Georgia startups saw a drop in venture funding in the second quarter as investors have largely pulled back, leading some startups to cut costs through layoffs.
Between April and June, Georgia startups raised $617 million across 60 venture deals, according to PitchBook and National Venture Capital Association's second quarter Venture Monitor report. Compare that with last quarter, when Georgia startups raised $922 million across 80 deals.
“While deal count remained strong, when compared with the highs of 2021, deal value declined significantly across all stages,” PitchBook said in a news release. “The VC industry is likely to see the trends of steady deal count but readjusted pricing continue until certainty returns to the market.”
Sid Mookerji, managing director at Silicon Road Ventures, says that a decline in venture investment will continue so long as two questions aren’t resolved: What effect will inflation have and will there be a recession? He also adds that investment firms will become more cautious on which companies they invest in.
“We'll see a decline in reckless investments. Firms deployed money at a fast pace in companies that didn’t have real revenue," Mookerji said. "It was based on metrics like eyeballs and page views. Everyone will start looking at basics.”
The state’s largest venture deals in the second quarter included supply chain unicorn Stord raising $120 million in April, robotics company GreyOrange Inc. raising $110 million in May and insurance agency Renegade Insurance raising $75 million in April.
The drop occurs as Georgia comes off a record year for investments. In 2021, startups in the state raised over $4 billion, doubling what was raised the previous year. It was the second year in a row that Georgia startups doubled their venture capital raises.
Georgia dropped two ranks to No. 13 in terms of how much venture capital was invested in the second quarter per state. It landed just behind Maryland with $747 million and in front of the District of Columbia with $582 million.
That drop in rankings isn’t an indication of a loss of momentum for Georgia, said Mookerji. Large tech corporations, including Microsoft Corp. and Google, are bringing thousands of jobs to Atlanta, which he says will give lasting power to Georgia’s tech ecosystem.
Leading states in the second quarter were California with $25 billion, New York with $8.3 billion, Massachusetts with $5 billion and Washington with $2.7 billion.
Just one Georgia company, business management startup SingleOps, had an exit in this year’s second quarter with a buyout of $136 million, according to the report. California led the U.S. with 10 company exits ranging from $2 billion to $90 million.
