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.

To our knowledge there have been at least 10 deals that have gotten investor traction from our first two events, including a possible $3M series-A and many, many angel deals. Of course, the relationships and connections that have been formed through the event are worth far more than the capital. However, nothing serves our cause better than to hear the successful networking stories from entrepreneurs and investors – so if you have feedback, or a story to tell, let us know!

The quarterly StartupLounge.com Capital Connections event now routinely draws a solid base of investors. Past attendees have included UPS, Imlay Investments, Croft-Bender, Southern Capitol Ventures, Chrysalis Ventures, Noro-Moseley, Atlanta Technology Angels, Smith-Hoffman Capital, Kinetic Ventures, Grotech, Leader Ventures, EGL Ventures, Monolith Capital Partners, and many others.

If you are a fast-growth entrepreneur in the Southeast U.S., or an investor who’d like to network among such innovators to scout for new deals, you won’t want to miss it.

For this next event, there will be some changes to the format:

1. Based upon feedback from both entrepreneurs and investors, we are introducing something new to the event. Investors will be let in an hour or so before entrepreneurs. This will afford investors with an opportunity to network among themselves prior to the event. Additionally, the StartupLounge.com team will hand-select a group of deals that will participate in a 2-minute “fast-pitch” on the microphone. No slides, no frills. Just two minutes presenting your deal to a room full of investors. After an hour of private networking and fast-pitching with the selected deals, we’ll open the venue to all attendees. Our goal here is threefold. First, we want to provide investors an opportunity to connect with each other, in a “less frenetic” environment. Second, we want to provide our investor attendees with a quick look at a handful of fresh (qualified) deals. Finally, the benefit to the entrepreneurial community is obvious.
2. Due to the logistics involved in throwing a party for 200-300 people every quarter, we are now going to close off registrations for the event a week or two before the actual event date. This will give us ample time to get name badges ready, and will allow the venue staff to prepare accordingly.
3. We are capping attendance from here on out. Fortunately (and I suppose unfortunately), the CapConn events have taken on a life of their own. And this means the venue is on the brink of getting filled to capacity. This has the side-effect of making it fairly difficult to navigate the room and find deals or investors. Therefore, we’ll be capping the attendance at around 225 people. What does this mean for everyone? It means you need to sign up sooner rather than later, in order to hold your spot!

The cost is still free, of course, and the room will be free of job-seekers and service-providers. However, we are seeking a few more sponsors to augment the sponsors we currently have. If your firm (or someone you know) is interested in helping us sponsor this event each quarter, please have them get in contact with us. Service-providers are welcome sponsors – in fact, it is the only way they can get in the room.

To apply to attend as an investor or entrepreneur/company, click here.

Cheers.

Here it is, midnight, and I just got home from our quarterly Capital Connections event. Wow, what a night. I am completely spent, so I’ll make this post brief!
We’ll have a full wrap-up posted in the next few days (along with tons of photos), but here are a few short observations:

• Despite the really terrible weather and apparently horrible accidents that backed up traffic on most of the major highways, we still managed to get over 200 people in the door – not bad. We had over 300 on the RSVP list, but I got calls from several investors and entrepreneurs shortly before the event telling me that they had diverted planes from Hartsfield Airport, and that the roads were seriously backed up. Several out of state VCs had their flights to Atlanta sufficiently delayed or cancelled. Yay. :( Nevertheless, 200+ entrepreneurs and investors in a room filled with gourmet crab cakes is never a bad recipe. It is probably a good thing – had the weather and traffic permitted, we would have quite likely been elbow-to-elbow. I think we may need to cap attendance at 250 or so for future events. 300 would have been brutal.
• It was good to see new deals and new investors in the room. Keeping the event “fresh” is something that is always at the top of our mind.
• It was also very encouraging to see established Atlanta entrepreneurs such as Chris Klaus coming to participate. We need more of this. Guys with ideas rarely become emerging growth companies without the mentorship, guidance, and wisdom that can be provided by those that have tread before them. Those of you who have experienced a great deal of success, and who are not sufficiently engaged, know who you are.
• The happy moment for me came when I looked across the demo area and saw literally dozens of entrepreneurs hunched over their laptops showing investors and other entrepreneurs what they were up to. This sort of transparency is very healthy.
• I saw some folks who participated in our recent PitchCamp showing off their new pitches and one pagers. Very cool!
• Despite repeated invitations, the Atlanta Journal Constitution still refuses to attend (or even write me back for that matter). Too bad. You would think that something as revolutionary, grassroots and impactful as these events would be newsworthy. Oh well. Thankfully, there is the Atlanta Business Chronicle, who realizes that this event represents a unique nexus between ideas and capital.

