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How did Atlanta become a top breeding ground for billion-dollar startups in the Southeast?

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How did Atlanta become a top breeding ground for billion-dollar startups in the Southeast?

Over the past five years, the Southeastern status, led by Atlanta, has gone from being “certainly one of the handiest kept secrets” in tech, to a vibrant ecosystem teeming with a herd of the billion dollar tech businesses that are referred to in the investment world as “unicorns” (thanks to their supposed rarity).

In these five years venture capital investments surged to $2.1 billion in the status, with $1 billion invested in the last year alone, according to Lisa Calhoun, a partner with the Atlanta based investment agency, Valor Ventures.

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It’s indicative of the entrepreneurial talent coming from the community of private and public faculties across the status appreciate Georgia Tech, the College of Alabama, Auburn, the College of Georgia, Vanderbilt, Emory, and the historically black faculties and universities appreciate Morehouse, Spelman, and Xavier. And it’s also a imprint of a reinvestment in local entrepreneurship — a decades-long campaign to point out Atlanta into the heart of a hub-and-spoke community of startup cities that spans Miami to Atlanta, with stops in Birmingham, Nashville, Original Orleans,

“Atlanta is what a next generation, global, post-Silicon Valley tech hub looks appreciate. Our demographics are ten years ahead of the U.S.’s transformation into a majority minority society,” wrote Calhoun in an email. “With over 40% of the U.S. population in the Southeast, the greatest density of founders and executives of shade, rafts of tech companies appreciate AirBnB locating right here, and our contain legacy of top tech and talent, Atlanta sets the tone for what’s next. We have the growing, diverse population base all tough founders wish to scale.”

There’s tranquil a lot of labor to be completed for the status to establish itself as certainly one of the next engines of commercial return for the venture capital and investment business, although.

“The Southeast is 24% of the US GDP, nevertheless handiest accounts for 7% of the venture investment,” eminent Blake Patton, the founder and general partner of the Atlanta-based investment agency, Tech Square Ventures. “With the latest momentum in the status, that is changing and investors are taking contemplate and backing local managers who in turn are investing the status’s handiest and brightest entrepreneurs.”

The Internet negate and bust in Atlanta

In the years after the 1996 Olympics, Atlanta was a excessive-flying contender for the title of certainly one of the next great startup hubs in the United States.

The Olympics had put the city on the world’s stage, and seeing the wave of activity, excitement, and investment that came with the advent of internet companies appreciate Virginia’s America Online, Atlanta’s city council and mayor have been making a push for the city to become a telecom and startup hub in the early days of the first Internet negate.

“Something happened in the mid-90s driven by the Olympics the place Atlanta hit the map worldwide. It wasn’t suitable that we have been a provide and logistics hub. In the late 90s as the dot-com negate really developed, things happened underground that aren’t as transparent as they ought to be. Atlanta Gas Gentle had the largest dark fiber ring in the nation surrounding Atlanta. That was constructed fully with the olympics in mind. We had Georgia Tech working on the next generation of aerospace, and they added computer engineering,” said Christy Brown, the founder of the Atlanta based non-income Launchpad2X and a serial entrepreneur and executive with deep ties to the Atlanta ecosystem.  

Atlanta also had its fair share of early successes — excessive flying telecom and networking companies that have been critical to the evolution of the first dot com era whose later years have been either mired in scandal or who have been acquired by remarkable larger entities. These are companies appreciate MCI Worldcom and Airtouch Cellular, which was devoured up by Singular Wi-fi and would eventually become part of a restructured AT&T.

“There have been all kinds of tech things happening in the city. A lot of these founders have been getting venture on paper which developed into the dot-bomb,” said 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 internet companies that came with the bursting of the dot-com bubble in 2000 reverberated thru Atlanta’s tech ecosystem, erasing the early gains that companies made and setting the stage for a decade-long interval of reconstruction punctuated by a few successes from holdouts that managed to make their way thru the wreckage.

Image Credits: TechCrunch

Thru the lean years

Belief to be one of these companies was MailChimp. Launched in 2001, in the early aftermath of the bursting of the tech bubble, the privately held email marketing startup was certainly one of a preference of initiatives at Ben Chestnut’s and Dan Kurzius’ internet fashion agency.

The two men met at Cox Interactive Media to work on an early MP3 product. When that fizzled both men eventually misplaced their jobs and went into business together. They constructed MailChimp off of income, bootstrapping the business with out venture capital in a model that many other tech founders in the area would scrutinize to replicate.

