Captain Anonymous and His View of Atlanta’s Startup Scene

Lately I’ve been getting some blog comments and Skribit “suggestions” from an anonymous visitor.  Let’s just say the comments haven’t been terribly “engaging” – some of them have actually been quite nasty. And look, I’ll be the first to admit this – I cuss like a sailor (well, a former soldier), and believe me, I can carry my weight in a bar, but I try to have at least some modicum of class when it comes to what I post on the Internet.  Nothing says “class act” like posting an anonymous comment on someone’s site and using an email address of “dick...@gmail.com”.

You had the semi-conductor revolution and built a cool ecosystem around it. Great. We get it.


I normally would not engage in a dialog over these types of comments, but today I am going to make an exception.  I just received this comment from Captain Anonymous:

any successful startups in Atlanta?  Seems like alot of “talk” and no meat.  When was the last exit?


Wow, where do I begin?

For starters, we don’t claim to be on the same playing field as Silicon Valley.  Everyone here in Atlanta realizes that Silicon Valley is an outlier when it comes to startup ecosystems.  As has been pointed out by many (including me), the Valley is a second (some would say third) generation capital market.  Atlanta is still a first-generation market.  You had the semi-conductor revolution and built a cool ecosystem around it.  Great.  We get it.  We also realize that Atlanta, and every other metro area in the country, will likely never reach the level of innovation and high-tech capital investment that occurs in the Valley.  And no one here is saying that we can, should, or will, ever achieve that.  In fact, if we did achieve that, I would leave – because along the way, we would most likely lose focus of the things that do make Atlanta such as a great place to be.  But we do know that given the amount of innovation that does occur here, we can be a better Atlanta, and that is an admirable goal.

Much effort has been put into the startup scene in Atlanta over the past couple of years.  I sold my last venture in 2005.  When I came up for air, I realized that the ecosystem here for startups was practically non-existent.  So a small group of us got to work to try and improve things. Since that time, countless initiatives, groups, funds, and other vehicles have surfaced – all of which have provided the foundation of a real startup community here in Atlanta.  Consider this really profound slide (see the animated version) that Stephen Fleming at Georgia Tech’s VentureLab put together, which illustrates just how many components of our startup infrastructure were not even around just a few years ago.

All of these new funds, events, groups, communities, and educational opportunities have been funneled through social media, which has effectively resulted in a completely new startup ecosystem here.

So, Captain Anonymous, I’d rather talk about what is happening, rather than what you think isn’t happening.  You aren’t even here.

Curious as to exactly what part of the world Captain Anonymous hails from, I looked up his known IP addresses from his various “contributions” to my blog.   While I have no way to verify this, it would appear that the posts were made from IP addresses belonging to Yahoo!’s corporate campus.  Hmm.  They are a pretty big company the last time I checked.  Yahoo! hasn’t been a “startup” in years.  If you are such a startup guru, Captain Anonymous, quit your job at the 600 pound gorilla, venture out on your own, and take some risk.  Then let’s talk again.  For all I know, you are a serial entrepreneur with 10 exits under your belt.  You see, that’s the downside of hiding behind an anonymous moniker – I’m just going to assume that you are an uninitiated troll.

Captain Anonymous wanted to know what exits have occured here in Atlanta.  Well, off the top of my head, here are some that come to mind (a definitive list would be longer, I’m sure – these are just people that I know or deals that everyone knows about – except for Captain Anonymous):

More importantly, let’s take a look at a list of successful (current) Atlanta startups that have been funded AND are growing (again, off the top of my head – there are plenty of others):

It is only a matter of time before we start seeing successful exits from these companies as well.    Considering we’re a first-generation capital market, and still a city that is still shedding it’s industrial legacy, it  isn’t bad at all.  These deals above all happened here in Atlanta, and are all technology companies. Many were acquired by companies located in California, by the way.  If we add the non-technology startups to the mix, the list would obviously get a lot longer.  If you expand the grid to include our closest startup ecosystem neighbor in Research Triangle Park/North Carolina, the list gets even longer.

