The southeast United States has become an area of intense focus for investors, according to The State of Startups in the Southeast by Panoramic Ventures. This report gives an overview of the venture capital and startup ecosystem in the region. On today’s show, we’re pleased to welcome Mark Flickinger, General Partner and Chief Operating Officer at Panoramic Ventures.
Transcription:
Jim Fitzpatrick:
Thank you, Mark, so much for joining us on the show.
Mark Flickinger:
Thanks for having me, excited to be here.
Jim Fitzpatrick:
Yeah. So it’s crazy times right now.
Mark Flickinger:
Yes.
Jim Fitzpatrick:
I mean, I guess, coming out of the pandemic, everybody’s batting down the last 18 months or now going on a couple of years. But so I’m sure that this report is kind of all over the place. From your perspective, what is the top area of investment?
Mark Flickinger:
Yeah. What’s fun, so we focus on the Southeast.
Jim Fitzpatrick:
Yeah.
Mark Flickinger:
And there’s been a lot of areas that have grown a lot, so I think this rising tide floats all boats. One of the biggest areas of investment is SaaS, software as a service.
Jim Fitzpatrick:
Yeah, yeah.
Mark Flickinger:
That’s a broad bucket that covers a lot of enterprise customers with a lot of B2B solutions.
Jim Fitzpatrick:
Fire sure.
Mark Flickinger:
FinTech’s huge. There’s actually a bunch going on, at least in the Southeast, in media as well.
Jim Fitzpatrick:
Really? Okay. Okay. Well, being in media, that’s good to hear.
Mark Flickinger:
Yeah, it’s great to be here. Most of that’s driven by a company named Epic Games out of North Carolina has done some large stuff, but as far as.
Jim Fitzpatrick:
Okay. Sure. Why don’t you tell us a little bit about what goes into the report, how you come up with it, how long it’s been running, and what you want the reader of this to leave with?
Mark Flickinger:
Sure. Yeah, so this is our fifth report, which is hard to believe. I’ve been involved with all five of them. When we first launched it we just thought, “Hey, there’s a lot of information that we gather,” whether it’s through third party data, our own work and product. If we could share that with everyone, that helps the overall ecosystem-
Jim Fitzpatrick:
Right.
Mark Flickinger:
… and innovation ecosystem continue to grow as well. We look at a five and a half year period, so for this one we cut off the data as of June 30th. Lots happened since June 30th now, but you have to cut the data up at some point.
Jim Fitzpatrick:
Sure.
Mark Flickinger:
And what we look for is what’s going on in a trend perspective from the Southeast, and then we also break it down state by state and say what’s happened state by state. And when we first started it, we didn’t know exactly what we were going to find. But now that we’ve done this over five years, it’s nice to see state by state how things have evolved, have changed, have slightly shifted going forward.
Jim Fitzpatrick:
Sure. Define the Southeast, what states are included?
Mark Flickinger:
We have nine states. If I list them all, I probably will miss one. It’s nine states in the Southeast.
Jim Fitzpatrick:
But I mean, it’s the nine Southeastern … Okay.
Mark Flickinger:
And I think the ones that draw the most attention historically are North Carolina, Georgia and Florida. That’s where the—is, but it’s nice to see the other six states that’ve been growing have also been attracting more and more investment.
Jim Fitzpatrick:
Yeah.
Mark Flickinger:
Recognizing now that great companies can be built anywhere.
Jim Fitzpatrick:
Right, right.
Mark Flickinger:
And I think both entrepreneurs and investors are looking at that together.
Jim Fitzpatrick:
Sure. And here we are in Atlanta, which is a hotbed right now of new startups and investment in all of those areas that you just mentioned, FinTech and SaaS companies and tech companies.
Mark Flickinger:
Yeah.
Jim Fitzpatrick:
And needless to say, we’ve done so many shows on why that is, between the universities and some of the money that is here and the low cost of living overall. But how has the pandemic impacted the startup investment market?
Mark Flickinger:
Yeah. I think when the pandemic first hit, if we go back there, everyone remembers that everything stopped.
Jim Fitzpatrick:
Yeah.
Mark Flickinger:
I mean, everything stopped.
Jim Fitzpatrick:
Right.
Mark Flickinger:
Everything stopped, I think. But from our perspective, we’re paid to invest capital in promising businesses. We had to rethink our business model just like everybody else.
Jim Fitzpatrick:
Yeah.
