AI, Startups, and Venture Capital: Trends Shaping the Southeast

During the kickoff to the 2025 Venture Atlanta Conference, General Partner and COO Mark Flickinger joined a high-caliber panel of venture capital thought leaders that included Kim Seals, Joe Mancini, and Sean Banks for a conversation about the state of the startup and investment ecosystem in the Southeast generally and Atlanta specifically. The panel covered some topics and trends that are shaping the region's progress, including:

• How AI is fundamentally transforming business models and investment strategies.
• Recent investment trends and future outlooks for the Southeast market.
• Comparative insights on Southeast tech ecosystems, particularly Atlanta.
• Essential guidance for startup founders navigating extended fundraising cycles.
• Strategic perspectives on Atlanta's pathway to becoming a top five U.S. tech hub.
• Obstacles that could hinder Atlanta's growth and solutions to overcome them.

AI is Changing Business Models

Not surprisingly, AI was the central topic of conversations throughout the Venture Atlanta kickoff event. The prevailing belief is that AI's impact will surpass previous technology shifts, creating broader and deeper business transformations.

The panelists explained that AI innovations have shifted from 'picks and shovels' to businesses finding innovative ways to deploy AI to generate unprecedented efficiency and speed in delivering services. As that evolution has transpired, investors have moved to focus on distinguishing direct investments in AI from investments in AI-enhanced business models. Investors expect future ventures to feature AI in proprietary Large Language Models (LLMs) or in new ways to improve upon or leverage existing AI tools.

Investment Trends in the Southeast

Despite growth across approximately 15,000 deals in 2024, investment in the Southeast contracted by roughly 30% compared to the previous year. Despite some slowdown, current investment levels still surpass historical averages seen pre-2020, signaling continued long-term growth despite recent fluctuations. The general sense is that the environment is finishing the process of resetting itself after the wild valuation and capital increases in 2020 and 2021.

The panelists were generally optimistic for healthy progress across deal counts, sizes, and valuations in 2025, likely resulting from mergers and acquisitions and market conditions.

"The median deal valuation in 2024 remained higher than pre-pandemic levels, reflecting sustained investor confidence." (Mark Flickinger, BIP Ventures)

See startup deal and private market investment trends from 2018 through 2024 in the BIP Ventures State of Startups 2024 Report.

Comparing Southeast Ecosystems

Front Porch Venture Partners recently released its inaugural Southeast VC Pulse Survey. The research findings indicate that early-stage investors and those investing beyond traditional software sectors are notably optimistic about the Southeast market. Atlanta ranks eighth nationally in venture density and serves as a critical regional hub, positively influencing nearby ecosystems such as Birmingham, Chattanooga, and Greenville. Other key findings include:

• Although good exits are happening, legacy stages are being redefined, while macro uncertainty weighs on near-term investor outlooks.
• Early-stage investors are most optimistic about the venture environment. Software investors are pointing to the promise of AI tools to bend the capital cost curve, and there's a general bullishness about opportunities beyond enterprise software.
• Investors are ready to get real on AI and down rounds.
• The wealth generated from legacy industries in the Southeast is a possible resource for driving venture capital progress in the region.

Read the Southeast VC Pulse Survey here.

How Founders can Endure Longer Funding Cycles

Fundraising cycles have extended for a variety of reasons, including more expensive capital, more due diligence, and macroeconomic uncertainty. As that has happened, founders have had to shift their expectations and behavior. The panelists offered suggestions for enduring this challenge of patience:

• Exercise financial discipline and patience
• Be cautious of overly optimistic valuations, particularly with instruments like safe notes
• Avoid any/significant dilution in subsequent funding rounds
• Be prepared to provide clear and objective milestones, efficient capital use, and pathways to profitability

Turning Atlanta into a Top Five Tech Hub

Atlanta is working hard to advance from eighth to a top-five U.S. tech hub. The city's strengths include a high density of Fortune 500 companies, robust startup activity, leading academic institutions, and growing investment capital. Lower operational costs and strategic incremental funding further support the city's competitive advantage. Ironically, one key obstacle to Atlanta's growth is potential complacency driven by its appealing lifestyle and affordability. The panelists explained that, rather than reinvesting in the ecosystem, some successful (exited) entrepreneurs are inclined to enjoy early retirement rather than reinvesting in the Atlanta innovation ecosystem. Doing so reduces vital reinvestments of experience and capital.

"Continued success requires active reinvestment from experienced entrepreneurs." (Sean Banks, TTV Capital)

Ensuring continuous engagement from seasoned entrepreneurs and promoting an active entrepreneurial culture is essential to the region's continued progress. In a 2024 episode of the Extraordinary Pursuits Podcast from BIP Ventures, Donnie Beamer, the Senior Technology Advisor for the City of Atlanta, shared the city's efforts to move Atlanta into the Top Five in this conversation with Mark Buffington.