Examples:

• Lack of local funding sources for early-stage companies
• Lack of management talent to take a company from startup to growth stage
• Georgia’s legal inability to invest state pension funds into alternative class investments such as venture capital funds
• Too many smart people are leaving the state
• Lack of this
• Lack of that
• Blah.

Undoubtedly, we all want the Atlanta startup ecosystem to improve (or continue to improve, as I believe is the case).   But for the past few years,  there have been two distinct threads running in parallel.

The first thread is what I described above:  the onslaught of panels, round-table discussions, and speaker events where we continue to beat dead horses. Everyone is searching for the answer – the silver bullet.  And as should be evident by now to all of us – that doesn’t exist.  There is no panacea.  There is no succinct list of things that “if we only did this or that”, we’d be in business.  Lists don’t move the needle.

The second thread, is a veritable tidal wave of radical ideas and new ways of thinking.  And just as history repeatedly tells us, those things move the needle. And that is what I want to talk about in this post.

What I am about to say is going to run counter to many of the things I’ve said or published in the past.  I don’t have a problem with this – I think it  is very healthy, in fact.  As with many startups, here at StarPound, we challenge the ideas of our colleagues each and every day – none of us is the smartest person in the room.  I’d like to think that is a valuable trait of any initiative (startup or otherwise).

When I sold my last business a few years ago (2005) and came up for air, I fell into the trap of saying “hey, there isn’t enough venture capital money in Atlanta.”  That progressed to the position that for some reason or another, it was the fault of the venture capital firms here.   Thankfully, I’ve evolved beyond that narrow thinking.

About 7 or 8 months ago, Mike Blake and I presented our concept of the Atlanta Startup Cloud during a special session of the Atlanta Web Entrepreneurs meetup.  In that presentation, we put forth several ideas.  Chief among them was that we went from a deafening silence to a cacophony of shouts here in the startup community.  In our view, there was too much noise in the community, and we proposed some ways to provide an umbrella for all of it.  I shelved that idea a few weeks later – not because I thought it was a bad idea at the time, but because it seemed to me, at least, that the rebirth of the ATDC was attempting to do a similar thing, so why duplicate effort?

But my thinking has evolved again.  A single umbrella organization or launchpad isn’t the right answer either.  So what is?

How many years can a mountain exist
Before it’s washed to the sea?
Yes, ‘n’ how many years can some people exist
Before they’re allowed to be free?
Yes, ‘n’ how many times can a man turn his head,
Pretending he just doesn’t see?
The answer, my friend, is blowin’ in the wind,
The answer is blowin’ in the wind.

The answer …. is right in front of us.  And if you don’t see it, you are quite possibly part of the problem, and not the solution.

What follows in this post is a fairly unfiltered series of thoughts that I’ve had for the past few weeks.

A Marketplace of Ideas – the Social Media Revolution

Silver bullets do not exist for many challenges in life.  The evolution of any community, startup or otherwise,  requires a marketplace of ideas.  No single idea, group, or cause can move the needle alone. But things have changed – and continue to evolve.  Why?

I’ve said this a hundred times before, and I’ll say it again.  Without the advent and adoption of social media, we likely wouldn’t have any sort of tangible startup ecosystem here at all.  The social media revolution empowered the Atlanta startup community and gave us a much-needed “collective voice.”  In the immortal words of Margaret Mead:

A small group of thoughtful people could change the world. Indeed, it’s the only thing that ever has.

Blogs gave us the ability to not only play the role of citizen journalists, but also the ability to facilitate an ongoing dialog.  Twitter, a tool that I once shat all over, gave us the power to communicate in real-time, overcoming geography and time.    We could now participate in our own marketplace of ideas, unimpeded by legacy stakeholders, traditional media, and bits of stale culture that kept us back.