A few years later, in 2003, another entrepreneur named John Marshall began installing internet hotspots at hospitality businesses, eventually expanding his Wandering WiFi carrier to include monitoring and managing other kinds of community infrastructure. This foray into startup land would eventually create another great Atlanta tech exit in AirWatch.

For the first six years MailChimp remained a aspect hustle, a product that the two co-founders continued to work on, nevertheless didn’t devote themselves to corpulent time. It wasn’t till 2007, when the carrier hit 10,000 customers, that the company became the corpulent-time job for both founders.

Their once-scrappy startup turned them into billionaires. A 2018 Forbes profile put the company’s valuation at $4.2 billion on roughly $600 million in income.

If there was a starting gun for the Atlanta tech renaissance, it can be 2006, a few years before the global financial crisis and a time when the broader tech industry was finding itself a much less financially precarious prospect for investors. Internet Security Techniques, an Atlanta area dot-com darling that held an initial public offering in the late 90s sold to IBM for $1.3 billion that year.

Tom Noonan and Chris Klaus, the co-founders at Internet Security Techniques, had an equally long road. What had started out as a company constructed when Klaus lived above Noonan’s garage in Atlanta in the mid-90s, morphed into a company pulling in $400 million in annual income before its acquisition by IBM.

As capital started flowing into Atlanta and the city regained a few of its footing in the tech world, founders who had exited their companies began to reinvest money locally. And the city moved to create extra events to foster entrepreneurship. 2006 saw the launch of Project Atlanta, a convention designed to showcase early talent and startups coming from the status that served as a launchpad for several entrepreneurs that would shape the future of the city’s technology industry.

Image Credits: TechCrunch

Setting a fresh scene

If 2006 was a great year for exits in Atlanta, it also proved to be the year that opened the floodgates on fresh entrepreneurial activity, which may give rise over the next decade to what’s now a thriving startup scene, pumping out a file preference of billion dollar tech businesses.

It was the year that David Cummings and Adam Blitzer based Pardot, a marketing and sales automation software developer that grew fast and attracted the attention of great industry players appreciate ExactTarget. It was also the year that Manhattan Associates executive Alan Dabbiere joined Marshall and Wandering WiFi became AirWatch, a company providing management and safety tech for cell enterprise networks.

Over the next few years MailChimp would become extra active; Cloud Sherpas, based by the entrepreneurs Michael Cohn and Sean O’Brien (who are now founders of the investment agency Overline Ventures) would launch and so would companies appreciate the video streaming tech developer, ClearLeap (sold by IBM in 2015 and valued at over $110 million); the safety company Damballa would launch (later acquired by Atlanta neighbor Core Security); and the carrier powering many of the major banks buyer rewards programs, Cardlytics (now trading on the Nasdaq with a $4 billion market cap).

Buoyed by these emerging tech companies, other entrepreneurs would join the fray, with Kabbage (acquired for $850 million), Calendly (a $3 billion business as of this year) and the suppose identification technology developer Pindrop (which raised $90 million back in 2018) emerging onto the scene at around the same time.

These companies operate the table for what would become a buffet of startups focused primarily on payments and financial products and services, cloud-based business solutions, and internet safety. Gone have been the hardware heavy telecom companies and networking companies appreciate Scientific Atlanta, whose business is compared to Hewlett Packard for having introduced a excessive tech industry to the city in the 1950s — remarkable appreciate HP did in Silicon Valley.

Meanwhile, a fresh generation of investor was moving into the Atlanta orbit, presaged by the 2006 launch of BIP Capital — an occasion that also proved meaningful for the city’s budding entrepreneurs.

Staking claims for Atlanta’s future

The rising tide of entrepreneurs coming out of Atlanta also served to revitalize the city’s moribund investment community. Hit hard by the bursting of the dot-com bubble, the Atlanta-area companies that managed to outlive the crash began to spy to later stage businesses and outside of the Atlanta tech ecosystem for startups to back, according to data from CrunchBase and several interviews with investors and founders.

Noro-Moseley Partners, for instance, is by far the most active investor hailing from Atlanta. Over it’s long history the agency has completed over 123 deals according to Crunchbase, nevertheless in the last five years, data indicates handiest four investment from the agency have been made into Atlanta-based companies.

By contrast, the arrivistes at BIP have been deploying capital and raising successively larger funds since they first came to town. Over the last five years the agency has invested in at least 15 Atlanta-area deals, and now, below the moniker of Panoramic Ventures, the agency is targeting a $300 million early stage fund to invest across the southeast and midwest.

