How did Atlanta turn out to be a high breeding floor for billion-dollar startups within the Southeast? –…

by akoloy


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 are referred to within the funding world as “unicorns” (due to their supposed rarity).

In these 5 years enterprise capital investments surged to $2.1 billion within the area, with $1 billion invested within the final 12 months alone, in keeping with Lisa Calhoun, a accomplice 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 faculties and universities like Morehouse, Spelman, and Xavier. And it’s additionally an indication 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 electronic 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 variety of work to be achieved for the area to determine itself as one of many 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 basic accomplice 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 one of many subsequent large startup hubs within the United States.

The Olympics had put the town on the world’s stage, and seeing the wave of exercise, pleasure, and funding that got here with the arrival of web corporations like Virginia’s America Online, Atlanta’s metropolis council and mayor have been making a push for the town to turn out to be a telecom and startup hub within the early days of the primary 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,” stated 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 corporations that have been important to the evolution of the primary dot com period whose later years have been both mired in scandal or who have been acquired by a lot bigger entities. These are corporations like MCI Worldcom and Airtouch Cellular, which was wolfed up by Singular Wireless and would ultimately turn out to be 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,” stated 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 corporations that got here with the bursting of the dot-com bubble in 2000 reverberated by means of Atlanta’s tech ecosystem, erasing the early features that corporations made and setting the stage for a decade-long interval of reconstruction punctuated by just a few successes from holdouts that managed to make their method by means of the wreckage.

 

Image Credits: TechCrunch

Through the lean years

One of these corporations was MailChimp. Launched in 2001, within the early aftermath of the bursting of the tech bubble, the privately held electronic mail advertising startup was one in all numerous initiatives at Ben Chestnut’s and Dan Kurzius’ net growth 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 within the space would search to duplicate.

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 primary six years MailChimp remained a facet hustle, a product that the 2 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 corporate grew to become the full-time job for each founders.

Their once-scrappy startup turned them into billionaires. A 2018 Forbes profile put the corporate’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, just a few years earlier than the worldwide monetary disaster and a time when the broader tech trade 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 12 months.

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

As capital began flowing into Atlanta and the town regained a few of its footing within the tech world, founders who had exited their corporations started to reinvest cash regionally. And the town 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 may form the way forward for the town’s know-how trade.

Image Credits: TechCrunch

Setting a brand new scene

If 2006 was a giant 12 months for exits in Atlanta, it additionally proved to be the 12 months that opened the floodgates on new entrepreneurial exercise, which might give rise over the following decade to what’s now a thriving startup scene, pumping out a report variety of billion greenback tech companies.

It was the 12 months that David Cummings and Adam Blitzer founded Pardot, a advertising and gross sales automation software program developer that grew rapidly and attracted the eye of huge trade gamers like ExactTarget. It was additionally the 12 months that Manhattan Associates govt Alan Dabbiere joined Marshall and Wandering WiFi became AirWatch, an organization offering administration and safety tech for cell enterprise networks.

Over the following few years MailChimp would turn out to be extra lively; Cloud Sherpas, based by the entrepreneurs Michael Cohn and Sean O’Brien (who are actually founders of the funding agency Overline Ventures) would launch and so would corporations just 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 most 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 corporations, 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 know-how developer Pindrop (which raised $90 million back in 2018) rising onto the scene at across the similar time.

These corporations set the desk for what would turn out to be a buffet of startups targeted totally on funds and monetary providers, cloud-based enterprise options, and web safety. Gone have been the {hardware} heavy telecom corporations and networking corporations like Scientific Atlanta, whose enterprise is in comparison with Hewlett Packard for having introduced a excessive tech trade to the town within the Nineteen Fifties — very similar to HP did in Silicon Valley.

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

Staking claims for Atlanta’s future

The rising tide of entrepreneurs popping out of Atlanta additionally served to revitalize the town’s moribund funding neighborhood. 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 keeping with knowledge from CrunchBase and several other interviews with traders and founders.

Noro-Moseley Partners, for example, is by far essentially the most lively investor hailing from Atlanta. Over it’s lengthy historical past the agency has achieved over 123 offers in keeping with Crunchbase, however within the final 5 years, knowledge signifies solely 4 funding from the agency have been made into Atlanta-based corporations.

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, below 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 electronic 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 brand new college 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 ability of numerous the most important corporations in Atlanta, additionally galvanized entrepreneurship and the newfound curiosity in startup tech corporations.

“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 stated. “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 components have been wanted for the resurgence of startup exercise within 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 house round Hypepotamus — which stays the go-to publication for Southern startup exercise.

Every entrepreneur and investor talked about Cummings’ choice to reinvest within the metropolis and launch the Tech Village close to Atlanta’s tony suburb of Buckhead as one of many largest sparks for the town’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 numerous new startup founders whose companies would turn out to be the following wave of huge startups. “When David Cummings sold Pardot he wanted a place for entrepreneurs to have community,” stated one longtime participant within the Atlanta tech neighborhood. “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 job to play as properly, bringing traders from each nook of the nation to the town to showcase high expertise. Together with CreateX, and the Venture Atlanta program, the 4 initiatives and workspaces for early stage entrepreneurs planted numerous seeds that may quickly blossom into corporations like PartPic, Greenlight Financial (which is now worth $2.3 billion), Kabbage, FullStory and Pindrop.

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 house and places of work 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 within 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 house, and subsequent venues like Opportunity Hub and The Gathering Spot that catalyzed the Black entrepreneurial neighborhood in Atlanta, in keeping with a number of founders and traders.

And if the Hypepotamus house, carved out by National Builder Supply, was one of many catalysts, then the angel investor, Mike Ross, was the opposite.

“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 guide within the building and contracting trade 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 just like the Fearless Fund, a gaggle 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 stated. “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, nevertheless it’s working. Of the 36 enterprise capital corporations recognized as a part of TechCrunch’s analysis as having a concentrate on early stage investments within the Atlanta space, 41% met a number of of the next standards: identification as having a range focus throughout investments, identification as having a various fund administration group, or each, in keeping with knowledge from Crunchbase.

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

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

“Ten years ago [the Black tech startup ecosystem] was just starting out,” Ross advised 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,” stated 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 previous Los Angeles traders Paige and Leura Craig are all indicators of traders’ long-term perception within 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 electronic 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 corporations are additionally displaying their religion in Atlanta’s startup scene by means of vital investments into the ecosystem. Most just lately, 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 website to be constructed close to Atlanta’s Historically Black Colleges and Universities.

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

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

Apple isn’t the one large tech firm to decide to Atlanta’s thriving tech neighborhood. Facebook is constructing out a large, multi-billion greenback extension to knowledge heart services close to the town, and Google dedicated that the Atlanta space would obtain some fo the deliberate $9 billion funding in job development throughout the U.S.

The present development that Atlanta’s startup scene is experiencing can function a mannequin for different city areas on the rise. The recipe appears to be a robust technical faculty, an funding in collaborative startup sources, a community of prepared traders to reinvest in the local people, the help of metropolis authorities by means of non-profit and promotional actions, and eventually an embrace of the varied historical past of the town itself. There’s no have to 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 brand new Atlanta ecosystem

 

 



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1 comment

Jim Crews May 2, 2021 - 11:29 pm

Interesting article,,, unfortunately it is consumed with group think.

Calling out Americans based on the color of their skin; not judging of their character.

Pure Racism.

Kathleen Hamrick and TechCrunch should be ashamed.

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