Social media gave us something that we desperately needed – a vehicle for the conveyance of new ideas, and a way to challenge those ideas.  The end result is a powerful example of group think.  Things like Startuplounge, Startup Riot, Startup Chicks, Shotput Ventures, Startup Gauntlet, Techdrawl, Startup Drinks, and the newly reborn ATDC, would simply not exist had it not been for the mass adoption of social media by the startup community here.  We wouldn’t have cool startup co-working facilities like Ignition Alley, 151 Locust, and others popping up all over town.  We wouldn’t have much of anything.

Remember WifiCat from Startup Riot 2009?  Remember what I said at the end of that presentation?  It was the prolific use of social media that enabled us to pull off that joke.  The fact that we were able to do so told me, at least, that we actually had a startup community in Atlanta now. We couldn’t have done it otherwise.

Even Urvaksh, the technology & startup beat writer for the Atlanta Business Chronicle, is engaged through social media.  And whether you like his ideas or approach, or loathe them, it is a cool thing.  Everyone has, and should have, a voice.  And we do. And voices move the needle.

In fact, there is a great story that you may recall about fifty six men that sat around and bantered about what freedom meant, and what it would take to attain it.  Radical ideas combined with passion gets the needle moving.

“Washing the Mountain into the Sea …”

The flow of water in a stream can be a powerful force.  Simple physics, really, but powerful nonetheless.  If a rock lies in the stream, water will simply flow around it.  Eventually, the rock will erode until it no longer impedes the flow of water at all.

There were certain individuals and groups in Atlanta that missed the boat when it came to becoming engaged within the social media discussion.  By not engaging (for the right reasons, or not at all), they made themselves largely irrelevant.

Case in point, and I’ll go ahead and say it here, because no one else will, despite everyone of you agreeing with me in private.  Look at the Atlanta Technology Angels.  The prior administration did not seemingly truly engage in this new movement, or the social dialog.  Sorry, but sitting on panels, while no doubt informative, doesn’t constitute engagement within the community.  It got to the point where many entrepreneurs simply did not view them as a relevant stakeholder within the community (hindering deal flow).  In many cases, the ATA became the “funder of last resort” in the eyes of many entrepreneurs here.  And no, this does not come just from companies that got rejected by the ATA.  The end result, was that the water learned to flow around the rock.

But that has changed – there is redemption.  Gordon Rogers, the new incoming ATA President, has done an amazing job in a very short period of time in engaging the community – listening, and reacting.  And contributing unique ideas himself.  And giving his time to those that can benefit from it.  The ATA is relevant again, and that’s a very good thing. The ATA has helped moved the needle.

And speaking of giving time …

One of the issues that we have historically lamented here in Atlanta is the fact that many successful entrepreneurs don’t “give back” to the community by serving as mentors and advisors to the next generation of entrepreneurs.  In my view, while this hasn’t completely been turned around, I think we are well on our way.

Case in point.  A few months back, Chris Hanks and I were fiddling around with the idea of having a “pitch-off” competition between UGA and Georgia Tech.  The first event was held a week before the UGA/Georgia Tech football game – fitting!  We were very diligent in trying to identify judges that would not be biased either way – which proved to be a very difficult challenge.

I reached out to two guys in particular that I thought fit the bill – Warren Bare (Headhunter/Careerbuilder) and Mitch Free (MFG.com).  Within minutes of sending the email, both of them not only agreed to do it, but also let me know why they were doing it.   These two (and they aren’t the only ones) embodied the sense of community spirit that we need.  In fact, just before the first pitch started, I leaned over to Mitch and said “hey, thanks for coming and helping out with this, I really appreciate it.”  His response?  “Hey man, the community calls and I come!”  What’s not to love?

Gangs of Five are cropping up all over town.  Investors are becoming more engaged (@Unblakeable is working on a companion post that will go into this in more detail).  More and more successful entrepreneurs are getting back in (e.g. Shotput Ventures).  There is a veritable army of people within the Atlanta startup community that are ready to advise, mentor, coach,  and help an entrepreneur make critical connections.  Bingo.

Yes, we need more folks like Mitch and Warren, but this problem has been diminished greatly over the past couple of years.  Why?  Social media.  They are engaged within the larger dialog – they are plugged in – and they want to help make a difference.  The needle moves again.

