ATLANTA, Oct. 7, 2020 /PRNewswire/ -- BIP Capital, one of the most active venture capital firms in the southeastern United States, announced today the availability of its 2020 The State of StartupsSM in the Southeast eBook, which delivers a comprehensive overview of the venture capital and startup ecosystem in the region. This fourth annual report takes an in-depth look at startup activity in the southeastern United States over the five-and-a-half-year period from January 1, 2015, through June 30, 2020. The free report, which is available online, informs investors and entrepreneurs of emerging trends to watch and focuses on the impact of COVID-19 on the Southeast's venture ecosystem.
"Last year's research revealed that the rate of maturation in the Southeast is exceeding that of the Innovation Hubs of Boston, the San Francisco Bay Area, and New York City," said Mark Buffington, co-founder and CEO of BIP Capital. "This year, we set out to determine if that trend continued despite the unique nature of 2020. While we saw a rapid downturn in March due to the pandemic, both in the number of deals closed and dollars deployed, it does appear that the steep year-over-year decline we witnessed has begun to recover, with momentum returning as we headed into the second half of 2020. We are also closely watching the flight of talent from the established Innovation Hubs as innovators look for a better quality of life in the new work-from-home paradigm. We believe the Southeast's persistent market maturation has positioned it well to benefit from this talent migration as well as emerge from the current crisis."
The 2020 State of StartupsSM in the Southeast report reveals that:
- As institutional capital continues to show a growing appetite for private market exposure, investors have become more focused on deploying larger checks into a more curated set of companies.
- Companies in the Southeast that have previously raised a round of capital are now capturing 71 percent of deal volume (up from around 64 percent in 2015), and that percentage is expected to go up as the pandemic persists.
- There has been an accelerated increase in follow-on investor participation over the past few quarters, and a precipitous decrease in the number of first-time investors in startups over the same period.
Notable trends and observations by state include:
- There appears to be rising interest in Healthcare IT and SaaS in Alabama, with each generating more than four times the investment dollars in 2019 than 2018.
- Both the number of investments and dollars invested in Florida halfway through 2020 are behind the record pace of 2019, at 39 percent and 30 percent of 2019's totals, respectively.
- FinTech overtook SaaS as the top area of investment in Georgia with nearly $700 million invested in 2019 alone—a more than two times increase over 2018.
- FinTech is showing great promise in Kentucky in 2020, with almost $6 million already invested over the first half of the year, a meaningful increase over the same time last year.
- Total invested dollars in Mississippi have consistently declined yearly since a high of $15 million in 2017.
- Biotech/Pharma continues to lead the way in North Carolina, attracting more than $2.5 billion in investment money over 375 deals since 2015.
- Consumer Products has jumped Healthcare IT as the most active sector in South Carolina, with 101 deals capturing a total of $117 million over five years. The sector has already seen four deals worth a total of $14.2 million in 2020.
- Healthcare IT continues to lead in Tennessee, with 169 deals totaling $566 million over the five-and-a-half-year period.
- The SaaS sector continues to draw the most focus from investors in Virginia, with 320 deals worth a total of $959.8 million since 2015.
What the Future Holds
BIP Capital's experts draw a number of conclusions from the report in regard to what investors can likely expect in the coming months and years:
- The current funding malaise will continue for at least a few more months as investors continue to adjust to a rapidly-shifting landscape.
- There will be attractive opportunities to invest, especially among smaller rounds, in the latter half of 2020 and into 2021.
- Funds will continue to deploy capital into their existing portfolios. Strong performers prior to the pandemic will likely secure follow-on rounds and investors will capitalize on opportunities created by the pandemic, particularly in businesses that have been thrust into higher demand.
- The funding of minority- and female-led businesses should increase in the years to come, creating more opportunity for those trying to solve today's complex challenges.
- Interest in businesses solving real problems through virtual or contactless delivery of services will persist and expand into other verticals as customers rethink how their business gets done.
- Talent will continue to leave the Innovation Hubs, settling in places around the country that offer a better quality of life within the new work-from-home paradigm.
"It goes without saying that we are in uncertain times. However, the maturation of the southeastern startup ecosystem has allowed for a steadfast response in the face of adversity. We've already begun to recover from the worst of the pandemic and, although forever reshaped by the events of 2020, we expect the state of startups in the Southeast to continually improve," said Buffington.
Multiple data sources were used to create The State of StartupsSM in the Southeast report, including interviews with key players at multiple funds, interviews with entrepreneurs, and independent third-party data. The full report details, including findings per state, can be reviewed here.
About BIP Capital
BIP Capital is recognized as one of the most active and successful venture investors in the Southeast, serving entrepreneurs, investors, and operators to grow the emerging company ecosystem. It applies experience and process to make investment decisions and operational recommendations, allowing its portfolio companies to achieve and stay on a glide path of growth. Areas of focus include Enterprise SaaS, Healthcare IT, Digital Media, Dev Tools, and MarTech. For more information, visit www.bip-capital.com or follow BIP Capital on LinkedIn or Twitter @BIPCapital.
SOURCE BIP Capital