Mark Flickinger:
And really since the beginning of Q3 there’s been an acceleration of investing, as people have figured out how to do business differently and realize there are all these companies being built everywhere, not just in Silicon Valley, Boston or New York.
Jim Fitzpatrick:
Sure.
Mark Flickinger:
And so we’ve raised these really large funds collectively as an industry. Those funds still need to get to put to work, whether COVID happened or not.
Jim Fitzpatrick:
Sure.
Mark Flickinger:
And I think, so what we’ve seen since then is really an acceleration in companies being funded, companies being found. And that makes it much more competitive from our perspective. Valuations have gone up, more money’s gone into the market, entrepreneurs are able to build things faster.
Jim Fitzpatrick:
Right.
Mark Flickinger:
And then the last comment I’ll say is the adoption of the solutions that these people are making has been much faster. And we invest predominantly in B2B software businesses. And one of the hiccups has change, people have to change the way they do work to adopt a software solution that’s hopefully more efficient.
Jim Fitzpatrick:
Sure.
Mark Flickinger:
Almost overnight because of COVID someone said, “I need a software solution to make it more efficient.” We’re not all in the same space anymore, I can’t have people in the office.
Jim Fitzpatrick:
Sure.
Mark Flickinger:
And so what we’ve seen is that if you’re in that vein of where you’re investing, there’s been a compression of sales cycles as more and more people realize how much faster or more efficiently they can do work with some of these solutions.
Jim Fitzpatrick:
Sure, sure. And a venture capital that I spoke to, earlier today in fact, said that the pandemic caused this influx of money and it’s sitting on the sidelines, it’s got to get deployed. Now you’ve got, I don’t want to say it’s a heyday out there, but you’ve got a lot of people placing bets with companies and stepping up and making investments because you got to deploy the capital.
Mark Flickinger:
Yeah. Yeah, there is pressure to deploy the capital.
Jim Fitzpatrick:
Yeah.
Mark Flickinger:
I think what’s great to realize, and having done this five years now, is a lot of the foundations of success that we’re starting to see where people with large balance sheets or a lot of money on the sidelines-
Jim Fitzpatrick:
Sure.
Mark Flickinger:
… need to deploy it, these companies they didn’t start yesterday.
Jim Fitzpatrick:
Right.
Mark Flickinger:
These companies been built methodically to solve a problem. And now that they’re showing more sales traction, more people adoption, people are coming in and saying, “Wow, that is a great solution.” I expect, particularly in Atlanta, this has been going on for years now, way back from when ATDC was started in Midtown.
Jim Fitzpatrick:
Yeah, sure.
Mark Flickinger:
But you mentioned already, we have talent here, we have great companies, incubators, accelerators, et cetera.
Jim Fitzpatrick:
Yeah, for sure.
Mark Flickinger:
I expect that to have a long run, where as far as more and more companies continue to get built going forward.
Jim Fitzpatrick:
Yeah, yeah. For sure. Can you speak to some of these region and state specific findings?
Mark Flickinger:
Yeah. I think in broad brushstroke, what we’re seeing as far as … What happened is obviously there’s a lot more investment that’s gone on. Looking Georgia specifically, Georgia had $2 billion invested in the first half of the year.
Jim Fitzpatrick:
Wow.
Mark Flickinger:
Another billion dollars was invested in Q3. And I think most exciting to them is that the most number of unicorns are here. So unicorn’s a business that’s valued at a billion dollars.
Jim Fitzpatrick:
Yeah, yeah. Sure.
Mark Flickinger:
Again, in aggregate from the Southeast, we’ve had 22 fundings already in the first half of the year that are north of $80 million.
Jim Fitzpatrick:
Geez.
Mark Flickinger:
That’s more we’ve ever had in a year.
Jim Fitzpatrick:
Wow.
Mark Flickinger:
Again, first half. A lot of that comes out of North Carolina. I mentioned media already.
Jim Fitzpatrick:
Okay.
Mark Flickinger:
Great company, they’re named Epic Hames, that’s founded a lot of large billion dollar investments. And I think in North Carolina you predominantly think about that as a pharma and biotech kind of area from what’s going on in the research triangle.
Jim Fitzpatrick:
Sure.
Mark Flickinger:
And I think that is still happening, but what you’re seeing is these other industries in North Carolina, they’re doing really well as well.
Jim Fitzpatrick:
Yeah. That’s great. Wow.
Mark Flickinger:
Yeah.
Jim Fitzpatrick:
So you’re here to tell us that the state of investing and startups is pretty healthy right now.
