Last week, I had the opportunity to participate in two events that turned the spotlight on the vibrant startup ecosystem of the Southeast for founders and investors. The Siggie Awards celebrated early-stage investors in Atlanta, and gWen x Atlanta Ventures was a panel discussion on raising capital for early-stage founders, particularly in North Carolina. In the heart of the innovation community, Atlanta and Charlotte represent the region's robust and innovative spirit. They are testaments to how startups in the Southeast are thriving against the odds.
The recently published State of Startups in the Southeast 2023 report shares that, despite a noticeable dip in venture capital deal volume this year, the narrative isn't one of gloom but of strategic growth and concentrated value. The startups securing funding are attracting larger investments, indicating a surge in confidence from investors in the fundamental value early-stage companies present.
It's a positive shift from our perspective, signifying a more deliberate and diligent investment strategy.
For early-stage founders embarking on the first institutional capital raise, start early. Founders underestimate the time it takes to raise. Moreover, compared to the frenetic pace of the Big 3 Innovation markets of the Bay Area, Boston, and New York City, Southeast investors take a more measured stride. The approach leans towards more sizeable checks for fewer but more promising startups, showing a disciplined investment style supporting sustainable growth.
The shifting landscape towards larger but fewer Seed deals signals a more selective but potentially rewarding challenge for founders. Investors in the Southeast tend to be observant of good opportunities across industries, have the flexibility to pursue those opportunities, and can capture and support startups as they scale.
In this market, founders are encouraged to optimize their operations and focus on sound unit economics that demonstrates a pathway to profitability. Focusing on product-market fit without the constant chase for the next funding round will help extend the runway between investments to scale efficiently and effectively.
From an investor's perspective, the region is a beacon of steadfast growth and potential. From our vantage point, Georgia and North Carolina offer compelling narratives with remarkable opportunities for investors. Let's dive into the specifics. The average check size of $13.5M is a clear indicator of the maturity and quality of the startups that are building in North Carolina. Funding, while slow, is substantial and continues to underline the faith investors place in the region's entrepreneurs and their paths to category leadership.
While the $1B mark at the 2023 mid-point may seem modest compared to the high-velocity investment of previous years, it's the caliber and potential for scalable success that should be the focal points for investors. North Carolina's startup environment isn't just maintaining its deal flow; it's strategically poised for sustained growth.
Similarly, Georgia is a steady innovation and startup environment that continues to evolve. So far, in 2023, SaaS has replaced Fintech in the number of deals and the dollars invested, continuing a trend that began last year. At mid-year, Georgia trailed slightly in deal count (146) and dollars invested ($730M). Both are at about a third of 2022 numbers (446 and $2.6B, respectively). The funding community has also evolved, with new names in almost every investor category.
Georgia and North Carolina are undeniably fertile grounds for investors seeking to sow seeds of long-term value creation. It's a place where prudence meets potential. The measured pace of funding means founders can build their companies with the assurance that investors value them for substance over hype.
Overall, the Southeast is a healthy funding environment for startups. Fewer deals, the inclination toward follow-on investments, and the patience and tenacity of investors to stay with a company through its entire capital market journey mean more time for founders to build successful, sustainable businesses.
Reflecting on the discussions and insights shared at last week's events, it's clear that the Southeast stands out with vibrant threads of innovation, opportunity, and growth. For early-stage founders and discerning investors, there's truly no better place to build and invest. The Southeast is no longer playing catch-up to the Big 3 Innovation markets – it's carving out its distinct identity as a region where long-term value creation is the norm and the potential for impact is an expectation.
Build for the promise of innovation, and invest for the proven track record of success.