Thanks to everyone who came out and participated! A thanks to our sponsors as well! Your collective support allows us to continue providing a remarkable quarterly opportunity to drive change. The event continues to evolve, and we are grateful for your patience!
We’ll soon begin planning our Q4 event, which will be in early December. Should be a great time to gather around the holidays ….

Cheers.

The next quarterly StartupLounge.com Capital Connections event will be held on August 29th here in Atlanta.

If you are a fast-growth entrepreneur in the Southeast U.S., or an investor who’d like to network among such innovators to scout for new deals, head on over to StartupLounge.com and sign up. If you missed the last event, you can read the wrap up and check out the photo gallery over here. We had about 180 folks last time – we’re estimating 250-300 this go around.

For this next event, there will be some changes to the format:

1. First and foremost, we are opening it up to entrepreneurs across the Southeast United States (not just those located in Georgia). We are doing this because Atlanta really, truly should be the hub of entrepreneurship in the region. Several investors that attended the first event also made this suggestion, and we think this move will benefit investors (more deal flow) and entrepreneurs (more regional connections).
2. We are going to cap attendance at some point, so if you have an interest in attending, it would probably be wise to sign up sooner rather than later.
3. As before, companies will be limited to sending no more than two (2) representatives (investors may send as many representatives as they’d like, though).
4. We’re encouraging more entrepreneurs to bring demos, laptops, etc. (especially on the technology side)
5. We’ll be providing some free coaching for entrepreneurs prior to the event (See “PitchCamp“)
6. We’ve expanded our RSVP form to capture additional information that will help us better serve attendees.
7. If you attended the first event, don’t apply again – you’ll receive the event code in your email very soon.

The cost is still free, of course, and the room will be free of job-seekers and service-providers. However, we are seeking a few more sponsors to augment the sponsors we currently have. If your firm (or someone you know) is interested in helping us sponsor this event each quarter, please have them get in contact with us. Service-providers are welcome sponsors – in fact, it is the only way they can get in the room.

Cheers.

Raising money is rarely easy. It is even harder in Atlanta. The good news is that software/IT is a sector in which Atlanta is very strong. There are a lot of people in this city that get information technology.

Whenever the “panels” and “luminaries” are asked this question, they usually throw out the two stock answers: the 3F’s and Sig Mosley. The 3F’s being friends, family, and fools, and Sig Mosley being the unwitting godfather of early-stage technology investing in Atlanta.

What they fail to tell you, however, is how you should actually go about approaching these angels, and in what order.

For the purposes of this discussion, I’m using the phrase “seed” capital to generally refer to the cash it takes to get a prototype together, and “angel” capital to refer to the cash it takes to get the sales process going and begin building the business. There is obviously some crossover, and nothing is ever black and white in venture.

Your Own Backyard

If you are personally sitting on a pile of cash, the answer here is obvious. However, that isn’t a luxury for most young entrepreneurs. I do see this quite a bit, though, with older first-time entrepreneurs (i.e. the person who took the package from the corporate exit.) In any event, if you don’t have tons of cash lying around, don’t despair. Hopefully, the reason you are an entrepreneur to begin with is because you are resourceful, innovative, and can think out of the box.

Do you have equity in your home? If you hve a home equity line of credit with a checkbook, this gets even easier – no need to even go to the bank and get a home equity loan, just start writing checks off your house. If you are contemplating buying a new home, make sure you work with your lender to establish a home equity line of credit up front – I hear they can be more difficult to establish once you’ve already bought the house.