EDIT: I could have taken an easy shortcut in my original posting here by simply linking to the excellent AtlLogos.com site (maintained by Paul Freet down at VentureLab).  Right now there are 157 early-stage technology companies in Atlanta per Paul’s research.  Obviously, there are plenty more that are in embryonic and/or stealth mode.  One look at the AtlLogos home page pretty much tells you everything you need to know about the Atlanta startup scene.

Is this on par with what is happening in the Valley?  Common wisdom would say it isn’t. But keep reading.

Out of curiosity, I asked Mike Blake, my StartupLounge co-founder (and valuation guru over at HA&W)  to pull some data from S&P (Standard & Poor’s).  I wanted to know how many successful acquisitions or public offerings there were in both the Atlanta and San Francisco bay areas.  We ran the report to cover transactions across all industries (after all, a startup is a startup), and excluded bankruptcies, spinoffs, etc. The timeframe used was from January, 2007 through today (6/3/2009), or just about two and a half years.

valley-atlanta-1

There were 754 such transactions in the Atlanta metro area during that time frame.  There were 700 such transactions in the San Francisco bay area.  Expanding the search southward into Silicon Valley reveals an additional 317 such transactions.  So, Atlanta has more than either one of those areas.  Even when you combine the two areas to form the broader bay area, Atlanta has still performed pretty well (754 in Atlanta, and 1,017 in the bay area, or almost 75% in a straight comparison).

Caveat: There are two categories where San Jose had no exits at all.  Since you can’t technically calculate a percentage against a zero value, I cheated a bit, and in the formula gave them a value of “1”.

Here is a breakdown of valuation metrics of these exits:

valley-atlanta-2

And finally, a breakdown of the deal sizes:

valley-atlanta-3

Some quick observations:

Now, we all know that numbers are like clay in an artist’s hands — they can be molded to represent practically anything you want.  But I think it is safe to say that there is exit activity here in Georgia.  Yes, the $1B+ exits were not all startups a few years ago – most, if not all, were older companies. But the same can be said of the Valley.  Every company is a startup at some point.  And when companies are acquired, some portion of those dollars ultimately factor into regional economic development.

As a point of reference, the bay area in California has a total population of around 7M people, whereas the Atlanta metro area has around 5M.  Also consider this side-by-side comparison of the two geographies from the air at night.  Notice something?  As I’ve pointed out in some of my presentations, Atlanta is effectively an “island”.  We don’t have the benefit of large, adjacent metro areas in our ecosystem.  Not that I’m complaining mind you – the traffic here is bad enough as it is.  It’s just an observation, but an important one.  An angel investor from Cupertino is not going to have a problem doing a deal up in San Francisco (and vice-versa).  We have to make do with the limited resources we have available – there are no other substantive angel investors around us.

Click on the image below and you’ll see what I’m talking about.  In California, it is one big light from San Francisco all the way down to Los Angeles.  Same for Boston and the Northeast corridor.

satellite-map-ecosystems

We have a number of growth sectors here – and they probably aren’t the sectors that would typically come to mind (e.g. enterprise software) when one thinks of Atlanta.  The stretch from Atlanta up to RTP in  North Carolina has more biotech wet labs than most anywhere else in the world.  Digital Entertainment/Gaming is really coming on strong here – Atlanta is home to four MMOs (that I know of), and has an incredibly vibrant community around interactive content, game development, etc.  We have a lot of stuff popping up around nanotech and cleantech as well.

With all of that said, is Silicon Valley a great place to start a company?  Sure.  But so is Atlanta – for lots of reasons.  Are they evenly comparable?  Of course not.  But there are plenty of things happening here in the startup scene.

In my view, the comments from Mr. Anonymous belittle the hard work that has gone on here in Atlanta to improve the ecosystem for startups. Stop hiding behind an “anonymous” moniker – be a part of the solution, not a sideshow distraction.  I invite you to join in the conversation and play a constructive/productive role.  What can we learn from you?  What can you share with us that can help us evolve? All boats rise with the rising tide, as they say.  Doing anything less just makes you look like an asshat.

Cheers.

18 Comments

  1. Great post Scott.

    Waned to add a few more exits to the discussion. SPI Dynamics was acquired by HP in 2007. Cambia was acquired by nCircle in 2007. CBeyond had a successful IPO in 2006.

