the state of start-ups℠ in the southeast - bip...

T H E S T A T E O F S T A R T - U P S ℠ I N T H E S O U T H E A S T

TABLE OF

CONTENTS

03 OVERVIEW & METHODOLOGY

NOTABLE DATA:

04 STARTUP TRENDS

05 INVESTMENTS

LOOKING THROUGH THE DATA:

06 ANGELS & UNICORNS

07 GROWTH & LOCATION

08 SEEING AROUND CORNERS

09 REGION SUMMARY

10 ALABAMA

11 FLORIDA

12 GEORGIA

13 KENTUCKY

14 MISSISSIPPI

15 NORTH CAROLINA

16 SOUTH CAROLINA

17 TENNESSEE

18 VIRGINIA

19 NOTABLE EXITS

O V E R V I E W

In this inaugural report, we have taken an in-depth look at

startup activity throughout nine states in the southeastern

United States over the time period 2012—2017 YTD. The

purpose of the State of Start-ups℠ in the Southeast is to deliver

a comprehensive overview of the venture capital and startup

ecosystem in this region. We hope this report will inform key

investors and entrepreneurs of emerging trends to watch as

well as highlight the area’s growth and future opportunities.

M E T H O D O L O G Y

To develop this year’s report, multiple data sources were

compiled, including both primary and secondary research. We

have interviewed people at multiple funds and have learned

a great deal about the region directly from the entrepreneurs

that reside there. We have also utilized independent third-

party data aggregators to fill out the data across multiple

vintage years. Startup companies were categorized

into 10 sectors: Biotech/Pharma, Consumer Technology,

Cybersecurity, FinTech, Healthcare IT, IT Infrastructure,

Manufacturing/Industrial Tech, Media, SaaS and Other.

Data is current as of August 31, 2017.

3

Over the past six years, the Southeast has seen an increasing number of startups and

venture capital funds in the region. This maturation of the startup ecosystem has been

spurred by an increase in notable exits from the region over the last 10 years and an

increased focus on developing the startup ecosystem by universities, state legislatures,

local government and local financiers.

NOTABLE DATA

OBSERVATIONS:

STARTUP TRENDS

Atlanta, Miami, Nashville, Northern Virginia and Research Triangle are emerging as market-leading tech innovation hubs.

This trend is especially strong in five locations—Atlanta, Miami, Nashville, Northern

Virginia and Research Triangle (Raleigh-Durham). These geographic areas are emerging as

market-leading tech innovation hubs, especially in certain sectors such as Healthcare IT,

Cybersecurity, FinTech and MarTech. At the state level, Florida, North Carolina and Georgia

lead southeastern states with respect to deal activity and total investment dollars.

4

The most investments in the Southeast in a single year occurred in 2014.

While most states in this study have experienced a decline in the number of

deals over the last 2 ½ years, the number of dollars invested was equal to or

greater than that of 2014 in five of nine states last year, showing the growth

of the ecosystem. 2017 looks to be a strong year, outpacing last year’s total

number of deals and dollars invested.

Our analysis shows that the largest decline in the number of deals has

occurred in the early-stage market, which is interesting, given the increase

in the number of angel investors entering the space.

NOTABLE DATA OBSERVATIONS:

INVESTMENTS

While the total dollars being invested have remained relatively steady over the past three years, the number of deals has declined for most states.

More and more southeastern states, cities and individuals are participating

in the development of startups, evidenced by the increasing amount

of investment dollars—both public and private—being directed toward

startups. At the same time, over the last two years investors seem to be

increasingly selective in choosing which companies to back. While the total

dollars being invested have remained relatively steady over the past three

years, the number of deals has declined for most states.

5

Given the increase in the number of investors that are participating in venture capital, it is interesting to note the

following trends:

• The number of angel investors in the Southeast has grown over the last six years.

• Angel investors’ average check size has declined considerably, leading to fewer aggregate dollars

being allocated to early-stage deals, even with additional participants.

We believe this is the result of angel investors pulling back on investing as they prepare for an economic downturn,

which limits the availability of later stage investment capital. This lack of future capital causes angel investors to pause

because of the lack of a clear exit strategy for their investments.