Do you have stuff you can (and are willing to) sell? Seriously. I know one guy who sold his collection of baseball cards to finance his business. That 1952 Mickey Mantle rookie card looks great up on the wall in the shadow box, but if it can put $250K+ into your business, it may start to look better on someone else’s wall.

Can you find a soul mate? If you are a young technology type, it may make sense to find your better half in an experienced CEO who can also fund your deal. There are plenty of these types of folks wandering around Atlanta right now. And many of them are looking for young bucks with bright ideas.

Can you bootstrap the business with initial sales? I see this a lot when the entrepreneur is a hands-on technical person. They pay $0 for software development, and can build the prototype on their own, and just start bootstrapping the business with those first sales.

I have some other bootstrapping tips here.

Friends, Family, & Fools

Everyone likes to think that they have lots and lots of friends. You really see who your friends are when you are trying to shake them down for cash. :) In the end, most of them will let you down. But that’s ok.

The next stop should definitely be your friends and family. Don’t get discouraged if they (a) don’t have the capital to invest in your venture, (b) refuse to do it because they don’t believe in your abilities or your idea, or (c) are simply scared of venturing forth into the unknown. This is the low-hanging fruit – if you can scrape up a few seed dollars from your friends and family, do it – and move on to the next group (the fools.)

My advice here? Don’t just show up on their door step and be completely half-assed prepared. Put together a presentation, demo, one-pager, etc. and walk them through it. Show them that you’re serious. At this stage, don’t waste time with a business plan, though. You’ll spend more time on that than you will in building the actual product or business. Just do a 1-3 page executive summary and a 10-15 slide presentation and go with it.

High-Net Worth Individuals

These people aren’t “literally” fools – they didn’t get to become high-net worth individuals by making silly decisions. Rather, they are fools in the figurative sense (“anyone investing money in Jimmy’s new venture is surely a fool.”)

How do you find these individuals? For most young entrepreneurs, it isn’t easy, as they have not yet amassed a large professional network against which to tap. In any event, the only way to really get to these individuals is through good old fashioned networking. Get out to every local professional event you can find. Throw out your pitch to anyone who will listen, and start following up. Soon, you’ll have built a pretty sizable list of contacts that you can leverage to try and raise the cash you need.

If you are here in Atlanta, there are networking events almost every night (MIT Enterprise Forum, Technology Association of Georgia, TechLINKS, etc.) But be aware that most of these events are rife with service providers, many of whom are not angel candidates (although there is the occasional exception.) For many reasons I prefer our Capital Connections event (via StartupLounge.com), which is free of service providers (by design.)

I should also point out that if you are just randomly trying to pitch to people, you are probably not going to secure funding (unless you’ve managed to cobble up the cure for cancer in your basement.) Target your search! For example, if your idea involves a software product that solves a big problem for insurance agents, go hang out with insurance agents. Find out where they have their events and go. Don’t waste your time at the big free-for-all networking events. This is perhaps one of the biggest reasons that people fail to meet angel investors, despite trying their best to network.

Oh, and don’t bother trying to find an angel at events that cater solely to entrepreneurs. They likely aren’t there.

You should also befriend the CEOs of other startup companies. Find out who their angels were, and establish a relationship with them. One angel can often lead to introductions to 5 or 10 others … always ask for a referral!

I would recommend pitching to at least 5 or 10 qualified, individual angels before moving to the next step. Ideally, you will begin to get some traction/interest from some of them.

Atlanta Technology Angels

The ATA is a membership organization comprised of high-net worth individuals. They meet once a month, and have a few companies come in and pitch to the group. That’s the good news. The bad news is that since they only allow a couple of companies to pitch each month, coupled with the fact that a good bit of their deal flow comes from the ATDC and/or Georgia Tech (simply due to proximity), your chances of getting selected to participate are probably mathematically lower.

