This is such a bold title and one that I’m not sure I can really address. However, a group of us have started to try and address this question and last night was our first formal dinner meeting. What started out a few weeks ago with a handful of us starting a brainstorming meeting – last night turned into 18 people very passionate about helping improve the environment. I’m sure this is just the start and it was apparent from last night’s dinner that there are a number of people that have a desire to improve the startup world here in the Southeast – starting right here at home.
Since I’m not sure who wants to have it known that they’re involved – or at least interested in being formally involved in this venture – I won’t name anyone here and keep their confidentiality. However, I can ensure you that we’re not talking about a few people who don’t have the resources, connections and talent to pull this off. And, I can bet that this is just a start. Given that our town is generally full of followers, I’ll predict a lot of people will pile on to this effort soon.
But while all this sounds fun and interesting – there are some potentially fundamental issues in front of anyone interested in taking on this issue, especially here in the Southeast. This project isn’t going to be for the faint at heart or the person that is looking for the quick fix. The issue as one attendee expressed is very complex and multi-dimensional. It’s also wrought with a number of tangled macro and micro issues.
I can’t begin to address all of them here and I won’t claim to have any smart thoughts yet on how we can address them. This will take a community effort – and one that reaches way beyond this group – some efforts will reach beyond Atlanta, reach beyond the current generations of the “powers that be” and will affect our educational, financial and government institutions.
And here are a few of our initial challenges in the form of questions. While these are presented in a numbered, linear fashion, they are not intended to be expressed in this form – it’s the only way I can enumerate them effectively in this blog.
1. Does Atlanta have sufficient supply ready to meet capital demands?
While we all initially think that Atlanta (and the southeast in a broader since) has a venture capital problem – it’s probably much less of the issue. Some of my fellow entrepreneurs will disagree with this statement and point out that most of the successful companies raise capital outside of town, namely in the Silicon Valley and Boston. And that is true. I could wax many digital pages in this blog talking about how the venture capital system is broken in this town – but I don’t believe it’s broken because of the lack of capital. In fact, I’d argue that there’s plenty of capital right here waiting (yearning) to be put to work.
But capital alone doesn’t make a difference if you don’t have a supply of quality entrepreneurs and quality businesses (read that as that, businesses) – one’s that are investable. Sure, that statement will no doubt aggravate qualified entrepreneurs or one’s like myself who had to go outside our region to raise capital and build companies. Remember, I said this was a complex issue and one that is interwoven in a number of other macro issues.
So capital is like water running down the mountain – it will find a path to the end – even if it takes twists and turns. Our twists and turns seem in the past few years to be other ways to invest capital and make an ROI: real estate, S&P and “later stage” deals to name a few. And for all, ROI is ROI – especially in a safe bull market.
A chicken and the egg problem indeed: more successful deals that convert to exists will create more opportunities for capital sources and more capital brings more entrepreneurs seeking capital to the region.
2. Is there a strong, vibrant community to cultivate and grow the startup environment?
I can say a lot of us have really been focused on this — and almost exclusively from an entrepreneur-driven motivation — in the past year. I can name a number of groups and activities around town that are grass-root activities aimed at this very question. Just a few are David Ratajczak’s YnR meetups, Mike Schinkel’s Atlanta Web Entreprenuers or Scott Burkett’s Startuplounge, Pitchcamp and Capital Connections. And this is just a few events to mention – there are plenty more happening organically.
Additionally, there are a number of other events that point to Atlanta playing part in the larger community conversation with events like SoCon07, BarCamp Atlanta, Podcamp Atlanta and Startup Weekend. These are events created by the community and for the community – nothing like TAG events (no offense to that great organization) over the past 10 years.
So, we’re making wonderful strides in this area – we’re just beginning – and in some cases, we’re actually pretty far behind the crowd on these events. While we’re good at creating similar events like Barcamp, we’re certainly not “innovating” in these types of community-based efforts on our own right. Atlanta has done a decent job of eventually creating environments that are similar to other areas – but only after we’ve seen it happen in other parts of our larger community outside of the Southeast.