There are currently 108 unicorns (i.e., any privately owned tech startup company that reaches a

valuation of $1 billion or greater) in the United States. 44% of the unicorns in the United States are

B2C companies. It is interesting to note that the percentage breakdown of B2C unicorns vs. B2B

unicorns in the Southeast roughly mirrors national trends, even though only 25% of deals funded in

the Southeast over the last six years were B2C focused. While the Southeast still lags behind other

regions in the creation of unicorns, the number of unicorns is growing.

Out of 108 unicorns in the U.S.,

the following unicorns are based

in the Southeast:

G E O R G I AGreenSky

Kabbage

Rubicon Global

F L O R I D AFanatics

JetSmarter

Magic Leap

N O R T H C A R O L I N AAvidXchange

Out of 108 unicorns in the U.S.,

of those startups are

B2C companies.

LOOKING THROUGH THE DATA: ANGELS & UNICORNS

44%

The venture capital and startup investment ecosystem is “democratizing” as more and more people see venture capital

as not only an acceptable, but also an exciting, asset class. These investors are learning how to take risk by exposing a

portion of their portfolio to the venture capital asset class in smarter ways, notably in Atlanta and Nashville.

Investors are learning how to take risk by exposing a portion of their portfolio to the venture capital asset class in smarter ways, notably in Atlanta and Nashville.

6

Another less obvious reason for the lower number of unicorns in the Southeast is that, throughout the almost six-

year observation period, the Southeast lagged behind all other regions with respect to collaboration among regional

venture firms. Limited collaboration among regional funds reduces the amount of private investment capital to help

growth-stage companies accelerate. This limited capital is holding the region back from maturing further and turning

out larger exits. This lack of growth capital to accelerate our most promising startup companies creates a drag on

wealth and net new job creation for the region. Companies end up either having smaller exits or moving elsewhere

as they mature.

Major corporations are relocating some or all of their technology operations to Technology Square in Atlanta. BIP Capital believes this is the direct result of investments made by the

state over a decade ago into projects managed by Georgia Tech (i.e., its Advanced Technology

Development Center). The multiplier effect of these investments continues to benefit Georgia

(and Atlanta in particular) today. Georgia Tech, always pushing innovation forward, is now

involved in the development of CODA at Tech Square, a tech hub designed to promote

innovation and collaboration, which is set to open in March 2019. This growth of startup office

centers will accelerate as entrepreneurs and technologists are proving in large numbers their

desire for office space near like-minded cohorts.

Southeastern corporations are allocating more of their balance sheets to venture activities as they look to keep

up with the rapidly evolving business landscape. This investment activity is particularly strong in startups that are

adjacent to or potentially threatening to large corporations’ core operations. This is one of the activities that is

making the Southeast increasingly competitive in B2B SaaS ventures, particularly in the areas of Healthcare IT,

FinTech, MarTech and Cybersecurity. Surprisingly, despite rumors of potentially cooling off, Sales Automation and

MarTech continue to surge.

LOOKING THROUGH THE DATA: GROWTH & LOCATION

Major corporations

are relocating

some or all of

their technology

operations to

Technology Square

in Atlanta, a direct

result of investments

made by the state

over a decade ago.

7

SEEING AROUND CORNERS

The continued democratization of the venture capital asset class as retail investors increase their

allocations to private market investment opportunities. This will increase the type and amount of

private market investment products, including venture capital.

The increasing role of data and workflow improvement as the U.S. Healthcare sector continues

to deconstruct and rebuild. The Southeast is poised to capitalize on this ongoing trend due to its

track record of success and immense talent pools coming out of Atlanta and Nashville.

National recognition of Atlanta as a market-leading innovation hub due to the convergence of

many forces—government and university investment, the influx of Fortune 500 companies and

their innovation centers, the continued growth of established capital providers and the foundation

of accelerators and incubators.

