Why You Should Start a Company in ... Atlanta

Not too long ago, about fifty years, Atlanta was the size of Little Rock, Ark. About a hundred years before that, it was burned to the ground. Atlanta has proven it can grow (adding 1.1 million residents in the last decade alone). Now, it’s building toward a sort of tech hub in the southeast, against a backdrop that includes the busiest international airport in the world; a healthy cluster of corporate giants in Coca-Cola, UPS, Delta and The Home Depot, among others; and a spur of entrepreneurial activity that put Atlanta in the top ten on this year’s Kauffman Entrepreneurial Index, which tracks new business creation.

But in a place where half the population isn’t from there, identity is a work-in-progress—the New York Times called Atlanta “corporate stronghold, a Southern belle and a hip-hop capital”—all at once. Add to that: home to Internet security expertise and a key drug in HIV treatment. Alan Taetle, general partner at venture capital firm Noro-Moseley Partners, spoke with Fast Company about what makes Atlanta’s startup scene unique.

What makes Atlanta great for startups?

Any startup community needs three great things. It needs leadership. It needs world class universities where intellectual property is being developed, and then it needs a ready and able workforce. Atlanta has all three of those things. On the university side we have Georgia Tech and Emory to being with. Georgia Tech has a broad platform of technologies that they deliver and Emory has great life science capabilities. Then on the leadership side, we have a lot of leaders in Atlanta that stem back from a software company in the 1980's called MSA. For example, Tom Noonan, who was the CEO of Internet Security Systems, was a sales person at MSA. And the CEO of one of my portfolio companies, Vocalocity, was also at MSA. So we have the roots of having some old software companies and having some leadership from those software companies continue to lead current investments as well. Then on the work force, Atlanta has a plethora of 25- to 34-year-olds. It's considered one of the best places to live for that age bracket. So we have a young, well-educated, plentiful workforce to pick from. Then, finally, we have one of the best airports in the world. So as all of these companies become global much earlier, you can get from Atlanta to India, China, anywhere around the world much more easily than you can from many other cities.

What types of startups do well in Atlanta?

We're really good at enterprise software from a long standing background. But in terms of startups we have strong expertise in internet security. From Internet Security Systems, which was acquired from IBM, there's been at least 15 companies that have been spawned from Internet Security Systems. And Georgia Tech has an internet security center that's one of the world leaders in internet security research as well. Atlanta is also a great place to start a payment processing or financial technology company. First Data, Global Payments, we have a long legacy link systems of having true payment processing expertise, and banking software expertise. Then finally UPS, so we have a lot of logistics capabilities as well. So on the IT side those are the three areas. On the life science side we have a strong history in the bio tech space. For example, at Emory one of the main drugs in the HIV cocktail was actually developed at Emory.

Does Atlanta breed or attracts entrepreneurs?

People who come to school at Georgia Tech will stay and start companies. Or people will come to get their PhD at Georgia Tech or Emory and stay and start companies. But if you look at it, not many people grew up here. I'll give you an example. Let's just say Cardlytics which is a company that just raised $18 million, we don't have an investment in it, so I don't have a biased, but these two entrepreneurs came from Cap One in the Midwest, and they just picked a city on the east coast they thought was the best place to start a company, and they picked Atlanta because of the ease of transportation and because of the payment processing expertise. That's sort of a classic Atlanta situation, if you will.

Add the cost of living in Atlanta, what you can buy in terms of a house or a lot, or the quality of life in terms of how long it takes you to commute to work in general is fantastic in Atlanta. Then the ease of getting places, if you have any sort of company that has a software development arm in India, China, or Atlanta it's a great hopping off point compared to other markets. When you can get to Tel Aviv, and Mumbai, and Beijing, so easily compared to other markets, our airport is truly a competitive differentiator for the city.

What's happening in the ecosystem that makes it sustainable?

We have one of the oldest business incubators in the country, and one of the most successful at Georgia Tech. It's funded by the state of Georgia a well. It's called the Advanced Technology Development Center, and I think you actually came to me through Lance Weatherby who is a venture catalyst there who does a terrific job. You know, ATDC is an institution that just knows how to cultivate and build companies. It's broadened it's reach. It used to be that the incubator would only take on companies that were physically housed in the Georgia Tech buildings. But now they have a much broader outreach program for startup companies and they provide resources for startup companies. So that by itself is a great enduring business creator that the city has. We also, in this world of cloud computing, Atlanta is one of the best locations to have data centers. From a real estate connectivity percent perspective, the cloud will do nothing but benefit Atlanta. I think we are going to continue to attract data centers.

