Alabama’s Venture Capital Investment is Apparently Declining after 5 Years

In spite of the South’s emergence as an investment hotspot, a new analysis of startup investments suggests money may have slowed in Alabama during the past year and a half.

Sixth in a series, “The State of Startups in the Southeast” by Atlanta’s Panoramic Ventures paints a positive picture of the Southeast’s startup scene at a time when investors are apparently losing interest in more traditional tech hubs like Silicon Valley, Boston, and New York.

The time frame covered by the report is July 2017 through June 2018. Since 2017, 10,784 investments totaling $65.9 billion have been made in businesses across the Southeast.

Spending in the South increased by around $6 billion in the second quarter of this year, compared to the same period last year, a growth of about $1 billion. Since 2012, yearly South investment has increased by a factor of six.

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The research indicates that while the beginning of the pandemic slowed growth in 2020, the venture market swiftly returned. According to the report, “in 2021, investors poured a record volume of funds into the Southeast, substantially double the levels of 2020 and 2019.”

Comparing the current decade to the one before it, the volume of transactions in the South saw a significant uptick between 2012 and 2017. But as the number of agreements dropped, the average size of each deal grew rapidly, increasing by 239% in the last five years.

However, the research notes that deal activity and capital deployment have decreased in Alabama during the past 18 months.

This is in stark contrast to neighboring Mississippi, which saw an investment of $51 million in 2018, which is more than the total of $36 million expected for the years 2017–2020 put together. Historically, most of the money has gone to the three southern states of Florida, Georgia, and North Carolina.

Alabama's Venture Capital Investment
Alabama’s Venture Capital Investment

According to the study, in the year between 2017 and 2018, Alabama received 354 investments worth a total of $979 million. Topping the list was the manufacturing sector.

Software as a service (SaaS) has surpassed investments in biotechnology and pharmaceuticals to become the second most heavily funded industry in the world, according to a new analysis.

Matt Hottle co-founded and is a partner at Redhawk Advisory. He also manages investments for the Alabama Futures Fund. The report may not be an accurate reflection of Alabama’s financial situation, he added.

He stated, “I am not seeing a downward trend.” While the rate of investment appears to be rising, the total sum invested has changed little from the previous year, if at all. Every one of the three or four agreements we close in Alabama every year completely wipes out the previous year’s numbers.

Hottle added the Alabama number in the report doesn’t seem to account for recent agreements like Landing’s $125 million Series C funding revealed in August.

It’s also a busy time at the Birmingham-based Techstars Alabama EnergyTech Accelerator, which just last month announced the participation of its third cohort.

Panorama’s employees “are absolute specialists in their profession,” so “for all I know, they’ve gotten a lot of this right and I just don’t have access to it,” he said. Alabama “has always handled relatively small numbers, relative deals, total amount investments, etc.”

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