Tech

How did Atlanta become a top breeding ground for billion-dollar startups in the Southeast? – TechCrunch


Over the previous 5 years, the Southeastern area, led by Atlanta, has gone from being “one of the best kept secrets” in tech, to a vibrant ecosystem teeming with a herd of the billion greenback tech companies which might be referred to in the funding world as “unicorns” (due to their supposed rarity).

In these 5 years enterprise capital investments surged to $2.1 billion in the area, with $1 billion invested in the final yr alone, in line with Lisa Calhoun, a companion with the Atlanta primarily based funding agency, Valor Ventures.

It’s indicative of the entrepreneurial expertise coming from the community of personal and public colleges throughout the area like Georgia Tech, the University of Alabama, Auburn, the University of Georgia, Vanderbilt, Emory, and the traditionally black schools and universities like Morehouse, Spelman, and Xavier. And it’s additionally a signal of a reinvestment in native entrepreneurship — a decades-long marketing campaign to show Atlanta into the middle of a hub-and-spoke community of startup cities that spans Miami to Atlanta, with stops in Birmingham, Nashville, New Orleans,

“Atlanta is what a next generation, global, post-Silicon Valley tech hub looks like. Our demographics are ten years ahead of the U.S.’s transformation into a majority minority society,” wrote Calhoun in an e mail. “With over 40% of the U.S. population in the Southeast, the greatest density of founders and executives of color, rafts of tech companies like AirBnB locating here, and our own legacy of top tech and talent, Atlanta sets the tone for what’s next. We have the growing, diverse population base all strong founders need to scale.”

There’s nonetheless a lot of labor to be carried out for the area to determine itself as considered one of the subsequent engines of financial return for the enterprise capital and funding enterprise, although.

“The Southeast is 24% of the US GDP, but only accounts for 7% of the venture investment,” famous Blake Patton, the founder and common companion of the Atlanta-based funding agency, Tech Square Ventures. “With the recent momentum in the region, that is changing and investors are taking notice and backing local managers who in turn are investing the region’s best and brightest entrepreneurs.”

The Internet increase and bust in Atlanta

In the years after the 1996 Olympics, Atlanta was a high-flying contender for the title of considered one of the subsequent large startup hubs in the United States.

The Olympics had put the metropolis on the world’s stage, and seeing the wave of exercise, pleasure, and funding that got here with the introduction of web firms like Virginia’s America Online, Atlanta’s metropolis council and mayor have been making a push for the metropolis to become a telecom and startup hub in the early days of the first Internet increase.

“Something happened in the mid-90s driven by the Olympics where Atlanta hit the map worldwide. It wasn’t just that we were a supply and logistics hub. In the late 90s as the dot-com boom really evolved, things happened underground that aren’t as transparent as they should be. Atlanta Gas Light had the largest dark fiber ring in the country surrounding Atlanta. That was built solely with the olympics in mind. We had Georgia Tech working on the next generation of aerospace, and they added computer engineering,” mentioned Christy Brown, the founding father of the Atlanta primarily based non-profit Launchpad2X and a serial entrepreneur and govt with deep ties to the Atlanta ecosystem.  

Atlanta additionally had its justifiable share of early successes — excessive flying telecom and networking firms that have been important to the evolution of the first dot com period whose later years have been both mired in scandal or who have been acquired by a lot bigger entities. These are firms like MCI Worldcom and Airtouch Cellular, which was devoured up by Singular Wireless and would ultimately become a part of a restructured AT&T.

“There were all kinds of tech things happening in the city. A lot of these founders were getting venture on paper which evolved into the dot-bomb,” mentioned Brown. “All of this was happening mid to late nineties, when the dot-bomb happened there was a lot of failure in the Atlanta area.”

The implosion of early web firms that got here with the bursting of the dot-com bubble in 2000 reverberated by Atlanta’s tech ecosystem, erasing the early beneficial properties that firms made and setting the stage for a decade-long interval of reconstruction punctuated by a few successes from holdouts that managed to make their method by the wreckage.

 

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Image Credits: TechCrunch

Through the lean years

One of these firms was MailChimp. Launched in 2001, in the early aftermath of the bursting of the tech bubble, the privately held e mail advertising and marketing startup was considered one of a variety of initiatives at Ben Chestnut’s and Dan Kurzius’ internet improvement agency.

The two males met at Cox Interactive Media to work on an early MP3 product. When that fizzled each males ultimately misplaced their jobs and went into enterprise collectively. They constructed MailChimp off of income, bootstrapping the enterprise with out enterprise capital in a mannequin that many different tech founders in the space would search to copy.

A couple of years later, in 2003, one other entrepreneur named John Marshall started putting in web hotspots at hospitality companies, ultimately increasing his Wandering WiFi service to incorporate monitoring and managing different kinds of community infrastructure. This foray into startup land would ultimately create one other large Atlanta tech exit in AirWatch.

