, Inc., the Johnson City Chamber of Commerce, ETSU’s program offices, and possibly additional tenants.

The project is located in a severely distressed census tract in Johnson City, with a poverty rate of 39.4 percent. It is expected to create or retain 164 permanent jobs in the area. The goal of the project aligns with the economic development strategy for the city, the local development district, and the Appalachian Regional Commission. In addition to providing direct financing for the project, Three Roots encouraged Summers-Taylor, Inc. to pursue New Markets Tax Credits (NMTCs) as a financing mechanism, introducing them to BrightBridge, which is an organization based in Chattanooga, Tennessee, that specializes in NMTC financing transactions.

“This project really makes a difference in the community for several reasons, including the high-quality jobs it’s going to create and locate in that area, the fact that we’re preserving a historic structure, and the way this project connects the university and downtown regions of Johnson City,” said Miller.

In addition to making multiple direct loans to the project over time, Three Roots worked with BrightBridge to secure additional capital for the project from several, well-respected financial institutions: First Horizon (previously known as First Tennessee), US Bank, Royal Bank of Canada, Citizens Bank, and People Incorporated Financial Services of Virginia. Total financing for the project amounts to $19.5 million, and Three Roots provided $10.6 million of the total financing.

“We want to work with the most capable, high-quality entrepreneurs, developers, companies, and financial institutions in our region,” said Miller. “The Model Mill project was another opportunity for us to do just that.”

Model Mill will be complete sometime in 2020.

Partner Spotlight: Bob Cantler

Three Roots Valued Partner Spotlight:
Bob Cantler, President and CEO of Johnson City Chamber of Commerce

Bob Cantler is the new president and CEO of the Johnson City Chamber of Commerce, and a valued partner of Three Roots Capital. With his extensive background working in the hospitality and tourism industry and business development sector, he was a natural fit to assume his role at the Johnson City Chamber and to promote innovation and entrepreneurship throughout the region.

As the Chamber’s new leader, Cantler is focused on business development. The Chamber is focused on enhancing the community’s ecosystem to help startups, small businesses, and entrepreneurs thrive. He said Three Roots has been a great partner for the Chamber with this goal.

“There has been a lot of growth in East Tennessee recently,” Cantler said. “The community has great momentum in terms of economic development opportunities. It is a great time to be a part of that.”

Cantler is a Johnson City native who returned to the area with his family in 2001 to work for Meadowview Marriott Resort. In 2005, he became vice president and general manager of the General Morgan Inn, where he began working in business development for the Niswonger Group.

It was during his tenure at the Niswonger Group that he got to know Grady Vanderhoofven, who eventually would launch Three Roots Capital and today is Three Roots’ president and chief executive officer. In 2016, Cantler founded his freelance consulting business, Internity Development, and began exploring opportunities to work with Vanderhoofven and Three Roots.

Currently, Three Roots and Cantler are working on a high-impact, business-development, community-improvement project in Johnson City

“Their knowledge and experience has been phenomenal,” Cantler explained. “They have been a unique resource for how do you look at venture capital, in terms of the value community development financial institutions (CDFI) bring to our lenders and projects. They bring different resources, ideas, and concepts to the table, which is important if you want to be progressive in today’s world.”

In addition to the current project, Cantler has connected Three Roots with several organizations that are looking to move to the region and may require funding or support. Three Roots has also supported established organizations in the area.

“Three Roots has helped some of our larger employers in the area who are looking to branch into innovation, such as what questions do you need to ask and how do you vet a project,” Cantler said. “They’ve been an instrumental partner and a resource not only for myself but for several of my stakeholders.”

Cherokee Crossing

Revitalizing a community and creating jobs with the help of valued partners: Cherokee Crossing

Three Roots Capital is proud of its partnerships with high-quality developers and financial institutions that also support its mission to have lasting, valuable economic impact in the East Tennessee region.

Chief Financial Officer Chris Miller explained that everyone on the Three Roots team has a mix of relationship and business management responsibilities. It is this collaborative work environment that led Miller to bring the Cherokee Crossing project to everyone’s attention.

“I knew people involved in this deal,” Miller said. “We began talking about how Three Roots is focused on helping projects in low-income communities. Their project lined up very nicely with what we were trying to do, while we offered capital in a way that was supportive of their goals and objectives.”

In June 2017, Three Roots Capital provided an initial round of financing to Cherokee Crossing, LLC to fund the development of the 15-acre property in Morristown, Tennessee. The initial site plan involved a grocery store, a financial institution, and additional space for mixed-use retail development. The following January, Three Roots provided additional financing to build out a 17,000-square foot, mixed-use retail space. To date, the restaurants and retail tenants in the space have created 140 jobs for the community.

Hamblen County – where the Cherokee Crossing development is located – is predominantly low income and rural. According to the Appalachian Regional Commission, Hamblen is categorized as an economically “at-risk” county in the greater Appalachian region.  Tennessee categorizes Hamblen County as a “Tier 3 enhancement county,” which means the state has prioritized job creation within the county as a result of lagging economic performance within the county.

“Being able to fund a project that puts a grocery store, a provider of financial services, and restaurant and retail locations in a low-income area is not only creating jobs, it’s also providing goods and services to that community,” Miller explained.  He went on to emphasize the importance of working with quality partners like Southeast Bank, as well as David Fiser and the other principals in Cherokee Crossing, LLC.

Three Roots worked closely with Josiah Glafenhein and other members of the development team to understand the capital needs of the project. Three Roots then collaborated with Southeast Bank to provide capital for the project.

“Three Roots has been very helpful on this project, at the beginning and on an ongoing basis.” Glafenhein remarked. “Three Roots understood what we were doing, and they put together an attractive financing package.  We appreciate the value Three Roots brings to our projects and to our community.”

“We want to work with the best developers and banks in our market for many years to come, and this project is a great example of that,” Miller said. “Being able to work with exceptional partners on impactful projects is one of the things I enjoy most about working at Three Roots.”