Recapping 2017 Southern Venture Capital Deals–$4B+ and Counting

That story about having to go to Silicon Valley to get funding–not so much, anymore.

A few trends are combining to free entrepreneurs to build a company almost anywhere. The most recent figures for seed stage deals across the country support that–and so do the local ones in the southern region, where Valor is headquartered. In this last year, looking at the broader South, private companies have pulled in $4 billion dollars and counting.

Southern venture capital deals at a glance

According to Pitchbook last quarter,  Georgia tripped the Top 10 states for venture deals, with Atlanta bringing in 19 deals. Across the country, most (64%) of seed stage deals were done outside of the Valley, underscoring my thesis that Silicon Valley is an innovation destination more than an origin.

Meanwhile, although deal count is off the charts as usual, total funding in Silicon Valley dropped last quarter and the cost to the entrepreneur per dollar of Tier 1 capital keeps going up, in ways that impact how you build your business including:

• Cost of living, including commute time, apartment average sq ft., etc
• Recruitment and turnover
• Educational options accessible to team members with children

Tools like this one calculate different costs of living. The same lifestyle you have in San Francisco can be achieved in Atlanta for 40% less.

• Imagine 40% smaller valuations to get a sense of that impact on venture capital. No wonder valuations in the South are lower–the whole economics of building companies once you cross the California state line are more different than the euro vs. the dollar.

Early stage deals are everywhere.

Seed-stage venture capital jumped from 20% of all venture capital deals in Q2’17 to 32% last quarter. According to Pitchbook, most companies raise their Series Seed at two and a half years old–after some angel capital. (That’s a national average, not a regional one.)  About 25% of those rounds are $1 million or below. That’s well within the reach of the active angel community across the country and the 500+ micro VC funds.

Overall, the Southern deal count continued to stack, coming in at 67 deals last quarter per Pitchbook.

But here’s where I take issue with how the deal analysts of this world have chosen to define the South. California, for example, is a huge state. I was born there. I can tell you the “natives” treat it like three–Southern, Northern, and wine country. So if that’s the case, maybe there’s reason to refactor how venture deal reporting companies like Pitchbook or CBI factor the southern states. For one thing, they often try to break out South East from South. That’s a line I wouldn’t want to try to call and I’m not sure it exists.

I took this curiosity to Crunchbase to see my own numbers. Having lived and worked across the South, I know Southern culture spreads from Texas to Tennessee. None of the venture reporting groups take that swath. I snagged the states where Southern culture is the norm, and got some interesting results.

I share a snapshot of the equity deals in the South over $500K this year in the table below. It adds up to well over $4B in new private capital flowing in the region just in the last year. If you factor in population density and cost of living, which I didn’t, raising capital in the Silicon South vs. in Silicon Valley looks more even than ever.

Get a feel for the landscape yourself by checking out recent investments in the Southern region this year. See if you still think you have to leave the Atlanta Beltline to pick up the big bucks.

Southern Venture Capital Deals 2017