» Artificial Intelligence that augments

human functions

» Tracking of a customer’s journey

» The acceleration of enterprise adoption of

Cloud Computing (public, private and hybrid)

» Machine learning in data analytics and

visual processing

» Robotics outside the factory and in the cloud

» The monetization of social influencers

» Voice/speech recognition

Based on our analysis of historical data and interviews with various market participants, we foresee the following in the coming year:

A growing number of innovative businesses in the following areas:

8

REGION

SUMMARY

With a growing presence of Fortune 500

companies located in the Southeast, B2B

SaaS startups continue to attract large

amounts of investor capital, commanding

over $4.5 billion in more than 1,600 deals.

Biotech/Pharma and Consumer Technology

are growing sectors in the Southeast, with

over $7 billion invested collectively.

Atlanta and Raleigh/Durham continue to rank

highly in lists of top innovation centers based

on activity, invested dollars and returns.

Total dollars invested since 2012:

$23.4 billionNumber of investments since 2012:

7,273Top area of investment:

SaaS

# of Investments

$ invested

2012 2013 2014 2015 2016 2017 (YTD)

997

2.9B

3.8B

4.6B4.8B

4.3B

3.0B

1,326

1,580

1,471

1,201

698

9

• Biotech remains Alabama’s hottest

market, drawing almost three times more

dollars than the second biggest sector,

Consumer Technology.

• Manufacturing/Industrial Tech and

SaaS are also garnering attention from

investors.

• Alabama has seen a decline in deals

since 2014, but 2017 is showing strong

growth, having already passed both

2015 and 2016 in dollars invested.

Lists represent investments made into Alabama.

S T A T E S U M M A R Y


$551 millionNumber of investments since 2012:

169Top area of investment:

Biotech/Pharma

A L A B A M A

V E N T U R E C A P I T A L F U N D S

I N C U B A T O R A C T I V I T Y

A N G E L I N V E S T O R S

Alabama

L

aunchpad

Innovation

Depot

Gigtank

365

Capital

Factory

Vertical

Accelerator

Huntsville Angel Network

Atlanta Technology

Angels Tom Ziegenfelder

Auburn Angel Network

AIM Group

65

32

1

5

33

21

The State of Start-ups℠ In

2

2

2

2

2

Greycroft Partners

e.ventures

Bonaventure Capital

Presidio Partners

Noro-Moseley Partners

1 0

• Consumer Technology is the dominant

startup sector with 358 deals over the

six-year period but is second to Media in

terms of dollars invested ($1.3 billion).

• Media companies attracted $1.7 billion in

investment since 2012, with more than

$1.3 billion going into one company,

Magic Leap.

• Biotech/Pharma holds a steady third place

with $1.2 billion invested over 256 deals.

• With 3 unicorns in residence, Florida

has commanded more investment than

any other state in this report. The three

unicorns—Fanatics, JetSmarter and Magic

Leap—have raised more than $2 billion

combined. (Editor’s Note: After the close

of this study on August 31, 2017, Fanatics

raised another $1 billion).

G O V E R N M E N T B A C K E DVenture

Hive

venVelo

Techsta

rs

Healthbox

500 Startups

AGP MiamiWestlake Ventures

Florida Funders

FAN Fund

Insight Venture Partners

Krillion Ventures

Florida Angel Nexus

Peter Livingston

New World Angels

Tamiami Angel Funds

27

15151515

16

1215

85





Media 12

11

10

10

10

Lists represent investments made into Florida.

Florida Institute for the Commercialization of Public Research

University of Central Florida Business Incubation Program

44

18

F L O R I D AThe State of Start-ups℠ In


V E N T U R E C A P I T A L F U N D S A N G E L I N V E S T O R S

1 1

• Georgia is the Southeast’s leader in SaaS

innovation and interest, with 365 deals

worth almost $1.5 billion.

• While not garnering as many deals as the

Consumer Technology sector, the FinTech

sector remains active, coming in second

with $762 million invested.

• 2016 saw a marked decrease in

investment from 2015’s $1.1 billion

invested, but 2017 seems to be back on

track with more than $760 million invested

in the first half of the year.

Advanced

Technology

Development

Center

Flashpoint a

t

Georgia Tech

Georgia Tech

VentureLab

Techsta

rsTe

chSquare

Labs

Atlanta Technology AngelsBIP Capital

BLH Venture Partners

Atlanta Ventures

TechOperators

Ellis Capital

Ashish Mistry

Sig Mosley

Angel Investor Management Group Tom

Noonan

46

3928

1210

37

109

6





SaaS

Lists represent investments made into Georgia.

