Atlanta’s venture ecosystem is looking pretty peachy.
In H1 2022, Atlanta companies raised $1.6 billion in funding, according to a recent PitchBook report. If the second half of the year is the same, it places the city on track to nearly hit the $3.7 billion in capital it raised last year. Another promising sign is that seed-stage deal volume appears to have remained consistent year over year, which signals healthy economic conditions for startups. There were 56 seed-stage deals in H1 2022, surpassing the 50 closed in H1 2021.
TechCrunch conducted a city vibe check with those in the Atlanta area to see how the ecosystem is faring. The verdict? The Silicon Peach is doing just fine. Lisa Calhoun, a general partner at Valor Ventures, said the city was the most promising of any metro area in the United States. Her fund invests broadly throughout the South and is still actively negotiating term sheets in the city.
“The venture capital opportunity in the South is better than it’s ever been,” Calhoun told TechCrunch. “A lot of new founders are starting companies at astonishing rates; in terms of deal flow, we’ve never had so much.”
She said that Atlanta’s steady growth is related to the comparatively low cost of living and the boost in talent stemming from those that relocated there during the pandemic. It’s also due to the previous influx of tech headquarters to the city and the fact that top students, many from local HBCUs and institutions like Georgia Tech, stayed in the area after graduation rather than moving to the coasts. These factors helped make Atlanta a hub for innovation, spurring the interest of VCs and founders looking for a change of pace.
“A lot of new founders are starting companies at astonishing rates; in terms of deal flow, we’ve never had so much.” Lisa Calhoun, general partner, Valor Ventures
As Calhoun pointed out, seed stage deals in the area have remained steady. Last year, Atlanta-based seed deals raised $271.79 million, with Q2 2021 alone witnessing $103 million invested from just 26 seed-stage deals. Q2 2022 reached a more modest $75.12 million, and Q3 numbers are still trickling in, but seed deals remain on track to hit at least $200 million this year, having raised $162.31 million so far, according to PitchBook.
The post-money median seed valuation in Atlanta accelerated rapidly from last year, expanding from around $6.5 million in the first half of 2021 to around $16 million in the first half of 2022, per PitchBook. At the same time, the yearly median seed deal size for the first two quarters rose slightly more than $2.5 million to this year’s roughly $3.5 million figure. Deal sizes also grew to $6 million in Q2 from $2.93 million in Q1, though it’s still too early to predict where Q3 will fall.
“There has been a pullback in valuations, but there’s absolutely no lessening of entrepreneurial energy,” Calhoun said, adding that the current venture reset has been a long time coming. “The fundamental basis of that is our exceptional talent population.”
Shila Nieves Burney, a general partner at Zane Venture Fund, agreed.
“Atlanta has a history of being the city too busy to hate, and the diversity and inclusion in the city can’t be replicated,” Burney told TechCrunch. “There’s a lot of opportunities right now for tech companies without having to move to San Francisco.”
“A lot of investors might not be based in Atlanta, but they are looking at startups in Atlanta.” Sheena Allen, founder, Capway
She said Atlanta has been “killing it” in striking deals this year. Although funding has slowed into new investments, Burney is using reserved capital to double down on companies already within her portfolio. Sheena Allen, the founder of the fintech startup Capway, said she’s also noticed an uptick in investor interest in the area, especially regarding early-stage funding.
Allen said investors appear more open to deploying cash in H2 than in H1 as the opportunities for early-stage funding seem even more promising than those in the growth stage. She also pointed out that the area has still seen high-profile acquisitions, such as Greenwood’s purchase of The Gathering Spot earlier this year.
“There’s so much opportunity to grow up here, and the talk ecosystem is amazing,” Allen told TechCrunch, adding that the investor pool is finally catching up to the talent in the city. “A lot of investors might not be based in Atlanta, but they are looking at startups in Atlanta.”
It’s not just Atlanta — the entire U.S. Southeast is having a moment.
The region is growing faster than any other part of the U.S., according to the 2020 Census, and with that has come an influx of economic opportunities. More than $9.1 billion in venture capital was invested into the region in the first half of the year, meaning it’s likely to surpass the overall $15 billion allocated last year, as previously noted by TechCrunch. In every other U.S. region, year-over-year deal activity declined.
The real question now is who is getting the money.
Last year, Black founders received 12% of all capital allocated in Atlanta, or around $444 million of the $3.7 billion raised. Within that $444 million, $350 million went to Calendly for its Series B raise, leaving $94 million spread among the rest. Atlanta is 49.8% Black, meaning the Black population is woefully underrepresented in those receiving venture funds. Perhaps in regard to that trend, some old habits are hard to shake.
Correction: A previous version of this story said Burney stated she was “killing it” in terms of investment. Her quote was in reference to Atlanta overall.