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This post was published on behalf of Alan Taetle, General Partner at Noro-Moseley. Alan and Noro have been very active investors in the southeast venture community for many years. I’d like to thank Alan for the time to put together his thoughts in response to my earlier post. -Jeff
Many of you know that we at Noro-Moseley have spent the past year raising our sixth fund. We have had met with at least 70 groups in the U.S. and in Europe. What you’re looking at above was one of the questions most posed to us. After all, we are a regional early-stage and early-growth venture fund focused on the region – who better than us to know?
Venture capital investing is pretty much based on the theory of ‘black swans‘ posed by Nassim Taleb in his most recent book (he is a great author, by the way; this and his first book, ‘Fooled by Randomness’, are must reads for anyone who invest for a living). The black swan is the outlier success story that provides insane returns. Google is the primary example in the last 5 years. Where are the black swans in our region? I am going to give you an example of the challenge we faced when fund raising when we were asked to prove what is world class.
Let’s first look at one area where some of the big wins have been in the IT space in the Southeast and where investment dollars seem to be going. First there is Internet Security. Tom Noonan and Chris Klaus created a mini black swan company with over a $1 B in economic value and just as importantly, Tom Noonan has invested and mentored other entrepreneurs to pursue opportunities in this space. Companies like SPI Dynamics, one of the leaders in web application security, would not exist if it weren’t for ISS. The Georgia Tech Information Security Center has cranked out new interesting technologies like what’s found in Damballa, a company built to combat the botnet problem. We also have Jay Chaudhry, who started one of the first security consulting firms and then one on to build Ciphertrust and Air Defense. In total, there are well over 15 start-ups in the security space in the Atlanta area many of whom were started by ISS alumni. Secureworks, one of NMP’s companies, will be the next major player to be noticed given its scale.
What I wrote above sounds like its a great world class story save for three things. First none of the companies remain public. ISS will not be Cisco. It’s now part of IBM. Ciphertrust is part of Secure Computing. All of the major public Internet security companies are based in the Valley. Second, why is RSA, far and away the largest trade show for Internet Security, in San Francisco? Why isn’t RSA located in Atlanta, the home of Internet Security? Third, what has our region done to market itself as a center of excellence for Internet security? Nothing that I’m aware of.
If we want to really move to the next stage of venture evolution with more capital invested, more start-ups and most importantly, more black swans, we are going to have to market our region more systematically on what we are world-class in. Excellent quality of life alone will not do it.
technorati tags: venturecapital, vc, atlanta, georgia, entrepreneur, noromoseley
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