# Inside the South’s rapid ascent as a VC and startup hub

**Author:** Kevin Dowd  
**Read time:** 5 minutes  
**Published date:** 3 January 2024

Three years ago, just 11.4% of all venture capital raised went to the South. In 2023, that figure almost hit 20%. What’s behind the shift?

## The demographics behind the South’s ascent

The U.S. Census divides the country into four primary regions: West, Midwest, South, and Northeast. The South is by far the biggest, with 128,716,192 residents [as of 2022](https://www.census.gov/newsroom/press-releases/2022/2022-population-estimates.html). The second-largest region is the West, with a population of 78,743,364—about 50 million fewer people.

The South is also the fastest-growing of the four regions. About 2.2 million people moved into the South [between 2020 and 2022](https://www.census.gov/popclock/data_tables.php?component=growth), accounting for about 1.8% population growth. Meanwhile, the populations of the Northeast and Midwest both got smaller, and the West grew by 92,000 people, or about one-tenth of 1%.

This growing population is packing an economic punch. In 2022, the six Southern states of Florida, Texas, Georgia, Tennessee, North Carolina, and South Carolina had a higher share of U.S. GDP [than the entire Northeast](https://www.bloomberg.com/news/features/2023-06-29/millions-move-to-the-south-as-us-economy-favors-its-wealth-job-opportunities), an inversion of historical trends.

Yet the South still lags well behind the Northeast and the West in terms of venture dollars. For investors, these three variables—the South’s population, its ongoing growth, and the VC gap that still exists between it and the coasts—make for a tantalizing combination. On a per capita basis, the South still has plenty of room to grow.

“There’s as much talent in the South as anywhere else,” Laube says. “There’s just a lot less money.”

The charts below show how various states across the South have assumed a growing role in VC over the past four years.

### 2020

### 2023

## Southern VCs on a shifting scene

Santosh Sankar has been part of the Southern venture ecosystem since 2016, when he co-founded Dynamo Ventures, a Chattanooga-based firm that makes [seed](/content/sg/en/learn/startups/fundraising/seed-funding/index.html) and [pre-seed investments](/content/sg/en/learn/startups/fundraising/pre-seed-funding/index.html) in supply chain and transportation startups. Even on that shorter timeline, the change has been remarkable.

“We have really seen an ecosystem emerge that in 2016 didn’t exist, quite frankly,” Sankar says.

Sankar thinks this emergence is due to a confluence of factors. One is that companies like Cardlytics have begun to establish a track record for success, which has in turn caused investors to pay more attention to the South. And when they pay more attention, Sankar says, they tend to like what they see.

”There’s more interest from outside capital providers,” Sankar says. "It was a realization that there are places in the U.S. other than San Francisco, Boston, and New York where you can find really interesting, smart people with ambition who can build large, meaningful businesses.”

Lisa Calhoun is the founding managing partner of Valor Ventures, where Laube now works. Some geographic regions are closely associated with one or two specific industries, such as California with tech, New York with financial services, and Boston with biotech. But Calhoun says that’s not the case in the South.

“There’s not a list of the top three things—there are dozens of things,” Calhoun says. “We have infrastructure, logistics, automobile manufacturing, carpet production, airlines … there’s healthcare, there’s transportation, there’s agriculture. If you look at a map of Fortune 500 corporate headquarters, 33% of them are headquartered in the South. That's more than any other census region."

## Building the pipeline of founders and funders

The proliferation of startup investment in the South is not limited to one or two metro areas. Sankar and Calhoun highlighted Atlanta, Miami, and Austin as three of the biggest markets. But the list goes on: Nashville, San Antonio, Washington, D.C., and the Research Triangle in North Carolina are emerging centers of VC activity.

In established markets like San Francisco and Boston, some of the best sources for early-stage funding are former founders and employees who achieved an exit and have decided to invest some of their profits in other startups. Historically, these sorts of people have been few and far between in the South. But as more companies go public or are acquired, the number of these potential angel investors grows.

“I know we created a lot of wealthy people in Atlanta. Many of them are now working for local startups, some of them are working for funds, and some of them are coaching local startups like I am doing,” Laube says. “Money follows talent. And that’s what we’re seeing happen.”