Also, they are an “angel group” – a bunch of angels that pool their funds together – this buying power can lead lead to a skewing towards where a traditional venture firm would invest (the ATA doesn’t invest in great ideas alone, although they do look at pre-or-early revenue prototype companies.) This is a macro venture trend that has been documented by plenty of other folks.

Also of note is the fact that according to their portfolio page, they only make a few investments per year – so keep that in mind. Of course, this doesn’t mean that a single individual member couldn’t invest on his/her own.

I recently attended one of their meetings, and shared some of my thoughts here.

The Communications Group

Attorney Martin Tilson runs a group called the Communications Group. Martin used to be with Kilpatrick Stockton, but is now with Burr & Forman. The group meets monthly and they have 2-3 entrepreneurs come in to pitch. This group has been around a long time, and as a result, the members skew to the “wizened” end of the age spectrum (fancy way of saying “populated by a bunch of grey-haired guys”.) Nothing wrong with that, just keep it in mind. They will likely get more excited about traditional types of companies such as telecom, enterprise software, and hardware.

Unlike the ATA, this group doesn’t invest as a group – but rather each member is free to follow up with the entrepreneur on their own. Note: the audience will range from high-net worth individuals to traditional venture-capitalists, and everything in between. Keep that in mind – many of those investors may not necessarily be looking for a true angel-level opportunity, but rather, something later stage.

My advice? Don’t pitch this group with cleantech, online communities, Web 2.0, social networks, and plays in other emerging industries, but if you have a more conventional play, give them a look.

Sig Mosley/Imlay Investments

Sig is a nice, unassuming type of guy. I don’t know him all that well, but I’ve met him several times. I’ve pitched to him before as well. Sig has a very strong reputation here in Atlanta. He’s made some good picks over the years and as a result, many others here often use Sig as an investment “compass.”

Many angels, VCs, attorneys, and accountants here in Atlanta, when approached by an entrepreneur seeking to raise outside capital, will simply ask “have you pitched to Sig yet?” If you have indeed pitched to Sig, and he passed on your deal (or didn’t get all excited about it,) the effort required to convince those other investors to take you seriously just went way up.

My advice? Pitch Sig last – not first. Maybe I’ve just coined a new buzzword here: “Sig’d: the tainting of the pool of local investors that occurs when you prematurely pitch your deal to the biggest angel in town only to have him pass on it.” :)

I would provide a link to the Imlay Investments web site, but they don’t have one (even though they own “imlay.net”, which they use for email.) Yes – the biggest early-stage technology investor in Atlanta doesn’t even have a web site. I’ll leave you to ponder the meaning and impact of that on your own. Sig/Imlay has had a ton of successes over the years. A web site promoting those successes would go a long way towards putting a spotlight on the good deals that have gotten done here. My two cents.

Note: You may run into Sig at either the ATA or Communications Group meetings. So you may end up pitching to him without realizing it. FWiW. I would still recommend pitching to these groups as a whole first.

Capital Brokers

I define a “capital broker” as simply “a person who charges you a fee to find capital.” There are a ton of these folks out there. I am not a fan of this model, for reasons I’ve written about in the past (and ranted on in our podcast.) Entrepreneurs shouldn’t have to pay to find capital. Period. This is a sign of an unhealthy market for early-stage capital.

And how much do these brokers charge? They vary, but I know some that want a piece of your company (5-8%), a finder’s fee (5-8%), and a monthly retainer fee ($3-5K.) Nonsense.

This type of service is typically used by uninitiated entrepreneurs or those who have explored every other option and have come up empty. My advice? Use these groups as a last resort, or hopefully, never at all. If you are struggling to find capital, perhaps your idea really does stink. Or, perhaps you just need a tune-up or makeover on your presentation. Ask someone for help, but please don’t perpetuate the problem by paying through the nose for it.

Pay-to-Pitch Groups

Another model I don’t particularly care for are the models where someone charges an entrepreneur to put them in a room full of alleged angels. See above. An entrepreneur should not have to pay to pitch their deal. Period. Again, last resort, or never at all. In a healthy market, these types of entities are out of business. Sadly, in Atlanta, they’ve been able to carvee out a place for themselves.

