I just got off the phone with Justin Rubner down at the Atlanta Business Chronicle. He called to solicit my thoughts on the recent PriceWaterhouseCoopers Money Tree report. The fact that he called me should tell you how desperate he must be to find content (*poke*). At any rate, at some point the topic turned to entrepreneurship in this part of the country, and what is potentially wrong with it.
As it turns out, we have had 5 straight quarters of decreasing deal flow here in Georgia. Ok, so we clearly have a lack of local companies getting funded. What is the problem?
Is it the fault of the local VCs? Are they just not investing enough? No! It isn’t their fault. I say that emphatically. For now, I am saving my thoughts on that for another post (which I’ve already begun drafting.) Edit: you can now read it here.
We can sit here and analyze, slice, and dice the PwC Money Tree report (and each quarter, we all do) until the cows come home. In the end, it won’t change anything. I think we all realize by now that Atlanta is not Palo Alto, and it likely never will be.
So what can we do? First, we need to understand the underpinnings of the entrepreneurial landscape here.
The startup culture here in the southeast is radically different than in places with more established ecosystems (California, Boston and the Northeast corridor, etc.) In the southeast, entrepreneurship is viewed as a very linear process. In fact, I’ve taken the time to flowchart it for you (with a nod to Karen Rands, who brought up the core of this point at a recent MIT Enterprise Forum event.)
Let’s summarize: You have a good idea, raise a warchest full of money, build a company, hopefully reach your pot of gold at the end of rainbow, and then you play golf for the rest of your life, with the occasional dabble into an investment here or there. Now, not all entrepreneurs here are like that – there are obviously exceptions. However, I suspect that this process is repeated in many other areas of the country as well.
Let’s contrast that to a community that has an advanced entrepreneurial base, such as Silicon Valley:
Here we see a slightly different model. After a liquidity event, there is generally a well-deserved vacation. Upon their return, these successful entrepreneurs face a decision point. While certainly some will consider their financial exit a terminal point, and will head to the golf courses, many will return to the startup world and begin a new venture (the serial entrepreneur). Others will return wearing slightly different hats, such as the hat of an angel investor, a mentor, or a consultant, and offer their wisdom and services to other entrepreneurs at various stages in their own pursuits. Some will even go so far as to launch their own venture capital fund.
This is the cycle of success. If you want to create an entrepreneurial community, this is the type of model that needs to arise. Again, there are some individuals here in the southeast that fall into this model, but as a geography, we lack this on a scale necessary to effect change.
Let me give you an example. Johnny decides that he is going to start a new B2B online pine-cone catalog (nod to Josh Watts for that one.) Johnny raises $5M, builds a great company, and is bought by Google (sorry, I couldn’t resist) for $100M. Johnny then decides that he wants to move to the north Georgia mountains and go trout fishing every day for the rest of his life. Certainly his perogative, mind you, but in the end, he isn’t helping anyone but himself.
Now imagine some of that $100M being spent, along with Johnny’s intellectual capital, on something other than Wild Turkey and fly fishing supplies.
Let’s say that Johnny invests $10M across 20 different companies as an angel investor. Let’s say that he also offers to lecture on his lessons learned at a nearby university or professional organization. Perhaps he volunteers to mentor some up-and-coming entrepreneurs one day a week. Johnny is still living large on $90M, but has left a very big imprint on the community around him. Carry this out to 5, 10, or even 20 successive iterations of successful exits from multiple entrepreneurs, and you have a groundswell of activity. You have a “beehive” of activity, and a new mindset.
Entrepreneurs in the linear model think of entrepreneurship as a solo game, while people playing in the cyclical model realize that entrepreneurship is very much a team sport.
However, it goes beyond simply plopping down a few boxes and linking them with arrows. There is a cultural component to all of this as well.
A few years back I was visiting the Sun Microsystems office in Silicon Valley. I recall stopping into this coffee shop to get my java fix. I inadvertently walked right into this informal gathering of angel investors and entrepreneurs. The investors were there, along with some seasoned entrepreneurs, openly advising and helping the newer entrepreneurs – with no expectation that they would be financing any of those deals. They were planting the seeds of tomorrow. Brilliant!
You see, it isn’t about a single deal, or even several deals. It is about a “pipeline” of activity. We have to collectively begin thinking about entrepreneurship and the capital market here as a company, a business. We have to fill our own pipeline with activity. We have to have an integrated mix of hunters, gatherers, and farmers.
In a traditional business, hunters seek new (selective) strategic business for the firm, gatherers go after whatever is laying in front of them (sales-wise), and farmers mine (“farm”) existing accounts for new business. The same metaphors can apply to entrepreneurship and the capital market as well.
We need less hunting, and more planting. You plant the seeds. Watch the plants grow. Animals eat them. Animals multiply. We then hunt the animals and garnish with the plants. Get it?
Ergo: You can’t expect a great harvest in the fall if you aren’t out there busting your ass planting seeds in the spring.
The more we begin thinking about things through the lens of an eco-system, the better off we’ll all be. Then, maybe we’ll start nurturing things a bit more.
In the southeast, entrepreneurs are largely left to their own devices. Of course, there are exceptions. For example, the Atlanta MIT Enterprise Forum does a good job of holding regular events centered around topics of entrepreneurial interest. But as a community we have done a very poor job of fostering an environment where entrepreneurs feel supported in their efforts. Note: I did not say “coddled”, I said “supported” – there is a tremendous difference.
My old middle school principal used to have a saying, and it went something like this:
Good, better, best. Never let it rest. Until the good are better, and the better are the best.
One of the goals that we are aiming for with our Gang of Five initiative is to give entrepreneurs everywhere the foundations of that support structure. Stay tuned to that web site for more info. We hope to roll the full site out within the next couple of weeks. Sorry for the teaser.
In the meantime, I look forward to your comments, thoughts, and ideas – feel free to post them below as a comment!