Fourth annual report reveals continued market maturation; $34.5 billion invested in southeastern startups since 2015
In the fourth quarter of what has been a unique and challenging year, we’re proud to be able to offer our fourth annual The State of Startups(SM) in the Southeast eBook, which delivers an overview of the venture capital and startup ecosystem in the region.
This year’s report takes an in-depth look at startup activity in the southeastern United States over the five-and-a-half-year period from January 1, 2015, through June 30, 2020. Unsurprisingly, much of it focuses on how the global COVID-19 pandemic affected the startup investment market in the Southeast.
While last year’s report discovered that the rate of maturation in the Southeast was actually exceeding that of the major Innovation Hubs, we wondered whether that trend would continue given the pandemic and 2020 economy.
What our research revealed: While we saw a rapid downturn in the region in March due to the pandemic, both in the number of deals closed and dollars deployed, it does appear that the steep year-over-year decline we witnessed has begun to recover, with momentum returning in the second half of 2020. Based on these findings, we believe that the Southeast’s market maturation is persistent and has positioned it well to emerge from the current crisis. Overall, some welcomed good news.
Other notable observations in the 2020 report:
- As institutional capital continues to show a growing appetite for private market exposure, investors have become more focused on deploying larger checks into a more curated set of companies.
- Companies in the Southeast that have previously raised a round of capital are now capturing 71 percent of deal volume (up from around 64 percent in 2015), and that percentage is expected to go up as the pandemic persists.
- There has been an accelerated increase in follow-on investor participation over the past few quarters, and a precipitous decrease in the number of first-time investors in startups over the same period.
Here are some other observations on a state-by-state basis:
- There appears to be rising interest in Healthcare IT and SaaS in Alabama, with each generating more than four times the investment dollars in 2019 than 2018.
- FinTech overtook SaaS as the top area of investment in Georgia with nearly $700 million invested in 2019 alone—a more than two times increase over 2018.
- Consumer Products has jumped Healthcare IT as the most active sector in South Carolina, with 101 deals capturing a total of $117 million over five years. The sector has already seen four deals worth a total of $14.2 million in 2020.
It of course goes without saying that we are in uncertain times. However, the maturation of the southeastern startup ecosystem is allowing for a steadfast response in the face of adversity. We’ve already begun to recover from the worst of the pandemic and, although forever reshaped by the events of 2020, we expect the state of startups in the Southeast to continually improve.
We invite you to read The State of Startups(SM) in the Southeast report here to dig deeper into the numbers and read more about notable trends we can likely expect in the coming months. (For example, we anticipate attractive opportunities to invest, especially among smaller rounds, in the latter half of 2020 and into 2021.) 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.