“Traditionally, access to capital was challenging for founders in Atlanta and the Southeast. In the past, it was opinion about a disadvantage for a tech business to be based outside of the traditional innovation hubs [in] Silicon Valley or the Northeast because it was extra complicated to accumulate investment capital. This was because the large funds have been located inside the hubs and had quite a lot of alternatives accurate on their doorsteps for investment,” wrote Mark Buffington, the co-founder and chief executive of BIP Capital, in an email to TechCrunch. “While the traditional hubs are tranquil key in phrases 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 nation the place innovation is occurring. At the same time, the amount of capital available from local and regional investors is growing, in large part attributable to the influx of dollars into the private markets.”

Another member of the fresh college of investors that’s changing Atlanta’s investment scene is Patton; whose work with Tech Square Ventures and Engage, the corporate venture capital investment agency and startup initiative harnessing the energy of a preference of the biggest companies in Atlanta, also galvanized entrepreneurship and the newfound interest in startup tech companies.

“The latest momentum in the status is driven by increased connectivity across the innovation ecosystem and a critical mass of entrepreneurs and talent coming out of the status’s many a success startups. With corporations thinking about digital transformation and innovation, all large companies have to a diploma become tech companies and that drives connectivity as talent moves across both startups and tech companies,” Patton said. “Perhaps our greatest strength is our variety and being dwelling to four leading HBCUs, and I’m hoping in the next 5 years the Southeast will emerge as a leader in producing a success startups based by diverse entrepreneurs and constructed with diverse teams. It’s no longer suitable a moral imperative – with half the nation’s black population, the Southeast must be triumphant in engaging below-served entrepreneurs to lead – and you can’t tackle variety nationally with out tackling it in the Southeast.”

Aloof, other ingredients have been wanted for the resurgence of startup activity in the city. These may presumably be co-workings spaces appreciate David Cummings’ launch of the Atlanta Tech Village in 2012; the continuing relevance of the Atlanta Tech Building Center; the Project Atlanta convention and the co-working space around Hypepotamus — which remains the lunge-to publication for Southern startup activity.

Each entrepreneur and investor talked about Cummings’ solution to reinvest in the city and launch the Tech Village near Atlanta’s tony suburb of Buckhead as certainly one of the biggest sparks for the city’s renewed entrepreneurial fervor. Soon after Cummings sold Pardot he and David Lightburn established Atlanta Tech Village as a co-working status for entrepreneurs. It attracted a preference of fresh startup founders whose businesses would become the next wave of great startups. “When David Cummings sold Pardot he wanted a place for entrepreneurs to have community,” said one longtime player in the Atlanta tech community. “They would accomplish these startup chow down lunches and really make stronger entrepreneurs building businesses.”

And suitable as key was the longtime hub for Georgia Tech-affiliated startups, the Atlanta Tech Building Center, the entrepreneurs and investors eminent. Project Atlanta had a operate to play as effectively, bringing investors from each nook of the nation to the city to showcase top talent. Together with CreateX, and the Project Atlanta program, the four initiatives and workspaces for early stage entrepreneurs planted a preference of seeds that would soon blossom into companies appreciate PartPic, Greenlight Financial (which is now value $2.3 billion), Kabbage, FullStory and Pindrop.

Image Credits: TechCrunch

A haven for diverse founders and investors

During these early days of the Atlanta startup ecosystem, there was one status extra welcoming than most for diverse and ladies-led founders — the co-working space and workplaces 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 in the U.S.

“My first place of labor was at Hypepotamus because they equipped free space,” Burks Solomon recalled. “And at the time I didn’t have remarkable money. Then when I raised some money the next major one was at ATDC — the state of Georgia’s incubator. They equipped subsidized space and they had an entrepreneur in space and they had a complete program to assist Atlanta-based startups with some kind of technology.”

It was the Hypepotamus space, and subsequent venues appreciate Alternative Hub and The Gathering Status that catalyzed the Black entrepreneurial community in Atlanta, according to several founders and investors.

And if the Hypepotamus space, carved out by National Builder Provide, was certainly one of the catalysts, then the angel investor, Mike Ross, was the other.

“Mike has funded many a success Black-led startups in the Atlanta ecosystem and we wouldn’t be the place we are today with out him,” entrepreneur Candace Mitchell Harris instructed UrbanGeekz in a latest profile. “When many have faced the speed 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 consultant in the building and contracting industry has backed Black founders and investors including: Luma, Partpic, Monsieur, Axis Replay, Myavana, TechSquare LabsAlternative Hub, and The Gathering Status.