Event overload?  I don’t think so.

There was a lot of hubbub recently (here and here) about so-called “event overload” in Atlanta.  Yes, there are now cool meetups, events, and groups popping up all over town. And yes, at times, it can seem to be a bit much.  But guess what, folks?   That’s a good thing.  You don’t go from dying of thirst to drinking from a firehose without saying “WTF?”  But I would call that progress.

Why is it a good thing? These meetups, groups, and events spawn new ideas and new ways of thinking.  And those ideas will eventually get challenged.  And the needle will move again. Rinse and repeat – the needle will keep moving.

Can I go to every event that I am either invited to attend, or want to attend?  Absolutely not.  I have a day job, several non-profit efforts that I’m involved in, oh, and my wife and two kids.  But … cluebell here.  I don’t have to go to every event.  But I like having options. It wasn’t so awful long ago that the only events in town for entrepreneurs were held by service providers and the establishment.   Some of these were (and still are) good intentioned – but again, there was no moving of the needle.

We wanted a vibrant ecosystem here in Atlanta, and guess what, folks?  It’s here now.

There has been a seismic shift in the nature of these social opportunities in Atlanta.

Most of the new organizations that have sprung up are non-profit, all-volunteer, grass-roots organizations where the organizers not only do not get paid, they do well not to lose money.  Most of the new opportunities do not have speakers (remember how much we hated speaker-driven events?)

Most of the new social opportunities vigilantly exclude or limit service provider involvement so that meaningful conversations can take place.  There are real competitors to the service-provider-dry-hump-fests of old (nod to @Unblakeable for that one).

As a result, real entrepreneurs and real investors are attending and that flow has increased steadily over time.  Institutional investors, notably the ATA and Noro-Moseley, are actively reaching out.  You may argue with the methods by which they do so at this point, but the fact they give a damn is incredibly encouraging.  And we need that.

All these things indicate that the new ecosystem is here.  It’s not fully baked yet – that’s years away.  But it’s in the oven and cooking along quite nicely, thank you.

A year from now, many of the things we see now will have fallen by the wayside.  And new ones will have taken their place.  That’s a good thing.  But ideas need to have an opportunity to flourish.  That’s called innovating.  Iteration is important. The only thing that moves the needle is the community – and in this case, the community is the market - not a group, person, or single idea.  Listen to the market – it will tell you everything you want to know.

Improvise, adapt, & overcome

We had a saying in the military – one that predated my service, and one that still exists today.  Improvise, adapt, overcome. In the face of a dynamically changing battle space, military leaders on the ground have no choice but to evaluate their assets constantly, and make critical decisions not necessarily knowing what the next milestone or outcome will be.  Smart entrepreneurs do the same thing.  It’s called bootstrapping.  It’s called being nimble.  It’s called … well, being entrepreneurial!

So, you think there isn’t enough true early-stage venture capital money in Atlanta?  So what? Who gives a shit?  Stop whining and start executing for the love of Pete (whoever that is). Good deals, should they require it, can get funded. We all know this – this isn’t profound news.

Let me lead you through a concise version of the evolution of our StartupLounge philosophy over the past nearly four years:

• 2006: Not enough money in Atlanta, not enough transparency in the capital raising process, some bits of stale culture.
• 2007: People are getting connected, a real dialog is forming, but the problems still exist.
• 2008-2009: Investors are engaged, but entrepreneurs can’t pitch their deals to save their life.  Let’s do this thing called PitchCamp! (200+ CEOS have gone through PitchCamp to date)
• 2010: It’s not about the money – let’s change the format of our CapitalLounge event.  Entrepreneurs need more free education and training, on pitching, financial modeling, sales, etc. More blocking and tackling.  Kids in high school need to view entrepreneurship as a career path. Let’s tackle these problems now.

