Atlanta’s BIP Capital has just released their annual report, The State of Startups in the Southeast, for 2020. Download the full report here. Of course, this year’s report looks a little different after 8+ months of an economy burdened by government induced safety precautions over the COVID19 pandemic, but the report is still full of good news and great insights for investors, entrepreneurs, and startups across the Southeast US. I’d like to bring attention to 5 specific points that I found interesting and actionable in the report.
Ecosystem Maturation Means Momentum Coming Out of the COVID Crisis
BIP discovered that the increased maturation of SE startups exceeded that of startups from the more well-known hubs like Boston, Chicago, and Silicon Valley. Because of that maturation, while everyone is impacted in some way from the pandemic, the southeast will come out of this crisis (yes, it will end) with more momentum and strength than comparable counterparts.
Sidelined Capital will Invest in More Mature Startups
Even investors have been affected by the pandemic. When there are fewer startups, investors have fewer options to deploy their funds. COVID19 destroyed a lot of startups, but coming out of this mess, those startups who somehow found a way to survive through the last 8 months have shown the investment community that they have the chops to survive just about anything. These more mature – or at least guttier and grittier – new companies are going to experience the abundance of funding available due to pent up demand for new and better investments.
Doubling Down on Existing Portfolio Companies
Similar to pre-funded startups surviving the pandemic seeing more interest, those startups who are already in investment portfolios are going to have the opportunity to raise more capital because they survived and because their existing investors need to deploy their funds. Investing more in their portfolio companies is a safer bet, requiring slightly less diligence than a brand new opportunity.
Minority & Female Founders Looking Up
While many investors are seeking safer bets within their portfolios, the opportunity for female and minority founders is unprecedented. Google just made dozens of investments through its Black Founders Fund, and Google is not alone in actively seeking out first time minority and female founders to fund.
Fintech Overtakes SaaS in Georgia
It’s not surprising, really, since Atlanta is commonly known as “transaction alley”. Home to FirstData, ICE, NCR, and dozens of other fintech powerhouses, it’s actually more surprising that SaaS has held the lead for so long. Fintech investments ($700M) more than doubled investments in SaaS ($303M) startups in Georgia.
Despite the damage that the pandemic has caused in the economy, it’s always fun to watch the new startups that are born out of that crisis. Look to the years just after the 1999 dot com bust and the 2008 financial crisis, and you’ll see a lot of very successful companies who rose out of those disasters. Necessity is the mother of invention, and economic crises tend to create necessity.