GRA Venture Fund18

G E O R G I AThe State of Start-ups℠ In

34

16

16

14

14

G O V E R N M E N T B A C K E DI N C U B A T O R A C T I V I T Y


9

1 2

• Consumer Technology and SaaS startups

in the Bluegrass State garnered the

highest number of deals (60 and 67,

respectively), but only an average amount

of dollars invested ($34 million and $42

million, respectively).

• Biotech/Pharma secured the most dollars

invested with $220 million, which is $32

million more than all the other sectors

combined.

• Kentucky has stayed fairly consistent

since 2012 with the number of annual

deals but is experiencing an uptick in

dollars invested with more than $81 million

already invested in the first half of 2017.

UpTech

XLerateHealth

Velocity

Indiana

Awesome

(Incubator)

Plug and Play

Tech Center

Northern Kentucky AngelsYearling Management

The Sequel Fund

Kentucky Enterprise Fund

The JumpFund

KTECH CapitalLouisville Enterprise

Angel Network

Queen City Angels

Enterprise Angels Community Fund Bluegrass

Angels

18

1513

53

8

5

3

65





Biotech/Pharma

Lists represent investments made into Kentucky.

K E N T U C K YThe State of Start-ups℠ In

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7

5

4

4



1 3

• Consumer Technology is the hottest sector

in Mississippi with 11 deals since 2012

totaling $43 million—over $10 million more

than all other sectors combined.

• Investment interest has been on a

downward trend since 2012, particularly in

dollars invested. 2017 is on track to garner

less than half of what 2016 brought to the

startup community.

Mississ

ippi Busin

ess

Incubators

Jim BarksdaleAdvantage Capital Partners

South Coast Capital Management


Mountain Group Partners

Meritus Ventures

Richard Biedenharn

Michael Caracci

South Mississippi Angel Network

Paul Mai

1

2

1 11





Technology

Lists represent investments made into Mississippi.

M I S S I S S I P P IThe State of Start-ups℠ In

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1

1

1

1



1

1 4

• Biotech/Pharma leads the way in North

Carolina, attracting more than $1.6 billion

in investment dollars over 272 deals

since 2012.

• Only 61 deals have been closed in Fintech,

but those deals were worth a total of $814

million (second only to Biotech/Pharma).

• The SaaS sector has also been strong,

with 239 deals totaling $648 million

invested over the past six years.

• Overall, 2017 is shaping up to be a good

year with $736 million invested in the first

six months, which is on track to be the

state’s best year yet in terms of dollars

invested in innovation.

RTP Capital AssociatesIDEA Fund Partners

Hatteras Venture Partners

Intersouth Partners

Cofounders Capital

Investors’ Circle David Gardner

Charlotte Angel Fund

Upstate Carolina Angel Network

Triangle Angel Partners

36

1010





Biotech/Pharma

Lists represent investments made into North Carolina.

N O R T H C A R O L I N AThe State of Start-ups℠ In

30

24

14

13

12

48

2820

15

6



87

1 5

Groundwork

LabsLaunch

Chapel HIll

The Startup

Factory

RevTech

Labs

First F

light

Venture Center

• The B2B SaaS sector stands out as the

leading sector with 71 deals totaling $146

million since 2012.

• Manufacturing/Industrial Tech comes in

second after securing $84 million.

• A strong first half of 2017 almost

surpassed the amount of investment seen

in all of 2016. If the trend continues, 2017

will be the best year for startup investing

since 2014.

Iron Yard

Ventures

The Harbor

Entrepreneur

Center

The Iron

Yard

Upstate Carolina Angel Network

Capital A Partners

OPENAIR Equity Partners


Morgenthaler Ventures

Intersouth Partners

Florida Angel Nexus Walter

Alessandrini

Don Byrne

Angel Capital Group

21

20

3

17

3 34

2





SaaS

Lists represent investments made into South Carolina.