Note: I was having a conversation recently with a non-Georgia VC who actually laughed when I told him about the proliferation of capital brokers and pay-to-pitch outfits here. He thought I was joking. Then he realized I was serious, and just shook his head in disbelief.

Traditional Venture Capital Firms

Noro-Moseley, H.I.G., Kinetic Ventures, EGL, etc. Don’t bother – they aren’t interested in making seed or angel investments, nor should they be. However, I would encourage you to make these connections and begin building those relationships for later use. You may occasionally find a venture capitalist that is an individual angel, or perhaps one that will become emotionally attached to you or your deal, and refer you to an angel. But by and large, it isn’t going to be worth your time (or theirs) to try and sell them on your seed/angel-level deal.

The “Optimum” Order

YOU!, friends, family, high-net worth individuals, ATA, Sig Mosley. Communications Group, capital brokers, pay-to-pitch. If all else fails, you could also consider debt financing. If after all of this, you still don’t have any interest, it could very well be that your idea stinks. Been known to happen. It could also be that your idea is tracking a few years ahead of the innovation curve here in the Southeast. Been known to happen as well.

Hope this helps those of you seeking to raise seed or angel capital for your new venture. If you have a question, I’m happy to try and answer it (or find someone who can answer it for you.) Or, you can post it in the forums over at StartupLounge.com. Good luck!

Cheers.

In keeping with the confidential setting of the meeting, I don’t want to reveal anything about the actual companies, but I can make some generalizations.

The format was very interesting. They had two companies do their pitch. One company was an ATDC company, the other was commercialized technology coming out of Georgia Tech. There were a few questions asked of each entrepreneur. Afterwards, the entrepreneurs left the room and the 20-25 angels in the room had an open discussion about what they thought of the deal. There were some really interesting exchanges of information, and I really like the format they used.

The diversity of backgrounds in the room made it so that there were “logical subject matter experts” on hand. The rest of the group relied on these individuals to give legitimacy to (or shoot holes in) the deal. Very nice.

For those interested, they were discussing 500K-$1M deals. After the discussion, someone was appointed to lead a “due diligence group,” I would assume to go off and meet with the company, and put together a more formal assessment of the company, market, technology, team, etc.

I also learned that Knox will soon be joining the blogosphere. I think this is a very welcome addition to the landscape here. I wish we could get more of the Atlanta venture folks blogging and exchanging ideas.

Afterwards, I had a great chat over dinner with Jeff Haynie. Bright guy – I wish I had met him years ago, but certainly glad we’re connected now. I love people that are brimming with ideas. It’s great to feed off that energy.

Cheers.

Enjoy!

If you weren’t able to attend, we hope you can make the next one. We certainly had a blast putting it together, and even more fun sharing ideas and connections.
Cheers.

So … I came across a post entitled “Angel Investors or Devils in Disguise” by Robert May on BusinessPundit.com. Interesting article, all in all.

Entrepreneurs looking for angel money need to realize they also are being evaluated. Part of the investor’s focus will be on how much money the founder has in the startup.

I was enjoying the read until I got to this quote quote from Greg Fischer, an angel investor in Louisville:

“It’s surprising how many people don’t put their own money into it,” Fischer said. “For a real entrepreneur, you expect them to be leveraged up to the hilt.”

“We like to see three or four credit cards maxed out,” Boden said. Fear of financial failure “tends to be a great motivator.”

Earth to Mr. Fischer. “Real” entrepreneurs are not graded by whether or not they are “leveraged up to the hilt.” They are graded on their ability to execute. There is a big difference. As I pointed out, it certainly shows the commitment level of the entrepreneur when they have personal skin in the game, and it certainly goes a long way toward easing the risk concerns of outside investors. However, there is no “personal leverage” prerequisite to be a “real entrepreneur.” Please.

And Mr. Boden’s advice is some of the worst I have seen in a long time. He may like to see entrepreneurs max out a handful of credit cards before they get to him, but I would strongly encourage entrepreneurs NOT to do this unless you absolutely have no choice, or have a safety net. Credit card debt is the worst possible debt that you can strap yourself with.

