Reporter’s Note: This is the second installment in a mini-series on Atlanta’s tech scene. On October 2, we published an article taking a look at how Atlanta’s startup scene is growing and just how much venture funding has increased in recent years. Here, we look at the flip side of that growth.
In every market, there’s room for improvement.
David Lightburn, a partner at Atlanta Ventures and co-founder of Atlanta Tech Village, is naturally bullish on Atlanta but joins Tech Village co-founder Karen Houghton in believing the city needs to have some larger exits so it’s “put on the map more.”
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“We just need some more big wins,” Lightburn told Crunchbase News. “There’s a lot of funding available and West Coast investors coming to us consistently looking for companies, but still, money is a little harder to come by here than it is elsewhere.”
John Yates, chair of the technology group at Morris, Manning & Martin LLP, has been advising tech companies in Atlanta for nearly four decades, many of which were some of the city’s fastest-growing startups (such as the now publicly-traded Witness Systems and nFront).
To Yates, the Atlanta tech startup scene is unique for a few reasons.
“First, we are one of the only U.S. cities that has the ability to connect growing tech businesses with Fortune 100 companies,” he said. “The Metro Atlanta Chamber and Technology Association of Georgia (TAG) have joined together to build bridges between tech startups and F100 companies.”
As did nearly everyone else I talked to, Yates cited the talent pool coming from area’s educational institutions as a win, but also pointed out that Atlanta is becoming the “destination-of-choice for many foreign tech companies looking to establish their startup operations in the US.”
It’s also far more affordable in terms of both cost of living and starting a business, he said.
But it does have some work to do.
Echoing Hamilton’s point above, Yates believes Atlanta’s biggest challenge is attracting Series A financing for startups.
“Atlanta has a growing and vibrant angel community, but we need more capital at the next level. Interestingly, we have attracted loads of private equity to our city – PE funds are flocking to our region given the number of bootstrapped tech companies that provide great opportunities for funds to make control investments,” he said. “But we still need more investors willing to support startups with a $5 million to $10 million check to get to the next level of growth.”
The city is working on addressing the issue by meeting with funds in other U.S. cities and inviting them to visit Atlanta’s startup communities at the ATDC (at Georgia Tech), Atlanta Tech Village, Loeb.ATL, and Atlanta Tech Park, said Yates.
Atlanta also needs to exercise its influence on the state level to create incentives for companies to locate in the city “and avoid legislation that may be perceived by many in the tech community as unfriendly or restrictive,” he said.
The Diversity Conundrum
That venture money can be hard to come by in Atlanta is a fact that one black entrepreneur, Harold Alexander, can attest to. He’s looking for funding for his startup, Underground App, and said it has been difficult despite the city being home to so many diverse founders.
Atlanta Tech Village, for example, operates the It Takes A Village Pre-Accelerator Program that aims to give startups led by women and people of color “the opportunity to gain direct access to community, education, mentorship, and capital.”
“It’s difficult to get money in general, but as a black founder, it’s even more difficult,” Alexander told Crunchbase News. “It just makes it that much harder.”
He relates the story of a friend, Goodr founder and social entrepreneur Jasmine Crowe, who he said had trouble raising money in her hometown and ended up closing a seed round led by San Francisco-based Precursor Ventures.
But some companies have managed just fine without venture backing by learning how to operate with a lean mentality. Mailchimp, which provides marketing automation for e-commerce businesses, is one of those startups that has reached unicorn status with nary a venture dollar.
And George Azih has also managed to build a fast-growing profitable business with no venture funding at all: LeaseQuery, a SaaS provider that offers solutions to complex issues around lease accounting.
So although there are challenges in Atlanta (as there are in all cities), it seems for now the pros outweigh the cons.
Illustration: Dom Guzman