This is a guest post from BIP Capital.
We at BIP Capital recently issued our third annual The State of StartupsSM in the Southeast report, delivering a comprehensive overview of the venture capital and startup ecosystem in this region of the country, including Georgia. The report reviews startup activity throughout nine states in the southeastern United States over the five-and-a-half-year time 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 number 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. 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. It is clear that the Southeast is still an excellent 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.
- The region still has room to grow in terms of attracting “category-defining” large rounds (over $80 million).
In regard to Georgia specifically:
- Georgia remains the Southeast’s SaaS innovation leader, with 349 deals totaling $1.7 billion over the time period reviewed.
- SaaS is on pace for another great year in Georgia, with total dollars invested through the first half of 2019 almost equal to the total dollars invested in the full year 2018.
- Looking at dollars invested, FinTech and Biotech/Pharma also drew VC attention in Georgia over the past five-and-a-half years, with $936 million and $807 million, respectively.
- Overall, Georgia is on pace to have a strong year. Total dollars invested in the state through the first half of 2019 almost equal the total in 2018.
We invite you to read The State of StartupsSM in the Southeast report in its entirety here. We hope this report will further educate investors on the emerging trends to watch as well as highlight the region’s growth and future opportunities.
About the Author: Mark Buffington is co-founder and CEO of BIP Capital, one of the most active and successful venture investors in the Southeast, serving entrepreneurs, investors and operators to grow the emerging company ecosystem. Follow him on Twitter @markbuffbip.