What happens if the entrepreneur misses a few payments on those “maxed out cards?” Even if you do make your minimum payments on time, remember, excessive credit card debt will lower your overall credit score (FICO). Opening up new credit card accounts will lower your average account “age”, also lowering your credit score. Credit-card financing strategies can actually come back to haunt you when you go for a later round of financing, or a business loan, and lenders or investors run a personal credit check on you during due diligence. Whoops.

I know that a lot of young entrepreneurs read my blog, and I want to be sure I get this message across to you loud and clear:

There are plenty of other ways to raise money that don’t involve jeopardizing your sheer existence.

If you have the capital to put into your business, great! Doing so will earn you valuable chits with potential investors. However, when you are ponying up the pink slip to the house, digging into Junior’s college fund, or running up expensive credit card debt, you are creating a potentially devastating set of circumstances. And if you show up on an investor’s doorstep, leveraged to the hilt, and in debt up to your eyeballs, guess who has the “leverage” now? The investor does, as he knows you are desperate. Perhaps these are the types of deals that Mr. Boden likes to work with.

Personally, as an angel, I wouldn’t touch a deal where the entrepreneur was desperate and leveraged beyond belief. That’s a different risk altogether. I know a lot of other investors who feel the same way. Running up excessive credit card debt while building a new business is not “entrepreneurship.” It’s gambling.

I have more respect for the entrepreneur who figures out creative ways of getting what he or she wants. Becoming eligible for debtor’s prison is not creative. That’s just stupid. It doesn’t take a genius to sign up for a bunch of credit cards and run up the debt (as keenly demonstrated by my ex-wife.) However, it does take a certain desirable skill to figure out ways of getting your product in the hands of customers, and getting your partners, customers, or other such parties to invest in your business. That’s the guy I want to bet on.

Prove to me that the dogs will eat your dog food. I don’t need proof that you can swipe credit cards at your local CompUSA.

Bruce Gill recently shared this gem with me in email:

Entrepreneurship is like jumping off a tall building and building your wings on the way down.

Entrepreneurs, instead, I challenge you to focus on finding creative ways of funding and building your business. Talk to other entrepreneurs. Network. Ask others for their insights. See my tips on bootstrapping if you need a starting point. If you really get stuck, drop me an email detailing your specific situation. I’m happy to try and provide some guidance for you.

Ok, I’m off the mat now.

Cheers.

While I consider myself to be a business-person first, I am (or was) a software engineer by trade. So, either way you slice it, I like data. The more the merrier. So, let’s examine things logically.

Fact #1: There are far fewer sources of venture capital in Georgia than in other, more established markets. Atlanta, while large for a city in the southeast, is an island. Other areas, such as southern California, NYC, and Boston, all are “connected” geographically to surrounding areas. Let’s face it – looking down from a 747, the northeast corridor from Boston down to Washington, D.C. looks like one massive suburb. Atlanta, on the other hand, looks a lot like a young couple’s first ultrasound – when the baby is only a few weeks old in the womb. Think of Atlanta as a “zygote” when it comes to its maturity as a capital market.

Think I’m kidding? See for yourself!

Note: for the purposes of this discussion, I am not including capital brokers, angel syndicates/investors or private equity groups.

Consider that there are only a handful of large-stock “pure” venture capital firms in Georgia. Here are the current “major” players:

• Noro-Moseley Venture Partners
• H.I.G. Ventures (not even based here, just an office)
• Live Oak Equity
• Cordova Ventures

Then you have a few smaller boutique funds, such as:

• 5 Paces Ventures
• Kinetic Ventures
• Imlay Investments (Sig Moseley)
• Croft & Bender

There are a few others, but my point is this:

There are that many players on one floor of the average office building in Silicon Valley. Okay, I’m exaggerating a little bit, but you get the point.

Over 35% of the nation’s venture capital money is centered in northern California (Silicon Valley, San Francisco, etc.) The number of venture capital firms there is somewhere around 175-200.