Again, it’s not about the money.  As an illustration, consider our upcoming StartupLounge event on March 4th.  We are making a ton of changes.  “CapitalLounge” is being renamed to simply “StartupLounge Atlanta”. There will be fewer attendees, but higher quality deals – ones that show traction, passion, and commitment on the part of the founders.  No more colored name badges – who cares who you are talking to at the event?  You aren’t there to get funding – you are there to hang out with like-minded people who care about early-stage companies (for a variety of reasons).  To make connections.  To help each other. To have fun with startups.  To consume copious amounts of adult beverages. And so on.  That’s what it is all about.

All of us, whether in our entrepreneurial endeavors or non-profit/community activities, have to be open to change, and open to being challenged (one of the many reasons I love things like PitchCamp and Startup Gauntlet).  And if you become irrelevant in the process, so what?  Evolve.  Re-invent yourself.  Find another way to contribute, or try and solve a different problem. Do your part to keep the needle moving.

Sig is retiring!! OMFG! What are we going to do?!?!?!?

Nothing.  Sig Mosley’s financial presence will no doubt be missed by us all.  Besides being a great guy, Sig is a legend, as is John Imlay.  But guess what?  The market will fill the void, just as it always has.  It isn’t the end of the world, because as I’ve said already here, it isn’t about one guy, one idea, etc.  Think Shotput Ventures & Tech Operators.  Ashish Mistry announced last night to a roomful of people that he was involved in a new fund.  There will be others.

Build successful companies and have some exits, and everything else will  just happen.  Trust me.

The needle is moving.

But all of our smart people are leaving!!!! OMFG!!

Whatever.

Sorry, but at this point, I have to question the alleged brilliance of “smart” people that leave Atlanta because they couldn’t get their idea off the ground here.

If you are a guy like Jeff Haynie (Appcelerator), and you raise a round of capital outside the state, and move the company thereafter – great!  I’m not talking about situations like that. Appcelerator had close to (if not more than) $1M in revenues before they raised their round and relocated.  That’s called execution.  That example is a perfect template of how to execute.  Traction. Traction. Traction.  And whatever happens, happens.

And I’m not talking about folks like Russell Jurney, who moved to Silicon Valley to expand his views on startups.  Again, different story – Russel took a great opportunity with Ning – he didn’t go there because he “couldn’t raise money here and everything in Atlanta sucks, and I’m sure they will love my idea in California.”

But, if your business plan is basically “I need to raise money for my idea”, you are most likely going to fail anyway, and spending the money to relocate is simply going to get you to your point of failure faster.  Frankly, if that is your path, and your advisors can’t convince you otherwise – I’d actually prefer that you move away from Atlanta.  That way, you can be a burden to some other city’s ecosystem.

If you execute, and do whatever it takes to get your company off the ground (drive value – financial or otherwise), you don’t have to leave Atlanta.  It’s as simple as that.  Atlanta is full of successful companies that didn’t have to leave to get off the ground – the founders just dug in and kept chopping wood (e.g. MFG.com).  Was it hard?  Sure.  But it’s hard everywhere – trust me.

So ….

This is more of a personal statement than anything else, but I am done sitting on panels to talk about what is wrong with Atlanta.  No more task forces, panels, and round-tables for me.  I fundamentally don’t believe anything is wrong at this point – we have gotten what we asked for. I am out of the “lists of things we can do better” and “10 step plans” business.  No more talking about how we get more investors to open up offices here, how we close the funding gap, and how do we get successful entrepreneurs re-engaged.  Those things will either happen on their own, as a by product of the movement, or they won’t.

Instead, I want to talk about innovation, startup strategies, business models, bootstrapping tactics, and ways to help others succeed.  And you should, too.

After all, that’s how we’ve already moved the needle. And that’s how we’ll continue to do so – together as a community.  Anything beyond that is gravy.

Cheers.

We made the announcement the other night at our quarterly CapitalLounge event, but here it is again for those that missed it.

AngelLounge is the angel investor community component of Startuplounge.  It is currently comprised of 80+ vetted angel investors in Georgia. The member list reads like a who’s who.

The good news is that not only have we not even scratched the surface of Atlanta, but we are also reaching out to other parts of the state as well, including Savannah, Columbus, Douglasville, Rome, etc.