For the first six years MailChimp remained a facet hustle, a product that the two co-founders continued to work on, however didn’t commit themselves to full time. It wasn’t till 2007, when the service hit 10,000 customers, that the firm grew to become the full-time job for each founders.

Their once-scrappy startup turned them into billionaires. A 2018 Forbes profile put the firm’s valuation at $4.2 billion on roughly $600 million in income.

If there was a beginning gun for the Atlanta tech renaissance, it may be 2006, a few years earlier than the international monetary disaster and a time when the broader tech business was discovering itself a much less financially precarious prospect for traders. Internet Security Systems, an Atlanta space dot-com darling that held an initial public offering in the late 90s bought to IBM for $1.3 billion that yr.

Tom Noonan and Chris Klaus, the co-founders at Internet Security Systems, had an equally lengthy highway. What had began out as a firm constructed when Klaus lived above Noonan’s garage in Atlanta in the mid-90s, morphed into a firm pulling in $400 million in annual income earlier than its acquisition by IBM.

As capital began flowing into Atlanta and the metropolis regained a few of its footing in the tech world, founders who had exited their firms started to reinvest cash domestically. And the metropolis moved to create extra occasions to foster entrepreneurship. 2006 noticed the launch of Venture Atlanta, a convention designed to showcase early expertise and startups coming from the area that served as a launchpad for a number of entrepreneurs that will form the way forward for the metropolis’s expertise business.

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Image Credits: TechCrunch

Setting a new scene

If 2006 was a large yr for exits in Atlanta, it additionally proved to be the yr that opened the floodgates on new entrepreneurial exercise, which might give rise over the subsequent decade to what’s now a thriving startup scene, pumping out a file variety of billion greenback tech companies.

It was the yr that David Cummings and Adam Blitzer founded Pardot, a advertising and marketing and gross sales automation software program developer that grew shortly and attracted the consideration of huge business gamers like ExactTarget. It was additionally the yr that Manhattan Associates govt Alan Dabbiere joined Marshall and Wandering WiFi became AirWatch, a firm offering administration and safety tech for cell enterprise networks.

Over the subsequent few years MailChimp would become extra energetic; Cloud Sherpas, based by the entrepreneurs Michael Cohn and Sean O’Brien (who at the moment are founders of the funding agency Overline Ventures) would launch and so would firms like the video streaming tech developer, ClearLeap (bought by IBM in 2015 and valued at over $110 million); the safety firm Damballa would launch (later acquired by Atlanta neighbor Core Security); and the service powering lots of the main banks buyer rewards applications, Cardlytics (now buying and selling on the Nasdaq with a $4 billion market cap).

Buoyed by these rising tech firms, different entrepreneurs would be part of the fray, with Kabbage (acquired for $850 million), Calendly (a $3 billion business as of this year) and the voice identification expertise developer Pindrop (which raised $90 million back in 2018) rising onto the scene at round the identical time.

These firms set the desk for what would become a buffet of startups centered totally on funds and monetary providers, cloud-based enterprise options, and web safety. Gone have been the {hardware} heavy telecom firms and networking firms like Scientific Atlanta, whose enterprise is in comparison with Hewlett Packard for having introduced a excessive tech business to the metropolis in the Fifties — very like HP did in Silicon Valley.

Meanwhile, a new era of investor was shifting into the Atlanta orbit, presaged by the 2006 launch of BIP Capital — an occasion that additionally proved significant for the metropolis’s budding entrepreneurs.

Staking claims for Atlanta’s future

The rising tide of entrepreneurs popping out of Atlanta additionally served to revitalize the metropolis’s moribund funding group. Hit arduous by the bursting of the dot-com bubble, the Atlanta-area corporations that managed to outlive the crash started to look to later stage companies and out of doors of the Atlanta tech ecosystem for startups to again, in line with knowledge from CrunchBase and a number of other interviews with traders and founders.

Noro-Moseley Partners, for occasion, is by far the most energetic investor hailing from Atlanta. Over it’s lengthy historical past the agency has carried out over 123 offers in line with Crunchbase, however in the final 5 years, knowledge signifies solely 4 funding from the agency have been made into Atlanta-based firms.

By distinction, the arrivistes at BIP have been deploying capital and elevating successively bigger funds since they first got here to city. Over the final 5 years the agency has invested in at the least 15 Atlanta-area offers, and now, beneath the moniker of Panoramic Ventures, the agency is concentrating on a $300 million early stage fund to take a position throughout the southeast and midwest.

