Atlanta’s innovation scene presents “a massive opportunity,” Silicon Valley Bank Managing Director Jordan Parcell told the Atlanta Business Chronicle.
The bank, which specializes in funding for tech companies, is back to business in Atlanta after its failure and subsequent acquisition by Raleigh, North Carolina’s First Citizens Bancshares Inc. in March.
His comments come amid the continued nationwide slowdown in venture capital funding.
Startups picked up $32.7 billion in funding in the third quarter of 2023. That's much less than in the same quarter of 2021, during a peak time for startup funding, when they scored $87.3 billion, according to the latest report from capital research firm PitchBook.
Georgia appears to be in line with that trend. As of July 2023, Georgia companies had completed $756.4 million in venture capital deals, less than half of the total of $2.5 billion in 2022, according to PitchBook.
Atlanta's startup strengths
Parcell said Atlanta is characterized by a strong talent pool driven by its many universities as well as an established tech ecosystem.
One sign of Atlanta’s maturity as a startup economy is the presence of founders who have sold their companies, allowing for a recycling of talent and capital. Plus, local founders tend to be more frugal with their money, and the city's relative affordability compared to places like California or New York help limit costs.
"You're not waiting for that flywheel to be built. It's already built,” said Parcell, who moved to Atlanta from Columbus, Ohio, earlier this year.
Parcell also cited the city’s sense of community as a strength.
“It’s one of those really nice communities that's tight knit enough and it's not overwhelming and fractured, where you've got enough density,” Parcell said. “There is a true sense of community.”
Industry focus of Atlanta innovation
Startups in each city usually focus their innovative solutions around a specific sector, Parcell said. In Atlanta, it should come as no surprise, that is financial technology. Atlanta has long been considered a hub for payment processing.
This month, Silicon Valley Bank provided one of Atlanta’s fintech startups, Rainforest Pay Inc., with a $3.25 million venture debt facility as part of the embedded payment company’s nearly $12 million fundraising round.
The Atlanta Silicon Valley Bank office also has a dedicated life sciences investment team, which is a growing industry in the city.
Startup fundraising landscape
Parcell said that in line with nationwide trends, startups are finding it easier to pick up seed stage and Series A funding while access to later funding rounds is tighter.
Later stage VC deals had the largest decline, according to PitchBook's third quarter report.
Capital may start to flow more freely if inflation can be controlled, interest rates come down and venture-backed companies go public, Parcell said. That would provide additional certainty to the market and loosen up the flow of capital.
Parcell said that mid- and late-stage companies are still raising money, but they are more likely to rely on internal fundraising or to not announce their fundraising than in years past. That's much different mindset than in 2021, when Georgia saw a record number of startups reach $1 billion valuations.
“They're really just kind of waiting until everybody gets a little more certainty on what is going to be valued going forward," Parcell said.
