https://businessalabama.com/new-venture-capital-fund-yields-early-returns/
Birmingham, along with the rest of Alabama, continues to make inroads in the nation’s entrepreneurship circles, particularly the high-tech sector.
The city received a major boost last September with the formation of the Alabama Futures Fund, a $25 million early-stage venture capital fund that will fund startup companies based in Alabama or companies that would consider moving to Alabama.
Backers include some of Birmingham’s biggest names — Raymond Harbert, chairman and chief executive officer of Harbert Management Co.; Auburn and NBA basketball great Charles Barkley; Protective Life Insurance Co.; Hoar Construction; G. Ruffner Page Jr., president of McWane Inc., and businessman Benny LaRussa Jr.
“We were fortunate to have several investors commit to the vision Mr. Harbert fostered and raised a total fund of $25 million,” says Matt Hottle, a partner in AFF’s advisory firm Red Hawk Advisory.
Hottle says Harbert had been considering an Alabama-focused, early-stage venture capital fund for a number of years.- Sponsor –
“Mr. Harbert believes that in order to create a robust entrepreneurial ecosystem in the state of Alabama, one of the elements needed is a pool of committed capital to invest in and support early-stage companies,” Hottle says.
Several recent studies show high-tech entrepreneurship is moving from areas like Silicon Valley and the North Carolina Triangle to the middle part of the country. Given that trend, Hottle says, “A fundamental tenet of the Alabama Futures Fund is to foster the Alabama entrepreneurial community and to attract early-stage companies to relocate to Alabama by creating a resident pool of capital to invest in our previously underserved market.”
Like any investment firm, AFF’s goal “is to create positive returns for the investors,” Hottle says. “But we are also taking advantage of the opportunity to work collaboratively with other stakeholders in Alabama’s business and entrepreneurial community to promote the entire spectrum of entrepreneurship and economic development. Whether we invest in a company or not, we try to encourage their success by providing access to a network of professional service providers and community business leaders to help with an array of non-financial support — ranging from executive mentoring to assistance with finding office space. The Fund will help promote the state as a supportive and strategic place for startups who can grow and innovate as effectively here as anywhere in the country.”
Hottle says that while the Alabama Futures Fund encourages early-stage investing and the development of startup communities across the state, Birmingham was a natural fit to serve as the base of operations. He points to Harbert’s strong ties to the institutional investor base in Birmingham and the recent success of several local startup companies.
“Maybe more instructive than any assessment that we made regarding the environment for early-stage companies in Alabama is the success that the Alabama Futures Fund has had in recruiting two of our first three portfolio companies to relocate their headquarters to Birmingham,” Hottle says. “We see this as definitive validation of the strength and attractiveness of Alabama’s entrepreneurial ecosystem.”
In just over six months, three firms have announced an investment from AFF and a decision to relocate to Birmingham simultaneously:
- At the end of June, San Francisco startup Prepaid2Cash Holdings Inc. announced that it had received capital from AFF and was relocating. “We are excited to join the burgeoning tech community in Birmingham,” said Peter Vogt, cofounder and CEO of Prepaid2Cash. “We were blown away by the ample resources and support available to a growing business like ours. This gives us confidence in our ability to scale our company and access new customers and tap regional connections.”
- In March, Case Status, a company founded in Atlanta to help law firms strengthen relationships with their clients, accepted funding from AFF and announced a move to Birmingham. “We believe the missions of Case Status and the Alabama Futures Fund are very much aligned,” says Case Status CEO and founder Lauren Sturdivant. “From out earliest days, we have focused on building deep, trusted and expansive relationships for the benefit of law firms and their clients. AFF demonstrated their commitment to the same ideals.” Like Vogt of Prepaid2Cash, Sturdivant praised the “Birmingham tech ecosystem,” and says her firm “is excited to be part of it.”
- Last December, Joonko Inc., which helps employers find a diverse pool of job applicants, announced plans to move its headquarters from San Francisco to Birmingham, after accepting AFF funding. “Expanding our operations in the U.S. is an exciting moment, and we couldn’t find a better place than Birmingham,” says Ilit Rax, founder and CEO of Joonko. “Working alongside the Alabama Futures Fund has been incredible from day one. Their support of the business, willingness to make introductions, and belief in the team, product and mission is not something you find in every investor.”
AFF also has invested in the Alabama-born firm VirtualCare LLC and its direct primary care platform, DoctorWELLington, which provides access to virtual care, telemedicine and primary care physician office visits for a monthly subscription fee, without co-pays, deductibles and other traditional insurance.
Several Southeastern communities have well-organized, early-stage investor communities, says Hottle, citing Atlanta, Austin, Raleigh and Nashville, as well as Chattanooga, Tampa and Charlotte. That investment “has helped those communities not only retain their local startup companies, but also attract startups from around the region, including some with Alabama roots.”
Birmingham’s existing entrepreneurial element, embodied in Innovation Depot, welcomes the AFF influence.
“Innovation Depot has been focused on building the tech entrepreneurial community for over a decade, and we are incredibly excited about the added momentum of focused capital sources like the Alabama Futures Fund,” says T. Devon Laney, president and CEO. “Being able to attract and support high-growth tech startups is essential to the future of our community and state, and we expect to continue working with partners like the AFF to drive these results moving forward.”
Bill Gerdes is a freelance contributor to Business Alabama. He is based in Hoover