  2. Here’s another one: WebTone was acquired by Fidelity (FDF) in 2003.

  3. And another: Synchrologic was acquired by Nokia a couple years ago.

  4. Great analysis, Scott, youdaman. One more: Last Minute Tee Times / LastMinuteGolfer acquired by Comcast / Golf Channel for $20M cash in late 2008.
    Wayt

  5. Great post Burkett; as always, well thought out and articulated…

  6. Thanks for shedding some factual light on the success of Atlanta’s startup community. Part of the issue is legacy perception, as the truth no longer matches our rap sheet. Having been lucky enough to work with some amazing people and brands across this planet, I can report Atlanta stands tall when it comes to innovation.

    The problem is much of our talent is locked safely behind corporate and agency doors (formerly UPS and Tribal DDB here). I believe getting more of these folks to take the plunge alongside the younger startup talent will signal the start of our second-generation market. In fact, I’m seeing it already. A former colleague of mine is running one of those MMOs you mentioned.

    Any thoughts on how we can encourage more startups from experienced talent? Thanks again for your insights, and here’s to becoming a better Atlanta…

  7. Thanks for the comments, all.

    Heath – we’re going to be announcing some new initiatives soon. One of them is aimed at middle-school and high-school students – we want to give them a degree of awareness and education around entrepreneurship. The other involves providing our large Fortune 1000 base here in Atlanta with some structured visibility into regional startups who are doing cool things.

    More soon …

    Cheers.
    Scott

  8. Scott,
    Thanks for the great leadership you’re taking in writing this post and in committing the research to make it very information rich.

    Below are some of the notable M&A that was not included above that came out of ATDC.
    SearchIgnite by 360i and Livedoor
    DVT by Cognex
    Synchrologic by Intellisync and Nokia
    Magnet by Digital Insight
    Vascular Genetics and GenStar
    Arizan by RIM
    Future Networks by Tellabs
    Digital Furnace by Broadcom
    AstraCom by Ciena
    Media4 by EchoStar
    RelevantKnowledge by MediaMetrixa

    And yes I agree that Purewire, Vendormate, Suniva and others who are rising stars are poised for a big company and/or a good exit if desired.

  9. awesome stuff scott! like you said to begin the post, the valley is essentially an outlier when it comes to a true startup scene these days. how can you possibly get a company off the ground when all your costs/funding would go to your own rent? i’ve managed to spend <$1,000 bootstrapping our startup in over 21 months of development! the valley can’t lend itself to a startup like the atlanta, austin or boulder areas can.

    additionally, i agree that social media has had a profound impact on our community coming together. i think we’ve made so much progress in such a limited time frame, and it sounds like it’s only going to get better!

  10. I love blog posts that are based on fact and have real information content. It’s info-tainment! I was shocked to see just how many exits our area has had.

    I’ll note that the S&P data primarily captures only those acquisitions that appeared in an SEC disclosure. If an acquisition was made by a private buyer, it may well not be captured there. There will be deals that are left out of both Atlanta and the Valley. In no way does that undermine the analysis though.

  11. Paul Freet the first to comment? Based on his recent tweets I suspected him to be Captain A. : )

    An old post of mine with some of the big Atlanta winners.
    http://blog.weatherby.net/2007/03/atlanta_winners.html

  12. I should have also pointed this out in my original post: Captain Anonymous made the comment that Atlanta’s startup scene seemed to be “all talk”. Well, “talk” (or dialogue) is what was missing from the startup community in Atlanta. We now have a lot of active dialogue happening, not just in Atlanta, but across the region.

    Dialogue is the first step. You can’t evolve unless people are talking about it first, and exchanging ideas, information, and connections.

    But as I think the post and the subsequent comment stream has illustrated, we aren’t “all talk”. But it is a key component.

    Cheers.
    Scott

  13. Thanks to Chad Koenig at NAIBG for pointing out my typo. The end of the paragraph beneath the first chart has been corrected:

    “754 in Atlanta, and 1,017 in the bay area, or almost 75% in a straight comparison”

  14. I’ve related this anecdote before, but might as well repeat it here…

    In one of my Atlanta investments, we had a syndicate partner from a major Silicon Valley VC firm. At one board meeting, the CFO was talking about the new building we were expanding into… dual redundant power feeds, dual SONET rings, blah blah blah. Exactly what we needed. “And we got a great deal; only $9.50 per square foot.”