SCRA Technology Ventures

83

S O U T H C A R O L I N AThe State of Start-ups℠ In

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3

3

3

3

G O V E R N M E N T B A C K E DI N C U B A T O R A C T I V I T Y


1 6

• B2B SaaS is very hot, drawing the most

deals (215) and $432 million of funding

since 2012.

• Healthcare IT and Biotech/Pharma also

have investors’ attention, with Healthcare

IT totaling $435 million—the most in the

state—and Biotech/Pharma earning

$361 million.

• 2017 is on track to come in quite a bit

lower than the growth years of 2015 and

2016, signaling a possible slowdown in

investor interest.

Nashville

Entrepreneur

Center

Start Co.

(VC)

GIGTANK

365

The TENN Maste

r

Accelerator

ZeroTo

510

NueCura PartnersInnova Memphis

Solidus

Jumpstart Foundry

MB Venture Partners

Chattanooga Renaissance Fund

Jo Glaser

The Lighthouse Fund

InCrowd Capital

Angel Capital Group

56

24

201715

8

3

66

4





Healthcare IT

Lists represent investments made into Tennessee.

Launch Tennessee78

T E N N E S S E EThe State of Start-ups℠ In

59

42

38

37

36

G O V E R N M E N T B A C K E D



1 7

• The SaaS sector is drawing great attention

from investors with 314 deals worth a total

of $893 million in the sector since 2012.

• Cybersecurity stands out as a key sector,

securing $584 million in funding since

2012, driven in part by the region’s

proximity to Washington, D.C.

• Overall, Virginia follows the general trend

of a declining number of deals countered

by an increase in the amount of dollars per

deal. 2017 is on track to garner 40% more

investment dollars than 2016.

MACH37

Lighthouse

Labs

i.Lab at

UVA

Tech.Co

500

Startups

Jennifer O’DanielBlu Venture Investors

Columbia Capital

NRV

New Enterprise Associates

NextGen Venture Partners

Charlottesville Angel Network

Baltimore Angels

Dingman Center Angels

New Dominion Angels

33

24

13

88

13

5

7

12

5





SaaS

Lists represent investments made into Virginia.

Center for Innovative Technology Gap Funds

74

V I R G I N I AThe State of Start-ups℠ In

26

18

15

14

9

G O V E R N M E N T B A C K E D



1 8

NOTABLEEXITS

Cvent Lanyon 2016 $1.65BCvent IPO 2013 $812M Eloqua IPO 2012 $368MEloqua Oracle 2013 $871MAppian IPO 2017 $704MEvolent Health IPO 2015 $973M

C O M PA N Y

C O M PA N Y

F L O R I D A

G E O R G I A

N O R T H C A R O L I N A

S O U T H C A R O L I N A

V I R G I N I A

B U Y E R

B U Y E R

Y E A R

Y E A R

V A L U E

V A L U E

SecureWorks IPO 2016 $1.87BAirWatch Vmware 2014 $1.55BGreenway Health IPO 2012 $278M

Greenway HealthVitera Healthcare

Solutions2015 $644M

Paymetric Vantiv 2017 $550MCloud Sherpas Accenture 2015 $400M Silverpop IBM 2016 $275M

Chewy PetSmart 2017 $3.35BAltor BioScience NantCell 2017 $1.08B

PentahoHitachi Data

Systems2015 $600M

Cardioxyl Pharmaceuticals

Bristol-Myers Squibb

2016 $2.07B

Scioderm Amicus Therapeutics

2017 $847M

MaxPoint Interactive IPO 2015 $294MBamboo Therapeutics Pfizer 2017 $645M

Benefitfocus IPO 2013 $644M

1 9

This report was generated using data from:

• Pitchbook

• CB Insights

• Interviews with entrepreneurs and investors in the region

• BIP Capital knowledge and experience

Although believed to be accurate, neither BIP Capital nor any of its

members, officers, employees, affiliates or subsidiaries make any

warranties regarding the information described herein. Neither the

information, nor any opinion expressed or implied in this report,

constitutes a solicitation by BIP Capital for the purchase or sale of any

securities.

WWW.BIPCAPITAL.COM

Our intent is for this report to further educate investors in our space, based

on our ten years of experience. We look forward to providing this book to

our audience every year.

http://bip-capital.com/

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