Interactive Trend Report Highlights Conservative Growth in Capital Deployed and Check Size Between 2018 and 1H 2024 in the Southeast
ATLANTA, October 25, 2024 – BIP Ventures, the North American-focused venture capital division of BIP Capital and one of the Southeast's largest and most active VC firms, has released its award-winning yearly State of StartupsSM in the Southeast report. The interactive 2024 edition spotlights key indicators of startup and investment activity in the region from Q1 2018 through June 30, 2024.
Most notably, the report depicts a region that continues to become an increasingly competitive innovation economy as a result of a measured, consistent approach to capital deployment and valuation. Capital deployed annually has risen by 23%, and the average check size increased by 5% between 2018 and the first half of 2024. Deal count is down slightly in the first half of 2024, but funding has expanded. Overall, capital, deal, and post-money valuation data indicate that 2023 was an overcorrection after the spikes that defined startup investments between 2020 and 2022, and we are now seeing market stabilization.
Key Trends in the State of Startups in the Southeast 2024
The report highlights the trends shaping the region's innovation economy. In 2024, the narrative centers around innovation—both in terms of the technology coming out of the startups and the types of investments fueling those startups.
Capital and valuation are returning to equilibrium. Investors in the Southeast are taking a measured, diligent approach to capital deployment and valuation—many are putting capital into more mature companies via follow-on rounds. We expect that approach will support a healthier, more sustainable, and more competitive startup investment ecosystem that rewards quality business fundamentals.
The time between rounds depends on where you are. As the startup investment environment has stabilized, the time between venture rounds has risen dramatically in the U.S. Conversely, in the Southeast, the time has accelerated, positioning the region as increasingly attractive for investors and entrepreneurs.
Private credit is on a hockey-stick trajectory. Founders and investors have recognized that public stocks, banks, and traditional private market alternatives are not the only ways to participate in the innovation economy. Private credit activity has increased by 400%, widening access to new options for balancing capital and risk requirements.
AI is the most essential tool in the box – but not the box. The market has shifted from AI hype to AI saturation. After more than doubling between 2019 and 2022 and then dropping precipitously in 2023, capital deployed and valuation for startups classified as AI or AI-enabled have found some balance. Valuations have climbed and funding levels appear steady as investors prioritize companies that integrate AI into the business model.
"As we dug into the data this year, we started to see what could be the kind of recovery where good companies are being funded, and median valuations seem to be ticking up after they flattened from 2023 to 2024. There are many reasons to be optimistic as we finish 2024 and head into 2025." (Mark Flickinger, General Partner and COO)
State-by-state Performance Indicators
The first half of The State of Startups in the Southeast report provides holistic innovation and investment trends for the region. The second half dials into the capital, sector, and investor activity driving that state's progress. Overall, the activity shows resilience. Alabama and Georgia are deploying slightly smaller amounts of capital than Florida and South Carolina, which continue to match or surpass pre-pandemic figures. Capital deployment is fluctuating in Kentucky, Mississippi, and Tennessee, but deal activity remains strong.
Alabama: Alabama's startup ecosystem is stabilizing, with deal activity in 2024 returning to pre-pandemic levels, led by SaaS and Healthcare sectors.
Florida: Florida's robust startup environment has held deal activity and capital investments steady in 2024, driven by the SaaS and Fintech sectors.
Georgia: The startup climate in Georgia is seeing continued deal flow but slightly lower capital invested compared to pre-pandemic years.
Kentucky: The state is positioned for a notable increase in 2024, particularly in capital investment, driven by partnerships between incubators, accelerators, and VCs.
Mississippi: Mississippi's startup activity continues to rebound after a dry 2023, with most deal activity concentrated in incubators and accelerators.
North Carolina: North Carolina's startup ecosystem is progressing well, with SaaS and Biotech/Pharma sectors capturing healthy deal size and activity.
South Carolina: Deal activity in South Carolina is on track to increase significantly, with SaaS and Fintech companies leading the progress.
Tennessee: Capital investment has slowed due to economic headwinds in Tennessee, but deal flow has generally remained steady.
Virginia: Virginia's startup environment remains stable in 2024, with SaaS and Healthcare sectors driving most of the deals and government-backed investments providing support.
"It used to be that there were pockets of expertise in the Southeast. As the ecosystem matures, we see other verticals and types of businesses succeeding. Similarly, on the investor side, there's room for more people to come in and participate in this ecosystem. If we have support at various stages of businesses, we can help startups stay in the Southeast as they grow and scale." (Mark Flickinger)
A team of BIP subject-matter experts performed the research and analysis for the 2024 State of Startups in the Southeast report. Led by Mark Flickinger, the team includes Vice President of Content Rachelle Kuramoto and Portfolio Reporting Manager Dana Vollkommer. Custom data was sourced predominantly from PitchBook, an independent third-party research entity.
The full report details, including findings per state, can be found here.
Mark Flickinger is a General Partner and the Chief Operating Officer for BIP Capital and BIP Ventures. He oversees fundraising, investor relations, marketing, talent, and acceleration for the firm and its strategies and products.
BIP Ventures portfolio company SentryHealth Inc. has merged with Wellview Inc. to provide a holistic, technology-enabled service offering for self-insured employers.