    The Sand Hill Road VC went white. “What? We’ve never paid more than $8.50 per square foot, and that was right on University Avenue in Palo Alto!!!”

    We looked at each other dumbfounded for several seconds until we figured it out. We were talking annual rent, he was talking monthly.

    Yep. 8.5 x 12 = over $100/sq.ft./year in RENT. How can you make startup economics work in that environment???

  15. Konstantyn · June 11, 2009 at 3:29 pm

    Scott,
    nice to see some statistical i.e quantitative data in the ocean of emotional cry which is prevalent in Atlanta’s entrepreneurs community. Though, there is always the mistake considering past results while making assumptions about actual moment and considering potential for the future. The past, actual moment and future are not the same nor have to be strong related! This simple truth has to be repeated.

    One of the useful instruments we can have assessing the actual moment and making predictions is data from your pet project Capital Launch. Particularly metrics such as:
    1. Number of registered investors.
    2. Number of registered investors, who has not attended the event during the last year.
    3. Percentage of registered investors, who indeed attended.
    4. Number of registered entrepreneurs
    5. Number of registered entrepreneurial companies, which have been in attendance or applied to attend continuously for the last year
    6. Number of registered entrepreneurs, who indeed attended
    Comparing those metrics on a time line will create real valuable insight.

  16. Konstantyn, interesting message, if I understand what you correctly. But I’m not sure what our CapitalLounge event statistics have to do with the topic here?

    CapitalLounge is just one aspect of the larger startup ecosystem in Atlanta. We think it is playing a pivotal role as a “vehicle for dialog”, but we in no way think it is anything other than a small part of a larger barometer.

    But, to answer your questions – I don’t have the data in front of me, but based upon my firsthand knowledge of our history, I can empirically state the following:

    1) Our community of entrepreneurs and investors continues to grow.
    2) Our overall attendance continues to grow
    3) Our company-to-investor ratio has held steady at around 4 to 1
    4) The number of applications (investors and entrepreneurs) that we reject continues to grow
    5) While this isn’t our primary goal (despite the name of the event), we do know that a number of deals have gotten done as a direct result of the event.
    6) Repeat visitors: Through our vetting process, we put in a lot of effort to screen repeat visitors before they are approved. Just because someone is initially approved, doesn’t mean they get a free pass to every event. We focus first on those companies that seem to have made some form of progress since the last time they attended the event. So any statistic around repeat-visitors is not necessarily directly applicable here. I will say this – we have a good number of repeat visitors, and they got back in because they have furthered their goals and have a better story to tell.

    Is it perfect? Nope. Never will be. But it’s a good start. And I wouldn’t classify CapitalLounge as a “pet project”, per se. It is an endeavor fueled by passion – most of my true pet projects collect dust on the shelf :)

    Cheers.
    Scott

  17. Konstantyn · June 11, 2009 at 9:35 pm

    Scott,
    I was responding to the title containing “Atlanta startup scene.” The dance IMHO is really all about the question: Is it worth for capitalists to devote time to take Atlanta under magnifier glass or not? As soon as the question is resolved all the rest of the ecosystem will evolve.
    You understand me right. The CapitalLounge is (I think you wanna believe it is) a representative part of Atlanta startup scene. If so, it can be the litmus test. Its numbers can represent the tendencies and priorities the players put on.
    The tendencies are not only in growing snowball. But also in the quality and in real intentions, which can be tracked by percentages, which show declared activity (registrants) compared with actions (indeed in attendance, repetitive attendance.) I’m sure you can imagine how to interpret the numbers beyond being said.
    Consider the “pet project” description as a result of my distorted understanding for English words. I have no doubt it is taken seriously. I was stressing the secondary nature of the effort. And I hope the distance to the tertiary projects like WiFiCat is so huge they wouldn’t qualify for a pet project.
    With sheer wishes of success in the effort to nurture entrepreneurship
    Konstantyn

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