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Veterans Take Note - VC investment in Georgia hits dot-com high

Posted by Michael Horn on Fri, Feb 05, 2016 @ 09:41 AM

We discuss veterans access to venture capital funding during one of our financial modules. This is one of many forms of funding available for veteran entrepreneurs to seek out as part of their funding strategy. In this article Urvaksh Karkaria, Staff Writer for the Atlanta Business Chronicle, shares the status of venture dollars. Read on to see that investment remained high in 2015. Entrepreneurs must understand the current and future market when developing a funding plan and modify that plan based on the market.

Karkaria writes - Venture capital invested in Peach State companies last year was the highest since the height of the dot-com bubble.

Georgia companies scored $836 million in venture dollars last year, up from $492 million the prior year, according to the MoneyTree Report, published by PricewaterhouseCoopers LLP and the National Venture Capital Association (NVCA), based on data from Thomson Reuters. The number of deals done last year rose to 71, versus 60 in 2014.

Georgia companies also raised the most venture capital — $364 million — in the fourth quarter since Q4 2000.

“The technology-enabled startups that are able to disrupt the traditional business models are the winners and are getting the funding,” said John Nee, partner in PwC’s Atlanta technology practice.

2015 was the “Year of the Megadeal” — those that involved $100 million-plus venture capital raises, Nee said.

In Georgia, Kabbage Inc. was one of 11 megadeals nationwide in Q4. The Atlanta financial technology company raised $135 million in a Series E investment led by Reverence Capital Partners.

Last year, 74 companies raised more than $100 million in venture capital, compared with 50 in 2014, Nee said.

However, the number of megadeals in 2015 trended downward over the course of 2015.

“There is going to be a normalization of venture funding in 2016,” Nee said. “Exits are getting tougher to execute.”

Venture capital investors make money when their portfolio companies are either acquired or go public.

2015 saw the fewest mergers and acquisitions since 2009. Meanwhile, the IPO exit was not as accessible due to market volatility in the fourth quarter. IPO exits in 2015 were down 40 percent compared to IPO exits in 2014.

Atlanta venture firm Fulcrum Equity Partners had a record year of deal flow in 2015, though it’s only a slight increase over the prior year, which was a noticeable increase over 2013, partner Jeff Muir said.

“While quantity basically remained steady, we have noticed an increase in the quality of companies coming to market in the second half of the year,” Muir said. “From an industry perspective, we continue to see more than 70 percent of our deal flow coming from the health-care services and technology, primarily cloud/SaaS-based IT, including healthcare IT, tech-enabled business services, fintech and cyber security companies.”

The capital venture investment in Georgia companies is surging as the region emerges as an entrepreneurial hub.

As more capital chases tech deals, however, Muir points to the “California effect” in Georgia deals. “A number of companies have high valuation expectations in comparison with historical valuation metrics,” Muir said.

Fundraising by venture firms, nationally, appears to have momentum with funds reaching their capital-raising goals in short time frames, Muir said.

“Certainly, the public markets (stock and debt) do not seem very promising for the foreseeable future, and it seems investors are increasingly turning to alternative asset classes, including venture, growth equity and PE,” he said. “Many institutions are increasing their allocations to alternative assets.”

Georgia ranked 7th out of 41 states in venture capital investment last quarter. The software sector drew the vast majority of venture dollars in Georgia ($367.7 million) last year. Financial services drew $142 million.

Later-stage companies (which typically command larger check sizes) accounted for the largest share of venture capital, $387.35 million, across 16 deals. Venture capitalists invested in 20 expansion-stage deals, putting a total of $242.57 million into those companies.

The average VC check in Georgia last year was $11.8 million, compared with $8.2 million in 2014.

Topics: Veteran, Vets, Entrepreneurship, VC, investors