“This makes AngelLounge the largest organized angel group in Georgia, and quite possibly in the Southeast.”

The group meets each month in an almost “unconference” like setting.  The goals are to have an open forum for the discussion of topics relating to angel investing, to encourage cross-pollination among investors as it pertains to deal flow, to create new angel investors by bringing in high net worth individuals seeking to explore early stage investing as a vehicle, and to create a logical funnel for these investors into the early-stage scene in Georgia.

One of the key pain points that has been constantly brought up at the meetings is the lack of exposure to investment opportunities (“deal flow”).  As evidenced by the over 160 companies that attended our CapitalLounge event the other night (over half of which were new to the event), there is clearly “stuff going on”.  So, putting our entrepreneurial hat on – we listened to the customer, and came up with a solution.  Actually, two solutions – a short term and a long term solution.

The short term solution is available today (the better, long-term solution is in development).

We have rolled out an automated deal referral and distribution system.  To distribute information on your deal, simply head to StartupLounge.com. If you haven’t done so, you’ll need to create a free community account in order to participate.

This is different from investment matching sites such as GoBig Network etc. because this isn’t just matching business plans with a blind database.

The AngelLounge members have organized themselves into vertical markets ranging from IT to consumer products to alternative energy to biotech. Each industry vertical has an angel investor volunteering to serve as an IAC (Industry Angel Coordinator). Any entrepreneur within the StartupLounge community can go online, upload their one pager or executive summary, and select the industries that fit the deal. The deal will be distributed on their behalf to the appropriate IACs. 

Every deal will get seen by the network, period – no bottlenecks – no middleman – no gatekeepers.

The role of the IAC is simply to ensure that the information received is actually a fit for the industry (or industries) that the entrepreneur selected. If it isn’t a fit for that IAC (e.g. the entrepreneur selected the wrong industry by mistake), the IAC simply forwards the deal to the appropriate IAC. Assuming an industry match, the deal is then distributed to the angel members who have expressed an interest in seeing deals in that particular market.

Devlishly simple.

Each angel is free to follow-up with the entrepreneur on their own – this is not a pledge fund, or a fund of any sort, for that matter. This is merely a mechanism to get deal flow going among local angels.

The angels have committed to delivering an initial response to the entrepreneur within within one (1) week. This takes us out of the role of gatekeeper and lets you deliver your opportunity directly multiple investors that actively want to see your deal.

This makes StartupLounge/AngelLounge the largest organized angel network in Georgia, and quite possibly in the Southeast.  This group is growing like mad, and there is little doubt in my mind that we’ll reach 100 members by Q1, and quite possibly double in size in 2009.

A special thanks to Jeff McConnell, Chris Demetree, and the others who logged a lot of time brainstorming the system.  Also thanks to Charlie Paparelli (Paparelli Ventures) who puts a boatload of effort into driving the overall effort with AngelLounge.

BTW, if you are interested in joining AngelLounge as an investor member, contact me. There is no fee to join (why should there be?), but there is an interview process.

Cheers.

By Stacy A. Williams

StartupLounge.com seeks to pair qualified investors with qualified companies. Our screening process is pretty rugged but it is not bullet proof. If you ever have a question about the integrity of an investor or entrepreneur that you have met at a StartupLounge event, we want to know about it. Please feel free to contact us if you ever have any questions or concerns about anyone that you have met at one of our events. We are here to be part of the solution – not another piece of the problem.

Some of these “investors” are just self-serving and need the income. We call these small fish: job-seekers, consultants and fund-raisers. They are not really doing anything illegal, but they can waste your time and money because they don’t plan to invest their own money and may not work that hard to find someone else’s for you – no matter how much you pay them.

Then there are the big shot wannabes and pathological nut-jobs. Oftentimes they are the same person. Their payoff is more emotional than financial. They like the long talks on the phone or over beers, and they like the way that you gaze at them when you think they are going to make your dreams come true. It is very often the case that you will waste time, money and opportunity with these types of “investors” because these people are more lonely than rich and desperately need to feel admired and powerful. This type of “investor” will lead you along, make you feel really good about your abilities and then find some reason why the deal won’t work. The relationship generally sputters into oblivion when the “investor” no longer gets the emotional payoff that he or she so deeply craves.

