It seems everything is doom and gloom in the U.S. venture market, between startup layoffs and declining venture deal counts to an essentially moribund exit environment. But there are bright spots, one of which being the Southeast region, which is on track for its best year yet.
The Southeast region had its best quarter for funding on record in Q2. More than $5.1 billion was invested across 289 deals during the period, according to PitchBook. The first half of this year collected $9.1 billion, which puts the region on track to surpass last year’s full-year record of $15 billion.
This compares to declines across many of the more active regions in the first half of 2022, including New England, down 28% from H1 2021; the West Coast, down 10%; and the Mid-Atlantic, down 7%.
North Carolina’s Epic Games’ $2 billion venture round in April definitely helped give the numbers a boost, but Q1 was also one of the best quarters for the region on record, while states we never hear about in venture conversations appeared: Mississippi minted a blockchain unicorn, Telos.
“This current is strong on its own,” Lisa Calhoun, a general partner at Atlanta-based Valor Ventures, told TechCrunch about the region. “What’s interesting is it’s not dependent on the larger venture ecosystem; it has its own momentum. It’s still relatively small, but it has a lot of momentum behind it.”
But while there may be more internal strength to the Southeast, one easy catalyst to point to regarding the region’s success this year is the explosion of Miami’s venture scene since 2020.
Saxon Baum, the vice president of investor relations at Florida Funders, a seed firm and angel network, said that the mass migration of talent to Florida has helped create numerous new startups and attracted VCs to back them. Now, many of the legacy firms are opening up offices in Florida — Andreessen Horowitz announced its last week — and they aren’t looking to sit idle.
“When a firm moves down to a new area, they really want to put a stake in the ground and show the community that they are here to stay and here to play,” he said. “They don’t just want to move here be stagnant — they want to be here to really help this ecosystem.”
But Miami is just a factor in the growth, not the entire reason, Baum said. The numbers echo this as $1.5 billion was invested in the state in Q2, down from Q1 and Q4 of last year.
Calhoun said that a strong foundation for innovation in the region may have helped the Southeast be a bit more resilient to the current market forces. She said that the abundance of potential corporate customers including Amazon, Home Depot and Coca-Cola, many of which have set up innovation programs in the Southeast, aren’t as reactive to market froth, which makes for more stable partnerships.
She added that the proliferation of seed firms focused on the region in recent years has allowed for companies to build up healthy balance sheets and stay in the region to grow.
“We have been joined by so many other fantastic seed-stage firms operating by choice in the Southeast,” Calhoun said. “That density of capital flowing into the early stages has made a big difference.”
Baum added that many of the region’s firms and angel investors are relatively new, meaning they most likely weren’t burnt by the last financial crisis and may be more open to investing during this market volatility than some of their legacy peers. Both Calhoun and Baum agreed that the Southeast is just getting started.
“The Southeast is growing 2x faster than the Northeast and 3x faster than the Midwest,” Calhoun said. “People are moving with their feet.”
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