What kind of exits do you anticipate out of Atlanta?

There are some really promising companies that I see that can have a billion dollars worth of value. I'll give you three that come to mind. Suniva, they are making a next-generation chip for solar panel. They've gotten a ton of funding from some world class investors, including NEA. The professor who designed the technology is out of Georgia Tech. They've already built two production plants, so they are doing extremely well. Secure Works, an internet security company where my firm is an investor. It's the largest pure-play stand alone player left in the internet security space. It's a major security service provider. Then I look at Sharecare as a new company that is started by Jeff Arnold who started Web M.D. and How Stuff Works. Sharecare is a next-generation Web M.D. I would never bet against Jeff. Those three by itself, I think all of them are billion dollar opportunities.

 

For more from this series:

  • Why you Should Start a Company in...Austin
  • Why you Should Start a Company in...New York
  • Why you Should Start a Company in...Los Angeles
  • Why you Should Start a Company in...Chicago
  • Why you Should Start a Company in...Boston

Laura Rich is a freelance writer and co-founder of Recessionwire.

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5 Comments

  • Scott Lockhart

    Three words: DO SOMETHING AWESOME.

    The whole argument that funding is an issue for Atlanta startups is patently absurd. If you have a worthwhile startup, you can get funded. End of story. Maybe it's just me, but ideally you spend your time creating a company that has investors approaching you... novel idea right? Believe it or not, this does happen in Atlanta. The other unbelievably short-sighted notion that permeates the community is that you only have to get investment from Atlanta investors/VC. Increased demand and success for investment dollars by viable companies with a reasonable shot of making money with a great team (not just a great idea), will spur more investment from investors here and elsewhere, people will want in. It will snowball. So all the people whining about lack of investors maybe have to take a good hard look at themselves and their businesses. Sorry to be harsh, but harsh realities are things that anyone running a startup should be thinking about daily, if not hourly. As far as the community goes, if you don't know it exists, you're certainly not in it. If you're actually doing something worthwhile the "community" comes to you and it's up to you to participate... and I'm not just talking about ATDC (although institutionally they serve a fairly valuable role). There are people in town who are doing things (not a huge amount granted), and we know each other... hell, a fairly healthy sized group of us meets every single week for hours over beers to discuss our startups. There more going on than meets the eye. (We're like Transformers).

    Oh yeah, while I'm ranting, F the need for leadership... that's also a weak excuse. Seriously... Who cares. Get over it. Be a leader yourself and do something worth following. This ongoing search for entrepreneurial leadership is nuts... quite frankly most of the "leaders" either aren't doing anything substantial themselves or resting on laurels of past triumphs. Not good enough. It's not even really a slight against them (although it could sound like it -- not intended), most of those guys would welcome some startup founders who are doing something to take the reigns and inspire more people to take the plunge. It's why they are doing what they are doing...

    True, we're not an Austin, NYC, or SV. But there are some big advantages to being here, and there ARE people doing interesting things. Yeah, some may kinda suck, never make a dime and never get funded; but getting funded is not the be all to end of creating an awesome company. There's many ways to do it, and "it" is making money. The sooner people understand that, the better.

    /rant

  • Cornelius McNab

    One word: FUNDING.

    Sure, Atlanta's venture community is up-and-coming, but it is no where near the scale of San Francisco's because the funding sources are relatively scarce in Atlanta.

    As a transplant to Atlanta from the northeast, I've heard a lot of other transpants say that they moved to Atlanta for better quality-of-life (lower cost of living, weather, diversity, etc.). Only once has someone told me that they moved to Atlanta to start a business, and that person was moving from Ohio I think.

    Regardless, a lot of folks are flocking to Atlanta for better quality-of-life, and then when they get here, many of them decide to start businesses.

    There's no lack of ideas and ingenious entrepreneurial talent in Atlanta, but the access to funding is not keeping up with the increasing demand.