Fact #2: The funds here in Georgia are very small. If a VC firm here raises a $50M fund, it is a big deal here. If a west coast VC invests $50M, that is a big deal there. With a small fund, you have even fewer chances to swing and miss.

Noro Moseley is the biggest venture capital player here in Georgia. They recently announced the raising of their latest fund, which is a $200M endeavor. A $200M fund is gargantuan for Georgia. Massive. Compare that to NEA’s (D.C. area) recent announcement of their raising of a $2.5B fund, or even Norwest Venture Partner’s (California) current fund, which sits at $650M.

Perhaps when investors here stop putting their money into real estate, we can plant the seeds for some larger funds of our own, but that is a story best reserved for another blog entry.

What does this mean? With more money to invest, more deals can get done. Bigger deals get done as well. You see a bigger diversity in the types of deals as well. Remember, venture capitalists have investors behind them as well, and they aren’t serving those investors well if they are just sitting on the cash and not investing. And this pressure level goes up proportionately with the size of the fund being managed.

Fact #3: The chances of the average entrepreneur raising venture capital is (based on my exhaustive scientific calculations) is roughly zero (.000).

I say this a bit facetiously, but also a bit realistically. Most ventures are not venture-backed. Very few are, actually. If 1,000 deals come into a VC, 100 will get looked at because they generally have their act together. 10 will go through due diligence, because they have all of the right elements in place. Out of those, one will get funded. The proverbial pyramid.

Fact #4: If you talk to three investors here in Atlanta and get rejected three times, you are batting zero (.000).

This is just simple mathemathics. If you pitch anywhere three times, and get rejected three times, you are batting zero. However, this is a logical segue into my next point.

Fact #5: If you walk down Sand Hill Road in Menlo Park, California (Silicon Valley) and pitch to three venture capital firms, and get rejected three times, you are still batting zero (.000). The difference being that you can pitch in Georgia a handful of times and quickly be out of options. In other markets, you can simply walk down the hall and pitch three more times to three different firms. Welcome to the numbers game.

If you pitch here in Georgia, and you don’t raise funding, all it means is that the handful of firms based here passed on your deal. If there were more venture capital firms with a presence here in Atlanta, your chances would go up, much as it would in Silicon Valley, New York City, Boston, or other such markets.

So, here is my advice to you entrepreneurs who live in an area with a limited capital market:

Look outside your state: Raising money is a numbers game, as I’ve said. The more times you can pitch, the better. If you want to pitch locally (assuming you can get an audience), then do it. But do so with an eye on the larger picture.

Think of raising money as fishing. To catch a fish, you need to go where the fish are. If you are one of 3 dozen fishermen all chasing the same 3 or 4 fish in the pond, it is time to move your quest to a bigger pond.

There is a LOT of capital floating around out there, you just need to find it. One of the many hats you get to wear as an entrepreneur is the one of “archaeologist”. The cash is out there, buried. And it is up to you as an entrepreneur to get out there and uncover it. Good luck!

Cheers.

I stumbled across this post today from Mark Christian Doerschlag:

Pete Cashmore over at Mashable! just wrote about iBloks and I just can’t keep quiet on this one. This got both angel and VC funding. What. The. Heck. I am at a loss for words.

This new desktop application is being called a “3D multimedia slideshow tool” – it allows you to combine photos, videos and music into an odd media mashup that you can send to your friends.

Each iBlok starts with a “mod” – a basic element that you can customize. For example, you can begin with an animated “dancing man” figure made from a number of gray squares. You can then drag photos and videos from a library and drop them on to the squares – if you drag a video, it will play repeatedly on the surface of the square. You can also add music to the mod, and make the character dance. Other mods include a sudoku game, TicTacToe and an animated loveheart. To confuse things even further, they’ve thrown in Mix Master, a music mixing tool.

The question is: why? Why the heck would anyone want to create these things in the first place? And why would I want to download yet another piece of software that has virtually no utility? The fact that it’s nigh impossible to explain the concept is also a concern: how do you sell someone on your product if you can’t even communicate what it does?