“Traditionally, access to capital was challenging for founders in Atlanta and the Southeast. In the past, it was considered a disadvantage for a tech business to be based outside of the traditional innovation hubs [in] Silicon Valley or the Northeast because it was more difficult to secure investment capital. This was because the large funds were located inside the hubs and had plenty of opportunities right on their doorsteps for investment,” wrote Mark Buffington, the co-founder and chief govt of BIP Capital, in an e mail to TechCrunch. “While the traditional hubs are still key in terms of aggregate capital, the requirement for startups to also be inside the hubs has changed. Increasingly, venture funds are locating themselves in other areas of the country where innovation is occurring. At the same time, the amount of capital available from local and regional investors is growing, in large part due to the influx of dollars into the private markets.”

Another member of the new faculty of traders that’s altering Atlanta’s funding scene is Patton; whose work with Tech Square Ventures and Engage, the company enterprise capital funding agency and startup initiative harnessing the energy of a variety of the largest firms in Atlanta, additionally galvanized entrepreneurship and the newfound curiosity in startup tech firms.

“The recent momentum in the region is driven by increased connectivity across the innovation ecosystem and a critical mass of entrepreneurs and talent coming out of the region’s many successful startups. With corporations focused on digital transformation and innovation, all large companies have to a degree become tech companies and that drives connectivity as talent moves across both startups and tech companies,” Patton mentioned. “Perhaps our greatest strength is our diversity and being home to four leading HBCUs, and I hope in the next 5 years the Southeast will emerge as a leader in producing successful startups founded by diverse entrepreneurs and built with diverse teams. It’s not just a moral imperative – with half the nation’s black population, the Southeast must succeed in engaging under-served entrepreneurs to lead – and you can’t tackle diversity nationally without tackling it in the Southeast.”

Still, different substances have been wanted for the resurgence of startup exercise in the metropolis. These could be co-workings areas like David Cummings’ launch of the Atlanta Tech Village in 2012; the persevering with relevance of the Atlanta Tech Development Center; the Venture Atlanta convention and the co-working area round Hypepotamus — which stays the go-to publication for Southern startup exercise.

Every entrepreneur and investor talked about Cummings’ determination to reinvest in the metropolis and launch the Tech Village close to Atlanta’s tony suburb of Buckhead as considered one of the largest sparks for the metropolis’s renewed entrepreneurial fervor. Soon after Cummings bought Pardot he and David Lightburn established Atlanta Tech Village as a co-working spot for entrepreneurs. It attracted a variety of new startup founders whose companies would become the subsequent wave of huge startups. “When David Cummings sold Pardot he wanted a place for entrepreneurs to have community,” mentioned one longtime participant in the Atlanta tech group. “They would do these startup chow down lunches and really support entrepreneurs building businesses.”

And simply as key was the longtime hub for Georgia Tech-affiliated startups, the Atlanta Tech Development Center, the entrepreneurs and traders famous. Venture Atlanta had a position to play as properly, bringing traders from each nook of the nation to the metropolis to showcase top expertise. Together with CreateX, and the Venture Atlanta program, the 4 initiatives and workspaces for early stage entrepreneurs planted a variety of seeds that will quickly blossom into firms like PartPic, Greenlight Financial (which is now worth $2.3 billion), Kabbage, FullStory and Pindrop.

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Image Credits: TechCrunch

A haven for numerous founders and traders

During these early days of the Atlanta startup ecosystem, there was one spot extra welcoming than most for numerous and women-led founders — the co-working area and workplaces for Hypepotamus.

Serial entrepreneur Monique Mills was there. So was Jewel Burks Solomon, who sold her company, PartPic, to Amazon in 2016 and is now the Head of Google for Startups in the U.S.

“My first office was at Hypepotamus because they offered free space,” Burks Solomon recalled. “And at the time I didn’t have much money. Then when I raised some money the next major one was at ATDC — the state of Georgia’s incubator. They offered subsidized space and they had an entrepreneur in residence and they had a whole program to help Atlanta-based startups with some kind of technology.”

It was the Hypepotamus area, and subsequent venues like Opportunity Hub and The Gathering Spot that catalyzed the Black entrepreneurial group in Atlanta, in line with a number of founders and traders.

And if the Hypepotamus area, carved out by National Builder Supply, was considered one of the catalysts, then the angel investor, Mike Ross, was the different.

“Mike has funded many successful Black-led startups in the Atlanta ecosystem and we wouldn’t be where we are today without him,” entrepreneur Candace Mitchell Harris told UrbanGeekz in a current profile. “When many have faced the run around of false promises or flat out rejections, Mike confidently put his money in and pushed our founders further.”

Ross, a Morehouse College alumnus, who made his wealth as a marketing consultant in the development and contracting business has backed Black founders and traders together with: Luma, Partpic, Monsieur, Axis Replay, Myavana, TechSquare LabsOpportunity Hub, and The Gathering Spot.

Investors like Paul Judge and entrepreneurs like Joey Womack, Barry Givens, and Mitchell Harris, all benefited from Ross’ funding largesse.

