Funding for startups across the Southeast took a slight hit when the pandemic arose in early 2020, but capital has continued to flow into the region at record levels in some states, signaling continued investor confidence in the region’s startups.
Unlike most other states, Alabama saw slightly more funding last year compared to pre-Covid levels, and the number of investments in Alabama is on track to meet or exceed 2020, albeit with slightly lower dollar amounts.
That’s according to Atlanta-based venture capital firm Panoramic Ventures’ fifth-annual State of Startups in the Southeast in 2021 report that took an in-depth look at startup activity in nine Southeastern states from Jan. 1, 2016, to June 30, 2021. Data for the report came from primary and secondary research as well as dialogue from growth equity funds, service providers and startup ecosystems in general.
While the number of deals by quarter in the region is down slightly compared to pre-pandemic levels, capital continues to increase. Total capital deployed reached its highest level historically at almost $5 billion in Q2 2021.
According to the report, 336 investments have been made in Alabama during the period. In the first half of 2021, $105 million has been deployed in the state.
And Innovation Depot’s Drew Honeycutt, CEO of the top incubator in the state which has seen 28 companies receive investments since 2016, said Birmingham’s startup scene continues to grow.
“There are a number of new companies that were ... not around this time last year that are launching, so it feels like the blueprint of how to take a startup to market is out there in Birmingham (and) in the region,” Honeycutt said. “You’re finding more people that are acting on ideas ... so we’re definitely meeting with more companies on a daily basis that are looking to launch their products.”
He said he is focused on the competitive advantages that the state can offer in health care and food and agricultural tech, among other sectors.
The capital city’s startup scene is experiencing growth, too, as well as Alabama as a whole, said Charisse Stokes, executive director of TechMGM, a collaboration of local industry, educational and governmental entities working to leverage Montgomery’s technology assets.
“Startups are definitely on the rise in the Montgomery area. They’ve existed in multiple pockets, but more recently there has been a concerted effort to grow this landscape,” Stokes said. “The future is bright for the state startup scene. We are seeing more opportunities for startups across the state, and the Alabama Innovation Commission has taken significant steps towards providing additional resources to grow this sector. Passing legislation recently has afforded small business entrepreneurs access to capital, talent retention programs and accelerator and mentoring programs.”
But despite the growth, challenges remain.
In Montgomery, Stokes said the biggest issue is access to capital and resources. Honeycutt said the biggest issue he sees across the region is some startups are building a product where there is no need for it. Another issue is a shortage of talent for startup employers, he said.