First, let’s look at the angel round of $500K. Any monkey with a Powerpoint deck can raise angel money. What is angel money anyway? Some guy (or gal) that has more money than the entrepreneur who is willing to roll the dice on something that is “different”, “desired”, and/or something that addresses a problem. The world is full of such people.

As far as the $3M institutional round goes, again, I go back to the business plan. Maveron was one of the investors in e-Bay. Maveron’s Howard Schultz is the current Chairman of Starbuck’s, and formerly served on the board of e-Bay as well. Maveron’s portfolio also appears pretty balanced. These aren’t trust fund babies with an itch to get on the train. This is big boy football.

Not all investments are going to pan out – we all know this. iBloks could very well turn out to be a bust. Perhaps their technology is outmoded. Perhaps their market projections or assumptions are out of whack. Who knows? But unless I’ve seen the business plan for iBloks, and am able to conduct due diligence, I can’t feasibly criticize the components or structure of the deal.

Remember – the goal of most investors is not to “change the world” or “make the world a better place.” Most of them simply want to get a 7x to 10x return on their capital. This can come in a variety of ways. You don’t have to invest in a company because you “believe in their product.” You can choose to invest in them because you simply see the opportunity to achieve that desired multiple. Perhaps such an opportunity was identified with iBloks. Again, who knows?

History is rife with “dumb ideas” that produced significant wealth generation.

If I told you in 1993 that I wanted you to invest in a “web site” (assuming you even knew what a web site was in 1993), and that this web site was going to have a name that was nebulous and not indicative of its purpose, and that its mission was to sell books to people online, you probably would have bounced me out on my ass.

A side note (but somewhat related): As fellow military veteran and entrepreneur/investor Alex Muse shared recently (by way of Diane Mulcahy), here is Jeff Bezos’ path to capital success with Amazon:

• 3rd Quarter 1994: Jeff scraped together $10K of his own cash and borrowed $44K more.
• 2nd Quarter 1995: Jeff’s parents invest $246K
• 4th Quarter 1995: Two angels invest $54K
• 1st Quarter 1996: 20 angels invest $47K each ($937K total)
• 2nd Quarter 1996: Jeff’s siblings invest $20K
• 2nd Quarter 1996 Two Venture firms invest $8MM total
• IPO 2nd Quarter 1997 – 3MM shares sold raising $49MM

In 1996, if I approached investors with a “virtual pet” idea (Tamagotchi), again, I would likely found myself quickly lying face down on the asphalt in front the VC’s office building. However, within a year of launch, they were available in 30 countries, and on nearly 400 different licensed products (t-shirts, hats, etc.) Over 11M units were sold in Japan and the United States. This spawned an entirely new industry segment, populated by players such as Nintendo and Tiger Electronics.

In 1975, if I approached investors with the idea of taking a uniformly rounded, smooth gray stone, wrapping it up, sticking it in a cardboard carrying case, and selling it as a low-maintenance “pet”, I would have been the recipient of a swift boot in my behind. However, Gary Dahl went on to sell over 1M units of his “Pet Rock”, at a unit price of $3.95 each.

My own grandfather bought a boatload of swamp land in Florida. Everyone thought he was nuts, and rightfully so. Imagine the greed-inspired smile on his face the day he sold it to Walt Disney for the expansion of the theme park in Orlando. Again, the presence of an opportunity, rather than a valuable product or service.

Finally, in his post about iBloks, Mark goes on to say:

Here I am trying to grow a services business in a viable market, going at it alone, but everywhere I go it seems I read more about half-baked software product ideas with zero-utility that get millions in funding. There is something wrong with this picture. This is proof that there are investors out there who have the money, but have perhaps been brainwashed into thinking that crap like this is worth funding. I seriously need to consider taking my case on the road to find people who want to invest in something that has a stable future.

Note: this piece is not a knock on Pete or Mark. I don’t know them at all. I’m just sharing my thoughts on this one. I will even go so far as to say that I understand their frustration (especially Mark’s).

Cheers.