Then there is the most dangerous type of “investor” to encounter – the millionaire imposter. This type of investor will most certainly display the characteristics of the big shot wannabe and the nut-job and will most certainly lack the integrity to go out and try to get a real job – like any self respecting job-seeker, consultant or fund-raiser. This type of “investor” is out to get your money and possibly your identity. The millionaire imposter oozes with wealth. He has a private plane, multiple mansions, carte blanche entrée into the Oval Office and an offshore bank account. And then he encounters you.

The world is his oyster and you are his pearl! He loves you. You have vision. He sees potential in you that you never knew existed. You are not like that little snot-nosed Harvard MBA that he had lunch with last week when he was on the coast of Spain. No – you are special and he is going to take time out of his busy life to groom you into the kind of CEO that will change the world. This goes on and on until you feel like you are on top of the world and then he asks for a check. He is not liquid right now. The wire transfer from his offshore account did not go through because it is Holy Week in Qatar. And the funds, by the way, have to be further directed through Minsk and then onto Ontario. Your prince will “roll that amount up in the deal when we sign it”. You are left feeling like you have to meet your mentor’s needs, because after all you are a savvy CEO and this is how things are done at this level. When you find out that the only thing getting rolled up in this deal is your money as your mentor stuffs it in his pocket, you feel violated and duped.

The sad thing is that most entrepreneurs just want the problem and the feelings to go away. They don’t want anyone to know that they fell for such a scam. They look back on their experiences with the “investor” and point out to themselves the red flags they should have seen all along. They beat themselves up because no entrepreneur worth his or her salt would ever have fallen for such a scam. They are afraid that people will talk about how stupid and gullible they are. The fact of the matter is that these imposters are stone-cold professionals who have left a trail of tears and smaller bank accounts far and wide. That snot-nosed MBA is probably crying into his Sangria much the same way you are into your beer.

What should you do when this happens to you? Talk about it! Start first with some trusted friends and work your way up to the authorities and the press if necessary. But for heaven’s sake, don’t keep your mouth shut. That is a sure fire way to ensure that some other honest, decent entrepreneur gets treated the same way – not to mention that your silence will rob you of the cathartic release from your self flagellating rage. Get it out and get it over with. Everyone gets “had” at least once in their lives and probably more than that. These experiences keep you humble, and ironically, make you the savvy entrepreneur that you need to be in order to change the world. Consider it a right of passage and don’t dwell on the past.

In general, qualified angel investors:

• Never ask for money from you
• Do not mind submitting to background checks
• Usually carry business cards
• Will want to see a business plan
• Will have some sort of term sheet that they are comfortable with
• Will not ask you to keep their role private
• May want to coach you but probably not groom you

Now there are some exceptions. Some angel investors are so well known in their communities that they don’t think cards are necessary. This type of person has a lot of cronies who can vouch for his or her integrity. Beware of the glamorous investor who swoops in on his jet plane and never has cards. A qualified investor may ask you not to talk about his or her role in a deal for a while, but if the investor takes on the air of a CIA agent, point him in the direction of Moscow and tell him you heard there were some Commies over there.

Michael Blake offers some questions that you can ask your Prince Charming before you buy the dress for the ball.

Certain questions will help you detect the phonies:

• What other deals are you invested in?
• What other deals are you looking at?
• What was successful about your last deal?
• Talk about an investment you made that didn’t pan out
• How do you spend your time on a daily basis?
• Why are you interested in angel investing?
• Why are you interested in my opportunity?
• What can you bring to the table besides money?
• How do you recommend your funds be allocated?
• Can you recommend an attorney?
• Can you recommend a financial advisor?

—

Note from Scott: If you haven’t seen the presentation by Mike Blake that is referenced here, check out the slidecast we published recently.