Mark Flickinger:
It is healthy. I think it’s a fun time to be involved in this space, and I think in any way you’re involved. Whether you’re an entrepreneur that has an idea, that’s looking to start a business, you don’t have to go somewhere else.
Jim Fitzpatrick:
Right.
Mark Flickinger:
There’s plenty foundational aspects to build a business here, and the capital to invest it as well. And then if there needs additional capital, people are paying attention outside.
Jim Fitzpatrick:
Sure.
Mark Flickinger:
But so whether you’re an entrepreneur, I think from an investor perspective, there’s a lot of great stuff going on. If you’re just helping out, if you’re looking to be a customer, there’s a great time to be involved in the startup scene.
Jim Fitzpatrick:
Yeah, we hear so much know … Tech always gets the limelight. You know what I mean, anything tech related.
Mark Flickinger:
Yeah.
Jim Fitzpatrick:
I know there’s probably a number of entrepreneurs watching us right now going, “Well, I’m trying to start a franchise company here and I clean carpets,” or, “I make pizzas,” or whatever the case might be. Not as flashy as tech, because sometimes you don’t have those incredible multiples and those huge valuations. Is it still good for those people out there?
Mark Flickinger:
Absolutely, I think it is.
Jim Fitzpatrick:
Yeah.
Mark Flickinger:
I mean, you mentioned franchise, is a great concept.
Jim Fitzpatrick:
Yeah.
Mark Flickinger:
I mean, Roark Investing here in town, in Atlanta, the predominant franchise—I think some of the multiples that are people seeing on franchise concepts are also doing really well.
Jim Fitzpatrick:
Yeah.
Mark Flickinger:
We were fortunate to be involved in one of those early on in its life cycle that we exited last year. And it was a phenomenal outcome for everyone involved, both entrepreneurs and investors.
Jim Fitzpatrick:
Yeah.
Mark Flickinger:
So I think there’s plenty of room for people to … Anywhere you’re solving a problem that people know about a problem, so you can define problem loosely, people know there’s a problem and you’re able to solve it for them, there’s an opportunity to be successful.
Jim Fitzpatrick:
That’s right. There’s no question about it. And where is institutional capital investing today?
Mark Flickinger:
Institutional capital is still investing all over the place.
Jim Fitzpatrick:
Okay.
Mark Flickinger:
I think, certainly tech, as you mentioned, is a hot area.
Jim Fitzpatrick:
Yeah. Sure.
Mark Flickinger:
I think a lot of the innovation that used to happen in what we would call the small cap, public markets, it’s shifted over the past 10 years. A lot of innovation is now happening in the private markets, and you could say innovation again broadly, but particularly in tech. And so institutional capital is realizing, “I used to have access to that innovation by investing in some small cap,” whether it’s bonds or ETFs or something. And now they’re saying, “Well, that’s happening in the private market, so I need to be involved in that.”
Mark Flickinger:
I think institutions in broad brush stroke are investing more in the private markets than they ever had, that theme of today’s discussion with all this additional capital being involved. But I think tech is a space where everyone says, “Hey, there is efficiencies to be made,” whether that’s in healthcare, IT, the travel industry, enterprise SaaS, we can go down a long list. “There’s efficiencies to—make my business more effective,” and therefore institutions kind of following that trend.
Jim Fitzpatrick:
Right. Yeah. For sure, for sure. So very exciting time to be out there right now. Let me ask you this, for entrepreneurs that are listening to us have this discussion, that want to put together a deck and want to raise capital. How many deals do you guys look at before you invest in one? What’s the ratio?
Mark Flickinger:
We try to cast a broad net. And so, the short answer is thousands.
Jim Fitzpatrick:
Okay.
Mark Flickinger:
It’s thousands of companies, but the reason—
Jim Fitzpatrick:
Before you invest in one?
Mark Flickinger:
Before we invest in one.
Jim Fitzpatrick:
Wow.
Mark Flickinger:
But that’s not necessarily because those thousands are all bad companies.
Jim Fitzpatrick:
Right.
Mark Flickinger:
I mean, you mentioned franchise, we don’t franchise anymore.
Jim Fitzpatrick:
Right.
Mark Flickinger:
We may get some franchise companies we look at and hopefully we can send them in a more direct path.
Jim Fitzpatrick:
Okay.
Mark Flickinger:
So some of it is not because the business is bad, it’s just because it’s not a good fit for us.
Jim Fitzpatrick:
For you. Right, right.
Mark Flickinger:
I think the combination, from an entrepreneur’s perspective, you should be looking for a partner that can help you, not just a checkbook.
