Round-Table Talk with BIP Capital: Entrepreneurism and Investing in the Southeast and Beyond

What We Learned in 2018, What’s Ahead in 2019

There is no denying that the U.S. economy is booming. Consumer confidence is at its highest in 18 years, unemployment has dropped to its lowest since 1969 and consumer spending between July and September was at its strongest in nearly four years. This economic upswing is also having a big impact on the growth of the U.S. entrepreneurial ecosystem, including here in the Southeast.

With 2019 just around the corner, members of our team gathered to discuss each other’s take on the biggest entrepreneurial trends in 2018 as well as what opportunities and challenges may arise in the coming year. Participating in the discussion from BIP Capital:

Mark Buffington, Co-Founder and CEO – Considered to be among the Southeast’s best venture investors, Buffington’s most notable deals include Vendormate, Ingenious Med, PlayOn! Sports and others.

Paul Iaffaldano, CIO – Iaffaldano is a builder of market-leading companies, with particular expertise in the communications and media industry. Notable deals include Blinq Media, SeniorLiving.net, Brightwhistle and more.

Mark Flickinger, COO – Flickinger focuses on fundraising, talent acquisition, marketing/branding and accelerating the growth of the firm’s portfolio companies. His portfolio coverage includes AchieveIt, PlayOn! Sports, VoApps and others.

Dan Drechsel, Senior VP – Drechsel has worked with leading innovators that include S1 and Global Energy Decisions. He oversees the firm’s investments in SaaS, FinTech and Dev Tools/Architecture.

Sarath Degala, VP – Considered to be a healthcare industry disruptor, Degala’s background includes C-level leadership in some of the nation’s largest hospital groups. His most notable deals include PriorAuthNow.

Cres Ferrell, VP – Ferrell focuses on product evaluation and market readiness of BIP Capital portfolio companies, most notably SaaS businesses. Key deals include Coldfire, 4th Strand, Gro Banking and others.

Round-Table Q&A

Q: What do you view as the most significant lesson learned or the most impactful happening in 2018 for the entrepreneurial ecosystem?

Buffington: As it has been throughout 2018, the market is very competitive right now and will continue to be so for the foreseeable future. Valuations in particular are up significantly. There are a lot of people chasing deals, which on the flip side can also make it harder to get deals done.

Iaffaldano: Here in Atlanta, it’s the re-emergence of the ATDC as the premier place to incubate a new technology company. Atlanta Tech Village and Techstars seemed to be pulling the center of gravity in a different direction for a while, but the quality of the coaching staff at ATDC has surged. They’re once again a force to be reckoned with, for certain.

Flickinger: Successful, privately held businesses are being established in every area of the country right now. This is impactful for both sides of the talent equation. Talented entrepreneurs and employees no longer have to move to San Francisco or Boston to start a business or work at a startup. They can find the right blend of work and life in just about any locale they choose. In turn, companies in all regions can now more easily attract top talent, but they also have to put together compelling plans for professional growth to retain it.

Drechsel: Data and the availability of knowledge continue to drive change in the FinTech ecosystem in particular. This data has formed the basis of several successful innovation companies, from GreenSky to Kabbage to Gro. All predictive analytics and machine-learning applications are based on actionable data, as are many lesser but still valuable innovations, like those for improving customer acquisition and marketing performance. Predictive analytics and machine learning will make huge leaps in the near future.

Degala: Private investments in the healthcare sector had a banner year in 2017 and 2018. In 2017, $42.6 billion was invested with 2018 shaping up to be a similar situation. Additionally, the multiples for businesses have become hyper-competitive and higher than in the past. Healthcare continues to lag behind other industries in terms of process automation and that remains a big opportunity, particularly for machine-learning innovations designed to replace manual, human tasks. Machine learning can be used in such areas as imaging interpretation and pathology interpretation, as well as to take over simpler tasks like gathering and sending patient information. Many in the healthcare industry are still using fax machines.

Ferrell: Over the past year, there’s been a significant amount of M&A activity in our region, which is something that looks as though it will continue into 2019. This impacts all aspects of the entrepreneurial ecosystem, from a willingness to start and/or fund ideas, to higher valuations throughout the lifecycle of a company, to the increased frequency of successful exits.