While it’s easy to think we need a more organized, concerted effort to drive these types of activities – I contend we need the exact opposite and we need more people to drive it. We need more fragmentation of these activities – completely separated, but symbiotic in un-explainable ways. We need environments by which people self-organize and help each other and then move on to create and help others. We don’t need to create another set of organizations that resemble corporate counter-cultures in the name of “community”. We don’t need more organization around these events – and in fact, organizations like Atlanta Web Enterprenuers that look like they’ll have the ability to reach up to 500 members and 100 people at an average meetup in a few months – should look to splinter on purpose, and do it as they fast approach size. We should focus on micro social networks that create community and help drive change, improvement and relationships. And please please please, can we just do away with all the self-congratulatory awards that every group seems to feel like they need to give away to each other?
I can’t even compare our environments to other major areas like the Valley or Boston – it’s just not much of a comparison. So, I won’t. Atlanta can become it’s own community and has the ability to not only do what others have done before us – but also innovate in it’s community environments. And, we need more people – “completely unknown” around town – to step up and make it happen. We need 100 Billy Payne’s passionate about making Atlanta a successful startup community, as much as the real Payne did for the Atlanta Olympic quest in the late 80s.
3. Can our educational institutions help us create graduates that have jobs in the region and a reason to stay?
This has been a hard problem for most of our institutions to grasp I think – mainly because I’m not sure they’ve really ever thought of it this way.
Georgia Tech is a great institution, well regarded around the world in wireless, hardware, robotics, aeronautical, chemical and industrial engineering and a number of other hard sciences.
How many companies in the southeast employee those types of engineers?
Scientific-Atlanta and Bellsouth a decade ago created a lot of demand for engineers in this area. Today, not so much. And some of the top wireless companies in the world are recruiting GT students because of its top notch wireless programs and research.
So, in effect, we’re inadvertently creating and training a strong workforce for other regional economies – like the Silicon Valley. And while in the global marketplace – that’s perfectly OK and way beyond Atlanta in terms of creating a globally aware, competitive nation. But as far as our little ole place we call home: our tax dollars help create wonderfully trained, bright minds and then we ship them off in droves every year.
And while we shouldn’t change any of these programs – they’re incredible and terrific – we should understand the impact this has.
At Stanford or MIT, at least I’ve seen and heard, a lot of graduates start or join companies right in the region during or just after college. Heck, at Stanford, you’re thinking about how you can start a company with your classmates before you’ve graduated in a lot of cases.
In my experience (and I’ve hired quite a few Tech graduates over the past 10+ years), we’re not generating students that can’t wait to create companies or pursue their dreams of making something to change the world (some of us would call those people “entrepreneurs”). We’re creating employees. We’re creating highly skilled laborers. And we all know that we those workers go off to bigger companies, mostly outside of town. But, unfortunately, that doesn’t help create a thriving startup environment right here in Hotlanta.
We do have an exception here – and probably others I’m just not aware of – in Emory University. Emory is well regarded both in medicine and in bio-tech – and there are a host of successes in the region specifically addressing this opportunity. And, we have the advantage of a built-in “larger institution” that can feed off innovations in the CDC and a number of regional medical institutions. It seems, people actually want to come to Atlanta – and stay – in these areas of technology/business. And this is a good thing and we need to learn from this.
4. Do we have an economy of larger companies that need to grow through acquiring smaller, innovative companies in the region?
Almost any large company in the world that grows naturally through acquisitions will not stop because of geographic distance to acquire a company because of a need. But, it takes concentrated effort, long distance connections and worst, travel. Do we have a pool of large enough acquirers actively looking to grow their business (or teams) through acquisitions right here in our backyard?
Do we have larger companies that produce entrepreneurs from the company that have dreams and aspirations – and domain expertise – to create off-shoot businesses that feed back into large region industries?
I was talking with a person a few months back about how large Atlanta was in terms of “old” and “new” media – and how lacking we are in companies feeding into that hot area of innovation. By far one of the largest media properties in the world (CNN/Turner) sits adjacent to the Georgia Tech campus – and there are almost no new media companies driving innovation in video, music or gaming here in town – except one (that I know of) with Chris Klaus’ Kaneva. However, recently, Turner brought in a host of companies from out-of-town to talk with them about “strategic opportunities”. We’re literally sitting at the nexus of the old and new media and we aren’t even currently feeding this opportunity.