Jim Fitzpatrick:
Right.
Mark Flickinger:
Someone that has the knowledge that you need to help you iterate forward on what your business idea is.
Jim Fitzpatrick:
That’s right.
Mark Flickinger:
And so someone who’s done something in the services industry or the franchise or something, that from an investment perspective, is a better fit for you than maybe us, who are sort of a software investor.
Jim Fitzpatrick:
That’s right.
Mark Flickinger:
One thing I will say is that, one of the challenges that they run into is how do I get in touch with them? How do I reach them?
Jim Fitzpatrick:
Right.
Mark Flickinger:
And with the Panoramic, we’ve attempted it to try and remove that velvet rope.
Jim Fitzpatrick:
Sure.
Mark Flickinger:
There’s ways to get in touch with us. One of the things that we run on a monthly basis is called Startup Showdown, is a rolling application, we run a pitch competition every month.
Jim Fitzpatrick:
Okay.
Mark Flickinger:
And the purpose of that, or the intent of that, is that people can get value in it at all times of the year.
Jim Fitzpatrick:
Sure.
Mark Flickinger:
As far as they make it and … Well, each month we will crown a winner that will get an investment.
Jim Fitzpatrick:
Oh cool.
Mark Flickinger:
You can learn how to do a pitch deck at the front end, and you can figure out what KPIs to pay attention to.
Jim Fitzpatrick:
Sure.
Mark Flickinger:
There’s a mentor day for the semi-finalists.
Jim Fitzpatrick:
Okay.
Mark Flickinger:
And then, so there’s connection along the way, as people can refine their business and say, “Hey, I haven’t thought about that yet. But they’re asking about it, so maybe I should.”
Jim Fitzpatrick:
That’s right, that’s right.
Mark Flickinger:
But that’s been really fun. We launched that earlier this year, it’s been really exciting for us to see. A lot of these, just past the idea stage, where an entrepreneur says, “I’m going to go after this and I need some feedback.”
Jim Fitzpatrick:
Right, right. And it should be said that … Or let me ask you this question, let me back up a minute. For the person that’s listening to us today that says, “I have an idea. I’ve put my deck together. How many pitches should I expect to go on before I land the right partner?”
Mark Flickinger:
Yeah. I mean, we always say that you’re one step closer to a yes once you get a no. And so the more you do it-
Jim Fitzpatrick:
It sounds like a salesman.
Mark Flickinger:
It does sound like a sales guy.
Jim Fitzpatrick:
“You got to go through those no’s.”
Mark Flickinger:
I think you have to. I mean, you refine your own business model when you hear the feedback from the person that you’re pitching to.
Jim Fitzpatrick:
Sure.
Mark Flickinger:
But it’s somewhere between 10 and 100.
Jim Fitzpatrick:
Okay.
Mark Flickinger:
I mean, there are people that have worked on their business model and they have to figure out what is the right solution.
Jim Fitzpatrick:
Right.
Mark Flickinger:
How do I identify the problem and then develop that solution to have that product market fit?
Jim Fitzpatrick:
Sure.
Mark Flickinger:
It may take you 100 times that you count as a pitch before you get successful. You may be successful much sooner than that.
Jim Fitzpatrick:
Sure.
Mark Flickinger:
But I think if people are convicted in what they’re doing, and as I mentioned before, there’s a known problem. I think one of the challenges entrepreneurs run into is, “Oh yeah, this is a problem everyone knows about, I’m going to solve it.”
Jim Fitzpatrick:
Right.
Mark Flickinger:
But if people don’t realize they have a pain point and you’re just trying provide them some type of a vitamin, it’s really hard to get their attention. You need a pain killer. So they have a problem that’s known, and you’re developing the solution to the problem they can’t develop on their own.
Jim Fitzpatrick:
Sure.
Mark Flickinger:
Then it’s easy to get people’s attention, whether that’s an investor or someone to buy your product.
Jim Fitzpatrick:
That’s right, that’s right. Well, Mark Flickinger, who is the General Partner and COO of Panoramic Ventures. I want to thank you so much for joining us here on the show. I know that our viewers and subscribers will get a lot out of your visit here today. So hopefully we’re going to have you back and do a followup.
Mark Flickinger:
I’d love to.
Jim Fitzpatrick:
Love to hear more numbers from the report, and then also learn more about the investment community here in Atlanta.
Mark Flickinger:
Thanks for having me, it’s been a lot of fun.
Jim Fitzpatrick:
Great. Thank you.
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