Investors appreciate Paul Assume and entrepreneurs appreciate Joey Womack, Barry Givens, and Mitchell Harris, all benefited from Ross’ investment largesse.

“Mike was the catalyst for our company’s success as our very first angel investor,” says Mitchell Harris, co-founder and CEO of beauty tech startup Myavana, instructed UrbanGeekz. “I tranquil bear in mind meeting him for the first time at the Black Founders Convention in June 2012, inquisitive and eager to win behind the stream that was beginning in Atlanta in the tech startup scene.”

And Ross blazed a trail for other investors appreciate the Fearless Fund, a community of ladies investors 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) — shut to a decade after Ross first began investing.

“Factual now ladies of shade are the most based nevertheless the least funded entrepreneurs,” Simone said. “Atlanta is a mecca of black entrepreneurship for us to have a venture capital and tech presence right here.. I will charge the city of Atlanta and the state of Georgia and the banks that they wish to back what we’re doing right here.. It is miles wanted.”

Now not handiest is it wanted, nevertheless it’s working. Of the 36 venture capital companies acknowledged as part of TechCrunch’s research as having a focal point on early stage investments in the Atlanta area, 41% met one or extra of the following criteria: identification as having a variety focal point across investments, identification as having a diverse fund management team, or both, according to data from Crunchbase.

And thru a sample size of 158 startups spanning Pre-Seed, Seed, or Sequence A in the Atlanta area, that have been included in TechCrunch’s research, 48% met one or extra of the following criteria: identification as having a sex-diverse founding team, identification has having a racially-diverse founding team, or both. In many instances, founding teams did no longer self identify, so the preference of diverse founders may be greater than at the 2nd documented based on publicly available data.

As UrbanGeekz eminent, about 25% of the employees in Atlanta’s tech industry are black. In San Francisco, by contrast, that determine is 6%.

“Ten years ago [the Black tech startup ecosystem] was suitable starting out,” Ross instructed UrbanGeekz. “Now Atlanta is certainly one of the top tech hubs in the nation and the ecosystem is probably certainly one of the most diverse.”

Looking ahead

“I’m really angry about what’s happening now. It’s remarkable extra diverse in phrases of the people that have the ability to deploy capital. I’m optimistic about what is to advance in the tech space,” said Burks Solomon.

She’s no longer alone. Original companies appreciate Cohn and O’Brien’s Overline Ventures, Panoramic, and Outlander Labs, the agency launched by the former Los Angeles investors Paige and Leura Craig are all indicators of investors’ long-interval of time perception in the health 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 appreciate Los Angeles five years ago. The talent is right here nevertheless historically the assure has been lack of mentorship, early stage capital, and the later stage capital as they develop and scale,” wrote Outlander co-founder Leura Craig, in an email. “Then again that is all changing given the fact that so many investors are now moving to all parts of the nation and are originate to investing in areas that they never invested in before. Covid dramatically accelerated the flight from California and Original York and the Southeast’s tech scene is going to be a tall winner as a results of this migration. ”

Major tech companies are also showing their faith in Atlanta’s startup scene thru significant investments into the ecosystem. Most lately, Apple has committed nearly $100 million to fresh initiatives including the Propel Center, a $25 million explain designed to encourage variety and entrepreneurship at a diagram to be constructed near Atlanta’s Historically Black Faculties and Universities.

It is miles going to be both a virtual platform and a physical campus in the Atlanta College Center.

Students will be able to practice assorted educational tracks thinking about artificial intelligence, agricultural technologies, social justice, entertainment, app fashion, augmented reality, obtain and creative arts and entrepreneurship. This isn’t suitable a monetary investment for Apple, as employees will assist map curricula and provide mentorship as effectively. There will be internship alternatives for college students.

Apple isn’t the handiest great tech company to commit to Atlanta’s thriving tech community. Facebook is building out a massive, multi-billion dollar extension to data heart facilities near the city, and Google committed that the Atlanta area would receive some fo the planned $9 billion investment in job growth across the U.S.

The fresh growth that Atlanta’s startup scene is experiencing can wait on as a model for other urban areas on the rise. The recipe appears to be a tough technical college, an investment in collaborative startup resources, a community of willing investors to reinvest in the local community, the make stronger of city authorities thru non-income and promotional activities, and finally an embrace of the diverse history of the city itself. There’s no wish to remake Silicon Valley, nevertheless the tools of Silicon Valley can be feeble to make burgeoning tech communities better.

With reporting assistance from TechCrunch analyst Kathleen Hamrick

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How did Atlanta become a top breeding ground for billion-dollar startups in the Southeast?