Startups in the Southeast: 2024 Highlights for Founders

The 2024 State of Startups in the Southeast report provides founders, startups, and innovators with a comprehensive analysis of the region's evolving ecosystem. This year's core narrative is balance, as capital and valuations return to equilibrium. New sources of private capital are equipping investors and founders with flexibility and options for aligning their goals. AI is evolving from a product to a tool, finding its place inside startups as a resource. In the Southeast, investors continue to judiciously prioritize business quality over hype, contributing to a healthier and more mature startup ecosystem.

Southeast Startup Market Opportunities Abound

In the first half of 2024, investors deployed $6.0B in private capital across the Southeast—a 5% increase from the second half of 2023, though slightly down from $6.3B during the same period in 2023. This trend reflects a stabilizing ecosystem after recent volatility. Notably, annual capital deployment rose approximately 23% between 2018 and (projected) FY2024. Average check sizes have also increased by about $250,000, from $4.69M in 2018 to $4.94M in the first half of 2024. The stabilization trends suggest a return to pre-pandemic investment norms, offering a more predictable environment for fundraising. Founders should focus on sustainable growth and robust business models to attract investment in this balanced market.‍

Valuation Trends‍

Median post-money valuations are reaching record highs, particularly in follow-on rounds, indicating a shift towards investing in more mature businesses. This cautious approach aligns capital deployment with a startup's maturity, size, sector, and business model, reflecting a return to historical venture capital norms. Emphasizing scalable revenue models and demonstrating operational efficiency are crucial. Startups with proven traction and solid metrics are more likely to secure higher valuations in this environment.‍

Investment Pace in the Southeast‍

The Southeast has maintained a steady approach to capital deployment, balancing growth with strong fundamentals. As the U.S. capital market generally saw times between rounds slow down in 2024, the Southeast continued its stable pace and funding levels. The contrast does not indicate that the region is speeding up follow-on capital investments; it indicates the ecosystem remains reliable and focused on prioritizing companies that demonstrate consistently strong operational efficiency and business fundamentals.‍

Emergence of Private Credit‍

Private credit activity in the Southeast has surged by 400% since 2019. This asset class provides flexible alternative financing options that allow founders to align their goals with balanced capital and risk requirements. Exploring private credit as a financing option can be advantageous, especially for those seeking non-dilutive capital to fuel growth while preserving equity.‍

Integration of Artificial Intelligence‍

Artificial Intelligence (AI) has transitioned from a standalone product to an essential tool within startups, and the funding market reflects this shift. Category funding and valuations are stabilizing as investors move capital from AI-specific startups to businesses that effectively integrate AI into their business models to drive and accelerate innovation and efficiency.‍

State-by-State Startup Performance in the Southeast

The data in the State of Startups report related to the stable, fundamentals-focused Southeastern startup ecosystem tells a powerful story about why the region continues to attract high-quality founders and startups. State-by-state performance insights help founders to focus their fundraising and business-building activities. In each state, founders can find opportunities appropriate to their sector, maturity, and funding requirements – allowing them to center their efforts on the most appropriate, best possible capital environments. The report also offers data correlating how capital activity has risen in states with more SaaS, Healthcare, Fintech, and Biotech startups.‍

State Trends

• ‍Alabama: Deal flow is returning to pre-pandemic levels, with opportunities growing in SaaS and Healthcare. Founders in these sectors can benefit from the state's steady and supportive market.‍
• Florida: With consistent deal sizes and strong capital allocation, Florida is a hotspot for SaaS and Fintech startups. Founders here can leverage the state's robust infrastructure and sector focus to attract investors.‍
• Georgia: The startup scene remains active, driven by Healthcare and Enterprise SaaS. Founders in these sectors can capitalize on the demand for scalable and essential solutions despite slightly reduced capital investment.‍
• Kentucky: Growth in capital investment and partnerships is fueled by incubators and accelerators. Founders have access to resources that support scaling and early-stage growth.‍
• Mississippi: With a resurgence of activity in incubators and accelerators, founders have opportunities to launch and grow startups in this emerging market.‍
• North Carolina: Biotech and SaaS sectors dominate, making it one of the region's top markets for founders seeking consistent deal flow and sector-specific support.‍
• South Carolina: A maturing ecosystem, particularly in SaaS and Fintech, offers founders a growing platform to scale and secure funding.‍
• Tennessee: Despite slower capital investment, steady deal flow provides opportunities for founders focused on building resilient and enduring business models.‍
• Virginia: Government-backed investments and strong support in SaaS and Healthcare create a stable environment for founders prioritizing long-term growth.

As the Southeast startup ecosystem stabilizes, founders have growing opportunities to hone their capital and business-building strategies based on their sector and stage. Investors continue to promote the importance of business fundamentals, sustainable growth, operational efficiency, and strategic integration of AI. Startups that do these things stand to do well in this steady, resilient funding environment.

To delve deeper into these trends and identify actionable opportunities, read the 2024 State of Startups in the Southeast report.