Guest Column: Alabama should invest in its own

Committing 1% of institutional and private investors' portfolios to local ventures in Alabama could yield transformative results and robust returns

At a recent civic gathering, leaders from across Alabama were remarkably synchronized on their comments related to economic growth, talent attraction and the future of our state. Conversations circled around the importance of creating more small businesses and high growth startups, providing professional opportunities to high-potential college graduates, and the tried and true “if you can get them here, you can keep them here” approach to recruiting top talent. We are committed to finding ways to keep talent and companies in Alabama — but what if we also found more ways to keep our money here?

Historically, our state has exported its wealth to distant corporations and institutions to the detriment of our own communities. For example, Birmingham, with its steel industry legacy, saw much of its riches siphoned off to northern executives and investors in the 20th century. This pattern of divestment isn’t unique to us; many Midwestern states experienced similar trends. Despite economic shifts, the trend persists. According to a Brookings study, “Much of the great wealth amassed over the years by the regions’ companies, philanthropies, public and private pension funds, and university endowments serves to subsidize coastal VCs and new business growth elsewhere.” 

Emily Wykle, regional vice president at gener8tor.

Alabama’s population growth lags behind neighboring Southeastern states like Florida and Georgia. We struggle to retain out-of-state college graduates, with only 20% staying one-year post-graduation. Even among in-state students, retention rates, though better, still fall behind. To keep pace, we must rethink our approach. Allowing our most valuable resources — whether talent or wealth — to leave the state hampers our growth. Investing locally could be the answer. As tawdry as it might sound, this is a case where the old expression, “the answer to every question is money,” actually might solve our question of how we grow our economy and retain the best and brightest.

Keeping 1% in Alabama — an experiment worth trying

Imagine if Alabama led the nation in investing in local enterprises, multiplying our wealth and talent rather than exporting it. Some argue fiduciary responsibility limits such initiatives, suggesting investments elsewhere are safer bets. But if we don’t invest in our own, how can we expect others to? Committing 1% of institutional and private investors’ portfolios to local ventures could yield transformative results and robust returns. It could also tip the scales for young entrepreneurs and founders who are deciding whether to build their businesses here or search for greener pastures on the coasts.

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There are two specific places we can start. The first is to invest in locally based high-growth startups directly or through pooled funds. In Alabama, we are lucky to have a small group of investors who have led in this space, like Alabama Capital Network, Alabama Futures Fund and Prosper’s HealthTech Fund. But we can do even more. If our biggest endowments and corporations were to designate 1% of their venture portfolio to local investments, that would drive a catalytic increase in capital access for early-stage companies that need investment to grow. Thanks in large part to Innovate Alabama, accelerators like gener8tor have built infrastructure across the state to help startups grow faster and connect with the mentors, customers and investors they need to thrive. But without capital here in Alabama, we are accelerating those companies and their returns right out of the state.

The second way to bet on our own is to buy from these startups. Often, Alabama startups struggle until validated by buyers in other markets. Unfortunately, at that point it’s too late, and the companies have followed their biggest customers to Atlanta, Nashville or beyond. Platforms like Engage in Atlanta, offer intentional onramps for startups to secure corporate customers. These corporate giants are betting on their own, and it’s paying off. Participating startups have raised $3.2 billion in capital, had six exits and landed major corporate deals with Delta, Southern Company, The Home Depot and others.

Acclinate is a perfect example of a company worth betting on. An Alabama-based health-tech platform, Acclinate increases diversity in clinical trials through partnerships with pharmaceutical companies and health care organizations. This startup leverages the demographic diversity of Alabama, experienced founders, and the growing national trend of an increasing focus on personalized medicine and population health. They are trusted by the top three pharmaceutical companies in the world and participated in the Bronze Valley gBETA accelerator powered by gener8tor. Recently, Acclinate announced a $7 million Series A financing round led by a Fortune 11 company. This is a company that we want to stay in the state and create value for local investors and customers alike. There are so many more “Acclinates” in Alabama — we need to bet on these companies before their bets get placed elsewhere.

At gener8tor, our aim is to drive growth and investment in places like Alabama. In another market we work in, a poll asked residents what the state’s investment fund should be doing: 68% of residents said it should be making investments within the state rather than following the current policy of putting most of the money into primarily international investments. We now operate a local venture fund to help that state address this feedback. We are working to do the same in Alabama, both through our accelerator programs that help startups grow faster but also through investment opportunities that ensure that the gains realized from these companies stay local. The question is, are you willing to make your bet on Alabama? Because, at gener8tor, we are.

Emily Wykle is regional vice president at gener8tor, a nationally ranked venture capital firm and accelerator. In her role, Wykle oversees gener8tor’s operations in the Southern market, with a specific focus on Alabama. More than 150 companies in Alabama have actively participated in gener8tor’s accelerator programs, resulting in an impressive achievement of more than $50 million in capital raised and the creation of 586 new jobs in the state. Her responsibilities include investor engagement, client and government relations and business development. gener8tor runs accelerators accelerators in 44 cities, 22 states and 3 countries, working with more than 300 startups per year.

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