We’re proud to offer our second annual The State of StartupsSM in the Southeast report, delivering an overview of the venture capital and startup ecosystem in this region. The report takes an in-depth look at startup activity throughout nine states in the southeastern United States over the five-and-a-half-year period from January 1, 2013, through June 30, 2018. While some trends noted in last year’s report stayed on track, this year’s analysis delves into new areas and reveals some surprising trends.
I also want to highlight what we consider to be the most notable observation our research revealed. This year’s report took a closer look at the different types of deals being done in each southeastern state and how that compares to the established “Innovation Hubs” of Boston, New York City and the San Francisco Bay Area. We anticipated that we would find significant disparities in the percent ownership that a dollar buys from region to region and perhaps from state to state. We were wrong.
Instead, The State of StartupsSM in the Southeast reveals that a $1 million investment buys the same ownership percentage of a company regardless of region or state. However, businesses in the Southeast have more revenue at the same valuation, perhaps implying that investors got more value for their dollar in the Southeast. This fact might explain why large venture capital funds from the Innovation Hubs are showing a growing interest in investing in southern companies.
What does this tell us? Successful companies are now being built outside of the traditional investment centers in a more balanced supply/demand environment. While the dominant VC investors supporting southeastern companies are based within the region, if you look at the top five most active VC firms in each state (45 in total), nearly one-third are coming from the Innovation Hubs. In summary, everyone is starting to recognize that the Southeast is a great place to invest and we expect even more participation in southeastern venture capital as money finds its way to the best risk/return opportunities regardless of region.
Additional notable observations include:
- The number of startups and venture capital funds in the region continues to increase, reflecting the maturation of the startup ecosystem here.
- Funding in the Southeast has grown significantly since 2016—averaging 20.6 percent annual growth over the last two years.
- Incubators and accelerators remain a crucial driver of the Southeast’s innovation ecosystem.
On a state-by-state basis, here are some notable observations:
- While the number of deals has declined since its best year in 2014, Florida companies are receiving significantly more money from investors than ever before.
- Georgia remains the Southeast’s SaaS innovation leader, with 358 deals totaling $1.6 billion over the time period reviewed.
- Biotech/Pharma continues to lead the way in North Carolina, attracting almost $2 billion in investment money over 310 deals since 2013.
We invite you to read The State of StartupsSM in the Southeast report here to dig deeper into the numbers and read more about notable trends. We hope this report will further educate investors on the emerging trends to watch as well as highlight the area’s growth and future opportunities.