Annual Assessment Of The Birmingham Entrepreneurial Community
2019 is in the books, and as is custom, we reassess where we’ve been, where we are, and where we are going. Birmingham is lucky for its entrepreneurs, and we cherish their hard work. They are the backbone of our city, without whom we wouldn’t have as strong and vibrant of a community or economy.
Our bottom-line assessment: we need more. As has been our stance for the last few years, we remain cautiously optimistic about the Birmingham entrepreneurial scene. It is good, but it can be better.
In our July 2019 assessment, we said that we were concerned with the lack of exits, the state’s political climate, and gaps in connecting companies and available talent.
Regarding the first concern, we did have a couple of exits in 2019. However, these exits, coupled with a lack of exits in 2019, are not of the monetary size of the 2017 (Shipt, Therapy Brands, Hospicelink) exits. Exits provide the human and financial capital necessary to fuel the continued growth of the ecosystem, and we continue to need more exits to provide the fuel for growth. All exits help create a second generation of successful entrepreneurs to mentor the first This concern was a push in 2019; let us hope 2020 brings us more.
Some progress has been made on the second point, the “talent gap.” Birmingham has begun to better embrace the entrepreneur, showing a willingness to judge resumes on a win/loss basis and an acceptance of entrepreneurial risk takers. We’ve also seen more acceptance of entrepreneurs in the Birmingham social community (e.g. entrepreneurs belong to social clubs, perhaps even country clubs). I am not sure we always appreciated entrepreneurs, and our reluctance may have held the economy back. Although impossible to quantify, we believe that Birmingham has surpassed this biased perspective.
On the third perspective, the Alabama legislature did not have another monstrosity of a PR situation, like we had with the abortion bill. Of course, the legislature has not been in session in the last six months, so I am not sure that can really be considered a win.
Additional positive notes were that several companies received follow-on funding from institutions. Incycus and Fleetio, in particular, had large funding rounds.
So why the glass-half-empty perspective? It is not enough.
For the first time this year, First Avenue Ventures released a list of funded startups that have received material outside funding since 2015. Our goal with this list is to have a comprehensive list of all of Birmingham’s current startups. Based on this list, we have approximately 55 funded startups. This number is an important indicator of where we are as an entrepreneurial community.
While the list is not yet tested in years, in pulling this information together, we were surprised at the lack of depth in Birmingham’s entrepreneurial scene.
However, Birmingham does have something on which we can build. The eye-opener for us came when we were talking with a respected serial entrepreneur/funder from a major hub on the East Coast. We talked about ways we could get more institutional capital to invest in Alabama, under the premise that institutional investment is a key component of exponential growth. We talked about flying people down to meet companies, but then we realized that we don’t have enough companies in the pipeline yet. We have some, to be sure, but to pull together a parade of companies ready for institutional investment – that is a challenge.
That lack of start-ups positioned for institutional funding is the cold bucket of water on all of the kudos about Birmingham’s entrepreneurial scene. In today’s world, in order to grow a city’s economy, a robust entrepreneurial ecosystem is imperative. Birmingham will always lose its big companies – to purchase, to market winds, to mismanagement, to excellent management. The ONLY way to replace them is to grow them internally. Companies just are not moving headquarters. As a side note, though I am not a member and therefore cannot be super critical, I was nevertheless disappointed with the BBA’s lack of emphasis in this area in their 2019 year-end report (or, at least, the PR Summary of its report). We need a BBA focused on the entrepreneurial section of the economy first and foremost.
At First Avenue Ventures, we look forward to rolling our sleeves up in 2020 and getting dirty. We have been working with several entrepreneurs and look forward to working with more in 2020. Just as we see it as our mission to point out both the good and bad about Birmingham, we want to help entrepreneurs and companies with a realistic perspective. That requires digging in and seeing where we can help as well as being candid in our approach. This stuff is hard, but the challenge provides the reward and the meaning that makes it worthwhile.
To going forward in 2020: