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Ideas, Dollars And Success; The Atlanta Startup Scene Then And Now

Atlanta is recognized as one of the major hubs for U.S. startup companies. Rich with resources such as Georgia Tech, Emory University and numerous Fortune 500 company headquarters, Atlanta has attracted huge numbers of entrepreneurs looking to launch new companies and put their ideas on the map. I wrote about the Atlanta startup scene several years ago, but things have evolved for the Georgia city since then, so I thought it was time to revisit it.

Over the past few years, Atlanta has been lauded for its hip, cost-friendly environment and large cluster of companies in some of the fastest growing technology industries, including information security, telecom and health care. The city also claims a large pool of talented engineers and a thriving entrepreneurial subculture. However it has always struggled to attract big VC money. In my previous article, I warned if progress wasn’t made in bringing smart money to Atlanta, many companies might seek greener pastures elsewhere. So where is Atlanta today?

The good news is that the city continues to make progress in building incubators and support networks and attracting clusters of companies in major tech markets. A few years ago Atlanta startups focused mostly on telecom, cyber security and healthcare. Now, two other major markets – FinTech and Marking Tech – are sharing the spotlight and creating new startups with significant market presence.

On the FinTech front, more than 70% of all credit card transactions pass through one of four companies in Atlanta. This has created a pool of resources for those who can innovate and create new products for the financial market. While established players continue capturing market share, startups like Kabbage (small business lending), BitPay (bitcoin payments), Acculynk (a payments solutions provider) and Groundfloor (a real estate crowd-funding company) are striving to make their mark.

In marketing technology, dozens of companies have sprung up in the past few years. One of the major success stories is MailChimp. Launched in 2001, today the company has more than 14 million users and, in 2016 alone, it generated around $400 million in annual revenue.

One of the biggest reasons for the success of startups in Atlanta is the amount of support and resources available. Georgia Tech (GT) and the Advanced Technology Development Center (ATDC) continue to do what they can do best – invent new products/ideas – but they have yet to create a unicorn. Hopefully Atlanta’s three, new, major incubators can help to make more progress on that front. They include:

  1.  TechSquare Labs , which is located near GT and is currently supporting 100 young companies. Co-founder, Allen Nance, is very enthusiastic about the future of Atlanta startup scene. Nance thinks the bridge between GT and the startup community is strong. He pointed out that the capital investment to physically connect GT to Technology Square is a part of a 50-year plan. The goal is to create a full integration of entrepreneurs and students in a work/live/create environment.
  2. Atlanta Technology Village (ATV) is another major and successful incubator in Atlanta. Founder David Cummings is passionate about creating a supportive work environment for entrepreneurs. In the past four years, Cummings has grown the center to support hundreds of companies. The energy at ATV is palpable at all hours of the day as entrepreneurs work around the clock to make their ideas reality.
  3. Techstars Atlanta, which partners with Cox Communications, is in its second year and recently announced its 2017 program. The program offers 90 days of rapid acceleration, facilitates entrepreneurs building their business networks, gives them individualized support, and helps them learn how to do more faster – all while being embedded in Atlanta. Techstars is a nationwide incubator firm, but the relationship with Cox in Atlanta creates an unique advantage to companies going through the program there.

The resources for Atlanta-based entreprenurs and startups are deep, but funding is still an issue. Raj Palaniswamy, Managing Partner CTW Venture Partners, feels there are two sets of startups in Atlanta: early stage and those who have made it to the B and C rounds of funding. He believes the challenges for early stage companies in Atlanta are still enormous. There are simply not enough seed and early stage investors to cover the mass of new startups coming from a pool of talented entrepreneurs.

The local government recently launched a $100M fund called Invest Georgia to solve the funding problem. The intent is to funnel money into VCs in the hopes that they will invest in startup companies. The mandate, however, is very general and does not specify that the fund must only invest in early stage companies – which is what the city most needs.

Later stage companies in Atlanta are attracting big VC money. Atlanta’s success stories in that area include: Pindrop ($11M from a16z), Luma ($12.5M from Amazon and Accel Partners), and Cardlytics ($214.94M from seven investors, including Discovery Capital, West Coast Capital and Columbia Partners Private Capital). Still, the city is waiting on a major IPO success. Allen Nance believes a sustainable IPO that creates an ecosystem for other startups to follow is the only way Atlanta will reach it’s potential. I agree; Atlanta needs its own Intel, Cisco or Google that can pave the way for others to grow.

Atlanta’s startup ecosystem has improved leaps and bounds in the past few years. It still struggles on the money front, but the progress that has been made is putting the city on the startup map. Some say Atlanta could be the next Silicon Valley. I don’t think it really wants that. Atlanta wants to be Atlanta—a major startup center in south that is creating value one step at a time through a solid, long-term, realistic strategy.

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