    That's the reason why I started 40billion.com - the social funding network for entrepreneurs - here in Atlanta over 2 years ago. We've seen thousands of aspiring entrepreneurs from Atlanta (and other Georgia cities) with great ideas and networks, but no funding to start or grow their businesses. So, we help them to leverage their social networks to raise funding and find resources.

    The beauty of social networking is it allows you to tap into resources wherever they are. No longer do you have to move to another city in order to start a business. It's very empowering!

    Cornelius McNab
    40billion.com, Inc.
    http://www.40billion.com

  • lance

    It's a little disheartening when someone that is not involved in the technology startup community walks in, throws some rocks, and suggests others do something to fix problems they have incorrectly identified. I am going to jump in and address some of these questions.

    1. Lack of ideas - I am not Alan Taetle but I see about 40 new ideas every month. Of those I would consider between two to four to be of high quality. This sits nicely with seed funding events.

    2. Lack of seed funding - Based on some surveys that I have seen there have been at least 40 deals of less then $1 million in the past 12 months. Moreover, there are at least three of what might be considered to be later stage investment firms actively making moves to move into the seed market.

    3. Lack if venture capital - I do not know Noro's numbers but again am aware of about 15 venture deals being completed in Atlanta.

    4. Lack of Entrepreneurial Ecosystem - We are seeing a new generation entrepreneurs that are staying involved in the community. TechOperators is a prime example as well as folks like David Wright that instead of going to the beach are starting new companies again.

    5. Lack of Leadership and Vision - Neither newspapers or government entities are capable of leadership, vision, or innovation.

  • David Nour

    1. How many of those high quality ideas are YOU investing in?
    2. What's the source of your survey?
    3. Where is the list of the 15 ventures deals, over what period of time, and how would you say Atlanta ranks against the marquee capital markets?
    4. How many "new generation of entrepreneurs" have started something with a successful exit more than twice?
    5. If publications aren't highlighting all of the amazing success stories and government entities don't get behind any of them, we'll continue to remain the best kept secret in America!

    Sincerely,
    The Rock Thrower

  • David Nour

    It’s the Ecosystem that’s missing!

    I’ve lived and worked in & out of Atlanta since 1981 – I’m passionate about this town, the quality of life here, and so much that it has going for it. I know Alan Taetle at NMP and agree with a number of references in the article. Unfortunately, here are several fundamental points Alan didn’t mention:

    1.Lack of Ideas – Even with Tech and Emory in town, there are not enough compelling ideas being generated by intellectual curiosity and horsepower! Wonder how many quality and quantity deals Alan has looked at in the past month?

    2.Lack of Seed Funding – Atlanta has never been a strong capital market and we seem to lack visionary angel investors who are willing to put their money, experience and reputation behind budding entrepreneurs. In the past Angels would fund early, promising ideas – now they’re looking for proven market validation, i.e. customers! Wonder how many Angel deals of say less than $1M has been completed here in the last year?

    3.Lack of Venture Funding – ATDC can produce great ideas backed by decent entrepreneurs. A handful maybe able to find Angel investors, but then what? Without a robust and competitive venture capital community, how can these early stage firms mature and progress their vision? Wonder of all of the deals Alan looked at last year, how many did NMP fund? How many were co-syndicated by other local VCs?

    4.Lack of Entrepreneurial Ecosystem – Detrimental to the entire picture is lack of any sustainable entrepreneurial ecosystem. Unlike other regions where successful entrepreneurial exits tend to reinvest their green- and gray matters back into the market, Atlanta’s successful entrepreneurs retire to Lake Oconee or move on to real estate development, depriving the ecosystem from much needed fuel to support the next generation of ideas.

    5.Lack of Leadership and Vision – The local business chronicle has yet to replace its technology staff writer from the last one they let go two years ago! Leadership Atlanta seldom selects class members from the technology entrepreneur ranks. The local technology association often confuses vibration with forward motion. And our last several governors and mayors couldn’t spell technology if they tried.

    Atlanta is an amazing town – unfortunately, without a handful of exceptions, a technology entrepreneurial Mecca, it’s not. It’s about time we stopped kidding ourselves and started doing something about being seen as more than just the town that hosted the Olympics, and home to Coke, UPS and Delta!

    David Nour - CEO, The Nour Group, Inc.
    Author of Relationship Economics (Wiley), ConnectAbility (McGraw-Hill), and The Entrepreneur’s Guide to Raising Capital (Praeger).