And music? Atlanta is now the capital of the hip-hop world. Aren’t there opportunities in this area that some local entrepreneurs could capitalize on? Can’t we at least attempt to organize around several strengths and exploit them to our advantage?
But another little problem that most people miss about Atlanta’s corporate elite institutions – in Geoffrey Moore terms: they’re laggards. They’re not known for adopting technology early or embracing risk in an effort to grow innovation. A friend of mine recently told me when he was building a very successful startup company here in Atlanta how he approached selling software in the region early-on: they didn’t. They went straight to New York (financial institutions) and the Valley. His reason why? Atlanta-based companies are easier once you’ve got early adoption from some larger known companies – companies that generally will take risk to get ahead sooner. Once you have them, the local guys are easy.
5. Do we have a successful community of people “who’ve made it” who re-invest back into the community?
Do our successful entrepreneurs give-back? Well, probably most of them do in their own way. Nobody would ever dismiss (and certainly not me either) the impact that people like Bernie Marcus, Arthur Blank, Charles Brewer and Chris Klaus have had around town.
But is there a self-imposed, social obligation to re-invest – not just money – but time, connections, energy and through participation – back into the startup environment? Do we have a lot of one-time successes or a lot of successful serial entrepreneurs? Do we have an economy of mid-and executive level management teams ready to join new startups? Are “our success stories” getting back in the game once the exit happens – or, are they happy that their few million allows them to be a major star around town?
In the Valley or New York, a few million isn’t too much. In Atlanta, with a few million, you can become an angel investor and get a really nice house and live comfortably for a long-time. In the Valley or NYC, you can pay some bills, afford a very small house or apartment and then you have to go back to work and do it again. I’m not saying that’s a dream in my opinion – but it creates an environment that feeds back into itself a continuous cycle.
6. Can a person with passion and an idea raise money without a lot of connections?
Wow, this is a trick question. OK, raise your hand if you think you can walk in off the street in Atlanta and raise capital without knowing anyone or how the “system works”?
Not quite. Part of this is because of a lot of other factors (some above) like Atlanta largely existing of people who like to follow (or “pile on” to deals as you’ll frequently hear). You don’t have a lot of people willing to step out and take a risk on unknowns. Heck, Atlanta is so bad in this regard that if you don’t get endorsed by two prominent angel groups – regardless whether the deal is a good fit for their investment strategy – you have to wear an implicit scarlet letter around town. Everyone questions: “If X didn’t invest I wonder what’s wrong with the deal?”
In the southeast, it’s still a good-ole-boy-network.
7. Does anyone know about what’s happening inside and outside of town?
A very large part of the problem, and a very important key to building a startup environment, is marketing and buzz. Does the world know – and do people around town know – about all the wonderful things going on here in our city? Are people buzzing about some of the fun and exciting things going on? Do people want to move here to be part of what’s happening? Are companies around town getting a steady flow of people who want to work for them?
We recently had a local entreprenuer named Alec Peters get covered on TechCrunch. His business, called Screaming Sports, is right here in Atlanta – and a web2.0 startup. And by far, companies in the Web2.0 world all die to get covered by TechCrunch. I asked everyone last night if they had heard of this company? Not a single person did. If this crowd doesn’t know about it – we got problems, yo.
Conclusion
One of my questions at last night’s event was the following: “If we had unlimited funds, could we fund 15-20 startups tomorrow without just pissing our money away?”
How would you answer this?
- Do you have a business (not an idea, although those are potentially needed too) that creates values and demonstrates this value with real revenue?
- Do you have a business that others want to acquire (even if not right now because of the stage you’re at in your lifecycle) – either in private equity markets or the public markets through IPO?
- Do you have a business that can scale it’s workforce rapidly with a qualified and skilled workforce – in a reasonably efficient and affordable manner?
- Are you willing to risk everything to make it happen – possibly with a reduced lifestyle and paycheck (at least for a period of time)?
These are just a few questions to answer for yourself.
While I don’t claim to have much of any good answers – only strong opinions – I think there are the right mix of raw ingredients available to us in the region. Some of the negatives can be tweaked slightly to become competitive advantages.
How can you be part of the solution?
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