Funding wave boosts Birmingham tech startup scene
Entrepreneurs and innovators are getting noticed for their work in Birmingham, attracting millions of dollars in new investment for their technology-based startups.
In recent months, there have been at least three major funding announcements involving local firms:
• On-demand grocery delivery service Shipt announced this summer that it had secured $20.1 million in Series A funding.
• Fleetio raised $750,000 from private investors, the fleet management software firm said earlier this month.
• Swell Fundraising, a software company that serves nonprofits, in August announced $500,000 in angel investor funding.
Meanwhile, Daxko, a veteran of Birmingham’s tech scene, this month announced that San Francisco-based private equity firm GI Partners has acquired a majority stake in the company that will further accelerate its growth. Daxko provides software for health and wellness organizations.
All the funding activity shows Birmingham has the right ingredients to fuel a thriving technology landscape and more growth is on the horizon, said Kathleen Hamrick, director of the UAB iLab at the downtown business incubator Innovation Depot.
“The components people need to live, work, play and collaborate are here, in Birmingham,” she said. “That said, it’s exciting, but not all that surprising that we’re now seeing increased support for startups — evidenced by activity such as that of the recent funding rounds seen with Fleetio, Swell Fundraising, Shipt and Daxko.”
In addition, new programs designed to accelerate development of idea stage companies will magnify support in the region, Hamrick said.
One of those is Innovation Depot’s recently-launched Velocity Accelerator, which is supported by an economic development venture philanthropy fund, made possible by local community and corporate sponsors.
“In January 2017, the first cohort of Velocity Accelerator companies, up to 10 high-growth technology companies, will be accepted into the program,” Hamrick said. “Through the Velocity Accelerator, idea-stage companies in the South have the seed support they need to develop and scale.
“Velocity Accelerator companies will receive $50,000 in seed investment, over $800,000 in perks, heavy industry-specific mentorship, and access to an incredible space to build their companies alongside other top tech entrepreneurs over a twelve-week period.”
The $750,000 announcement from Fleetio is the firm’s first round of outside funding, raised from local, private investors who have been successful in their own right, said founder and CEO Tony Summerville. They’re also people he has known for some time who will serve as trusted advisers.
“We’ve grown the company this far without any outside investors, and we wanted to be picky on how we added more fuel to the fire,” he said.
Fleetio, which is based in Innovation Depot and has 16 employees, provides software that helps companies, organizations, nonprofits and governments manage their fleets and fleet-related assets. The company has customers in 40 different countries; about 60 percent are in the U.S.
These customers have various kinds of fleets, including cars, construction equipment and boats, and they use the software to manage things like maintenance, fuel costs, license renewals and driver qualifications.
The majority of the new funding will be used to hire more people, Summerville said.
“Like most businesses, we’ve had to grow to be able to afford to hire the next person,” he said. “We need more people to accelerate growth, and getting this additional capital allows us to hire in advance the next four or five people we need for key positions. We can get them on the team now, and they can help us do more to grow faster.”
The funding also will be spent on marketing to help generate new business leads.
Summerville said he is excited to be part of Birmingham’s growing tech startup community.
“There is a small but very strong tech startup community here, with talented people and great companies, a good mix of folks who are helping each other out,” he said. “Being in Birmingham now is exciting. It’s a great place to live and raise a family, but it’s also exciting from a downtown and city perspective. It’s fun to be a part of it.”
Shipt said its new funding also will be used to fuel more growth. Since its 2014 launch, the firm has grown to deliver groceries in 27 cities across 10 states with more than 5,000 shoppers who place orders via an app.
“Over the past year, we have laid a strong foundation for our business and scaled our service across the country. This funding is the catalyst that will propel us to the next level,” Shipt founder and CEO Bill Smith said.
“We are ready to put this funding to work strategically, so we can cultivate new partnerships and continue building the best way to buy groceries.”
Participants in the $20.1 million funding round included Greycroft Partners, Harbert Growth Partners and e.ventures.
Hamrick cites research from the Brookings Institution that shows new urban models called “Innovation Districts” are emerging.
According to Brookings’ Bruce Katz, these are geographic areas where leading-edge anchor institutions and companies cluster and connect with start-ups, business incubators and accelerators. They offer a blend of housing, retail and office space, they’re walkable and people interacting within them are connected by a strong technology infrastructure.
In these places, “open innovation” thrives, and entrepreneurs share resources, meet, mingle and collaborate.
“Birmingham has the ingredients which Katz has identified as essential for an innovation and entrepreneurship hub,” Hamrick said. “Its Entrepreneurial District was recently re-named the Innovation District. Innovation Depot is the hub of this District, and is home to over 100 member companies, Depot/U, the UAB iLab and the Velocity Accelerator.
“Beside Innovation Depot, the Pizitz building is being renovated and will be home to a mixture of retail, housing, a food hall, and REV Birmingham is working to bring a food incubator to the space. The bottom floor will be home to the Sidewalk Film Festival.”
Fleetio’s Summerville said one of the biggest advantages to being in Birmingham is entrepreneurs can be more connected to the city and see their impact on it.
“It’s a really exciting time to be in Birmingham. There’s a strong energy here, and the people here are great,” he said. “The biggest thing we’ve got ahead of us is continuing to recruit and retain technologists in Birmingham, and I think the momentum is swinging in the right direction on that one.”