Q: What in your opinion will be the most disruptive trend/innovation/prediction for 2019?

Buffington: I believe the predominant disruptive trend won’t be artificial intelligence, but actionable intelligence. In almost every industry, unique data is being converted into actionable information and then being put into workflow systems. The ability to have pertinent information at one’s fingertips at the “time of decision” is having a major impact on efficiency and quality of service in certain industries. This also has all sorts of implications for future employment and the things that humans (versus computers) will do at their jobs. I also believe that computer visioning is in the early innings of its long-term potential, but it will also play a large role in capturing unique data or data that has frequently been hard to get or costly to acquire.

Iaffaldano: Machine learning is now an ante or ingredient. It’s no longer a differentiator. The ability to “buy” off the shelve analytics has dramatically changed the innovation landscape and has raised the bar for the next wave of “innovative” companies.

Flickinger: We’ll continue to see more creative ways to get the best talent in the seat. This will include the use of flexible, fractional and distributed workforces, remote management and a combination of offshore and onshore resources to get the best team on the field to tackle the challenges ahead. As technology improves, the creative ways to employ the best combination of talent to grow your business will evolve, as well. For me, that’s huge.

Drechsel: Blockchain technologies retain the promise of creating different trust models that will result in significant innovations in a financial system that manages trust which manifests itself as risk. As an example, much of the settlement system and the payment systems are designed to manage credit risk.  Their trust models are built around institutional and regulatory infrastructure. This idea of an alternate way to build trust will impact how the financial system operates, allowing for a flurry of innovation. Blockchain will also impact other industries as well, such as development tools, supply chain and logistics, among others.

Degala: Amazon, Apple, Google and large, traditional retailers like Target, Walmart and CVS getting involved in healthcare in a serious way is a huge disruptor, from a care delivery perspective as well as with regard to the availability and cost of products and services. The size and scale of these companies makes interpreting their next moves very important as innovation continues across the global healthcare marketplace. If you don’t favorably compete with the moves of these large players, you’ll likely get left behind.

Ferrell: Tightening of data regulations due to the ramifications of what happened at Facebook and other data breaches will continue to occur and reshape many companies. Users will have more control over their data which, in turn, will take that control away from the organization.

Q: What’s your best advice for entrepreneurs who will be leading rising startups and high-growth companies in 2019 in order to meet their goals?

Buffington: It’s a seller’s market right now and will continue to be for a while. Raise as much capital as you can at these historically high valuations and then be thoughtful about how you deploy that capital.

Iaffaldano: Integrity in all things is a code to live by, and it’s especially true when it comes to serving your customers. To be truly valuable to your customer, the most important question you should be asking yourself isn’t how to better grow your business but how to grow their business. In other words, your focus needs to be on providing a solution for customers, not just providing a product.

Flickinger: Talent wins. As it’s been said before, “if you think it’s expensive to hire a professional, wait until you hire an amateur.” Wait to hire until your lack of resources is impacting your growth, and then go hire the best talent you can find to grow your team.

Drechsel: As investors, we work hard to understand the business goals of entrepreneurs—what makes their business tick, what they’re trying to do for their customers and how their product is a game-changer. Investors have business goals, as well. Entrepreneurs would do well to better understand the goals of their financial partners and how they can contribute in reaching those goals. This, in turn, will help entrepreneurs in reaching their own goals, particularly from an investment standpoint.

Degala: Fail fast, take calculated risks, look beyond the immediate six to 12 months to your long-term strategy and partner with strategic capital that can help your company scale quickly.

Ferrell: Stay close to your core customers to continually improve your product. These folks are in the trenches with your innovations, using them daily, so they know what works about them, what doesn’t work and what they would like to see added or improved upon. You really can’t get better advice from a product development standpoint than you can from your customer base.

For more insights into the region’s entrepreneurial ecosystem, including emerging trends to watch for and investment activity statistics state by state, download BIP Capital’s The State of StartupsSM in the Southeast report.

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