Birmingham had fewer funded startups in 2023. Here’s what that means for The Magic City

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(Nathan Watson / Bham Now)
(Nathan Watson / Bham Now)

Last week, Birmingham-based private business incubator First Avenue Ventures released their list of startups in The Magic City that received funding in 2023. As a whole, Birmingham funded fewer startups in 2023 than in years prior.

Bham Now spoke with Mike Goodrich, Principal at First Avenue Ventures, to learn more about their finding and what they mean for Birmingham.

Birmingham has fewer funded startups than in 2022

In 2023, Birmingham had a total of 93 funded startups—that is, currently active startups that have received funding at some point since established. By comparison, Birmingham had 105 funded startups in 2022.

Local incubator firm First Avenue Ventures has charted the number of funded startups in The Magic City since 2019.

“One way to guage the health of an economic ecosystem is by tracking the number of startups—and its not a good sign when it falls. When we saw our numbers for 2023, it reinforced what we were concerened about—a lack of capital and drying up of angel investors. This is not unique to Birmingham, and reflects a national trend. The adage ‘When Silicon Valley coughs, Birmingham gets the flu’ seems apt.”

Mike Goodrich, Principal, First Avenue Ventures

First Avenue Ventures shared two key takeaways from their findings:

  • The more startups in Birmingham, the better. If only one out of ten startups succeeds, having 94 funded startups vs. 105 equals one fewer financially successful company for Birmingham.
  • The decline in funded startups indicated a dwindling amount of reinvested capital, possibly due to a decline in cash exits since COVID.

What does this mean for Birmingham?

Birmingham / Skyline / Downtown Birmingham
(Nathan Watson / Bham Now)

Based on their findings, First Avenue Ventures expects to see the amount of startups in Birmingham shrink in 2024. This does not mean that the startup ecosystem is going away. Good startups should continue to get funded. While the leaner market will likely kill off less-than-stellar startups, the ones that survive will be stronger for it.

“The startup world is hard, especially in the current funding environment. People who are considering creating a startup should understand the challenges and recognize that it is probably a decade of your life that you will need to dedicate to this business to make it successful. With many of the traditional funding mechanisms drying up, founders need to develop new solutions for funding and make sure that their fundamentals and execution of their business are solid.”

Mike Goodrich, Principal, First Avenue Ventures

So, how can we support the startup ecosystem in Birmingham? Mr. Goodrich and First Avenue Ventures offered several potential methods:

  • Encourage constructive investments in startups
  • Encourage skilled and knowledgeable investors (and can afford the loss) to invest in startups
  • Encourage legislators to provide additional tax credits to seed investors
  • Encourage new funds to form through favorable legislation
  • Cut red tape to existing non-dilutive funding programs
  • Encourage trustees of large endowments to look at alternative assets, including funds created in Alabama

“Investing in our startups is important. These are the companies that we need to replace our medium- and large-sized companies when they get bought or sold. Companies don’t last forever. As our city changes, having a robust pipeline of up-and-coming companies is critical to Birmingham’s sucess.”

Mike Goodrich, Principal, First Avenue Ventures

Click here for more ways to support the startup ecosystem in Birmingham.

Nathan Watson
Nathan Watson

Senior Content Producer + Photographer

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