“Mike was the catalyst for our company’s success as our very first angel investor,” says Mitchell Harris, co-founder and CEO of magnificence tech startup Myavana, told UrbanGeekz. “I still remember meeting him for the first time at the Black Founders Conference in June 2012, inquisitive and eager to get behind the movement that was beginning in Atlanta in the tech startup scene.”

And Ross blazed a path for different traders like the Fearless Fund, a group of girls traders led by Arian Simone, Ayanna Parsons, and Keshia Knight Pulliam, who launched their first fund in 2019, and Collab Capital, which launched last year (and is led by Burks Solomon, Justin Dawkins, and Barry Givens) — near a decade after Ross first started investing.

“Right now women of color are the most founded but the least funded entrepreneurs,” Simone mentioned. “Atlanta is a mecca of black entrepreneurship for us to have a venture capital and tech presence here.. I will charge the city of Atlanta and the state of Georgia and the banks that they need to back what we’re doing here.. It is needed.”

Not solely is it wanted, however it’s working. Of the 36 enterprise capital corporations recognized as a part of TechCrunch’s analysis as having a give attention to early stage investments in the Atlanta space, 41% met a number of of the following standards: identification as having a range focus throughout investments, identification as having a numerous fund administration group, or each, in line with knowledge from Crunchbase.

And by a pattern dimension of 158 startups spanning Pre-Seed, Seed, or Series A in the Atlanta space, which have been included in TechCrunch’s analysis, 48% met a number of of the following standards: identification as having a sex-diverse founding group, identification has having a racially-diverse founding group, or each. In many cases, founding groups did not self establish, so the variety of numerous founders could also be higher than at the moment documented primarily based on publicly accessible knowledge.

As UrbanGeekz famous, about 25% of the staff in Atlanta’s tech business are black. In San Francisco, against this, that determine is 6%.

“Ten years ago [the Black tech startup ecosystem] was just starting out,” Ross instructed UrbanGeekz. “Now Atlanta is one of the top tech hubs in the country and the ecosystem is probably one of the most diverse.”

Looking forward

“I’m really excited about what’s happening now. It’s much more diverse in terms of the people that have the ability to deploy capital. I’m optimistic about what is to come in the tech space,” mentioned Burks Solomon.

She’s not alone. New corporations like Cohn and O’Brien’s Overline Ventures, Panoramic, and Outlander Labs, the agency launched by the former Los Angeles traders Paige and Leura Craig are all indicators of traders’ long-term perception in the well being of the Atlanta startup ecosystem.

“We think that the Southeast and especially Atlanta has the opportunity to become a key hub for tech startups in the next 5 years. It feels a lot like Los Angeles five years ago. The talent is here but historically the issue has been lack of mentorship, early stage capital, and the later stage capital as they grow and scale,” wrote Outlander co-founder Leura Craig, in an e mail. “However that is all changing given the fact that so many investors are now moving to all parts of the country and are open to investing in areas that they never invested in before. Covid dramatically accelerated the flight from California and New York and the Southeast’s tech scene is going to be a huge winner as a result of this migration. ”

Major tech firms are additionally displaying their religion in Atlanta’s startup scene by important investments into the ecosystem. Most not too long ago, Apple has committed nearly $100 million to new projects including the Propel Center, a $25 million bid designed to encourage range and entrepreneurship at a web site to be constructed close to Atlanta’s Historically Black Colleges and Universities.

It goes to be each a digital platform and a bodily campus in the Atlanta University Center.

Students will be capable of observe totally different instructional tracks centered on synthetic intelligence, agricultural applied sciences, social justice, leisure, app improvement, augmented actuality, design and artistic arts and entrepreneurship. This isn’t simply a financial funding for Apple, as staff will assist develop curricula and supply mentorship as properly. There will likely be internship alternatives for college students.

Apple isn’t the solely large tech firm to decide to Atlanta’s thriving tech group. Facebook is constructing out a large, multi-billion greenback extension to knowledge middle amenities close to the metropolis, and Google dedicated that the Atlanta space would obtain some fo the deliberate $9 billion funding in job progress throughout the U.S.

The present progress that Atlanta’s startup scene is experiencing can function a mannequin for different city areas on the rise. The recipe appears to be a sturdy technical school, an funding in collaborative startup sources, a community of keen traders to reinvest in the area people, the assist of metropolis authorities by non-profit and promotional actions, and eventually an embrace of the numerous historical past of the metropolis itself. There’s no must remake Silicon Valley, however the instruments of Silicon Valley can be utilized to make burgeoning tech communities higher.

With reporting help from TechCrunch analyst Kathleen Hamrick

Some rising stars of the new Atlanta ecosystem

 

 

Source Link – techcrunch.com

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