We’re proud to offer our third annual The State of StartupsSM in the Southeast eBook which delivers an overview of the venture capital and startup ecosystem in this region. The report takes an in-depth look at startup activity throughout nine southeastern U.S. states over the five-and-a-half-year period from January 1, 2014 through June 30, 2019.
Last year’s research revealed that the Southeast is an attractive place to invest relative to the more established and capital-intensive Innovation Hubs of Boston, the San Francisco Bay Area, and New York City. With that in mind, we wanted to know for our 2019 report exactly how mature the Southeast’s venture ecosystem has become.
Macroeconomic trends tell us to expect increasing valuations. Nationally, the amount of dollars flowing into the private markets as a whole is on the rise, with more dollars than ever being invested in early and growth-stage companies. We can expect a “rising tide” across the country when it comes to deal dynamics and, in particular, increasing valuations. Using pre-money valuation as a proxy for maturity, we examined how stable the pre-money valuation is in each region.
Under that backdrop, we were pleased to find that the overall rate of maturation in the Southeast is exceeding that of the Innovation Hubs. Our research confirms there is more innovation and more competitive early-stage deals happening in the Southeast than ever before. While it is clear the region still has a long way to go in terms of attracting “category defining” large rounds (over $80 million), the data shows that the Southeast is still a great environment for both investors and entrepreneurs in the early stages of building a business.
Other notable observations include:
- The gap in revenue multiples between the Southeast and the Innovation Hubs is closing, with revenue multiples increasing at a faster pace in the Southeast.
- More capital is being deployed by Southeast investors than ever before, creating less opportunity for outside funds to invest in the region.
- Looking at Atlanta, Charlotte, Nashville, and the Research Triangle in comparison to Boston, the San Francisco Bay Area, and New York City, Atlanta and the Research Triangle are showing signs of maturity, while Charlotte and Nashville are still maturing at a rate far exceeding that of the Innovation Hubs.
Here are some other observations on a state-by-state basis:
- Georgia remains the Southeast’s SaaS innovation leader, with 349 deals totaling $1.7 billion over the time period reviewed.
- South Carolina is having a very good 2019, with the total invested dollars already higher than all of 2018.
- Healthcare IT continues to lead the pack in Tennessee, with 158 deals totaling $466 million over the five-and-a-half-year period.
- 2019 is shaping up to be another strong year for SaaS investments in Virginia, with deals and dollars on track to equal 2018.
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. As always, we welcome any feedback or questions you may have.
Please tell your friends and colleagues about this year’s report. The more we all know and understand about the regional investment community, the better we can work together to cement the Southeast’s place as a national powerhouse for venture capital investment.