Today, BIP Capital, a venture capital firm here in Atlanta, released their first annual report on the state of startup capital and the startup ecosystem in the Southeastern US. The report is based on five years of data gathered and synthesized by the folks at BIP. You can download the report here. Great data on our exciting and growing startup world. Below are my thoughts on a few of the points of the report.
There is a definite maturation of the startup ecosystem in the Southeast, particularly in Georgia.
When the inevitable topic of “silicon valley of the south” comes up, my stance is, and has always been, that Atlanta will never be Silicon Valley, nor should we try to be. Atlanta has a completely different culture than the valley, and we should use that to our advantage. That said, Atlanta is decades behind Silicon Valley. Atlanta is a “teenager” in the startup ecosystem lifecycle: still young, still maturing, hasn’t totally defined itself yet, but it is maturing and it will be a major very strong player in the global startup ecosystem.
A few southern cities – Atlanta, Nashville, and Miami in particular — are emerging as market-leading tech innovation hubs.
I agree in general, but general here is not enough. Define “innovation”? Down at Tech Square, a lot of BigCo brand names have put their logo on some space. That in itself is not “innovation.” It’s PR. Not that there’s anything wrong with that, but let’s not call that something it’s not. But as many before me have said, when you put a bunch of really smart people in the same space with similar goals, connections, backing, and motivations, some really good stuff can and will happen. That’s what’s going on, and it’s good, and we should see strong results in the future. “Innovation” isn’t something that shows its results every single day.
The most investments in the Southeast in a single year occurred in 2014. That said, 2017 looks to be a strong year, outpacing last year’s total number of deals and dollars invested.
The trend is your friend. The current trend since 2014 is definitely down; however, 2017 looks to buck that trend back up. What were those 2014 investments focused on? Where is the focus in 2017? SaaS investments dominate, but Fintech, Biotech, and Cybersec are not far behind. As we look back on 2017, I believe the security vertical will see more investment, for fairly obvious reasons. Those are the pillar verticals that are thriving in Georgia.
The number of angel investors in the Southeast has grown over the last six years, but their average check size has declined.
Not surprising at all. More people see Angel investing as a career move, rightly or wrongly, but the biggest impediment to successful Angel investing is deal flow. In other words, there are only so many startups that are worthy of investment.
The Southeast still lags other regions in the creation of unicorns (any privately owned tech startup company that reaches a valuation of $1 billion or greater); however, the number of unicorns in the Southeast is growing.
Unicorns are great, but if your baseball team is measured only by the number of game seven, ninth-inning, two-out, down-by-three grand slams, every season is going to be a loser. This measurement points to the “teenager” analogy above. We’re not there yet, and that’s ok. Are we creating profitable, sustainable businesses and the environment and ecosystem to create and sustain more of them?
Southeastern corporations are allocating more of their balance sheets to venture activities.
“Venture activities” sounds a lot like “innovation”, and can carries as much buzz. What are those venture activities, and what are their goals, measurements, and results?
Georgia’s number of deals has declined, but the state has seen an uptick in the dollars invested, with more money going into fewer startups. Kentucky has seen a similar pattern.
Another baseball analogy: if you only get 25 at-bats, your chances of getting hits, driving in runs, and winning games is significantly less than if you get 30 at-bats. If all of those 25 at-bats are believed to be “unicorns”, then all of them will have much more scrutiny, meaning the fallout when the unicorn crown is removed or falls off will be much more visible. As noted in the report, the downward trend in investments has been at the early stage, which has the highest risk:reward ratio, but which also (usually) requires smaller investments.
The market likely can expect the emergence of mini-incubators and small startup office centers in smaller innovation hub.
Yes. Selling picks, axes, and shovels to gold miners is a good business. Atlanta Tech Village is a profitable business, despite the high rate of turnover among its tenants. The move to shared space with no long term leases is one of the major trends across all of startup land, not just in Atlanta or the Southeast.
Those are just some of my thoughts. You can download the entire report here. I have a few more thoughts on the data in the report that I’ll save for a future post.