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

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

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

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

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

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

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

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

• Scientific-Atlanta: acquired by Cisco for almost $7B
• ISS: sold to IBM for $1.3B
• Jungledisk: acquired by Rackspace
• AirDefense: acquired by Motorola
• CoreHarbor: acquired by USI/AT&T
• Harbor Payments: acquired by American Express
• Digital Insight: acquired by Intuit for $1.33B
• CipherTrust: soldto Secure Computing Corporation for $295M
• Witness Systems: sold to Verint for nearly $1B in cash
• Firethorn (Tripp Rackley, one of our board members at StarPound) sold to Qualcomm for $210M
• APEX Analytix (1/3 of Fortune 100 companies as customers, Noro company, sold to PNC Equity Partners)
• Engineous Software (sold to Dassault Systèmes)
• Gametap: founded by my friend Blake Lewin, acquired by Turner, then sold to Metaboli
• JBOSS: snapped up by Redhat for $350M
• N2 Broadband: Acquired by Tandberg for north of $100M
• Firearms Training Systems (FATS): Sold to Meggitt, a U.K. based defense contractor for $144M
• Weather Channel: acquired by Bain Capital ($3.5B)
• Sciele Pharma acquired for $1.3B
• Procuri: acquired by Ariba for $425M

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

• MFG.com: Completely changed the global manufacturing landscape – invested in heavily by Jeff Bezos and the Samwer Brothers.
• Suniva: seriously revolutionary photovoltaic technology out of Georgia Tech – recently secured a half billion dollar order from their first major customer)
• Vocalocity: A fellow Atlanta VOIP player (to what we’re doing at StarPound), a large customer base, and recently pulled in another round of growth capital
• CCP Games: Developers and operators of EVE Online, one of the most popular (and profitable) MMO’s in existence
• PureWire: Security in the cloud (already snatching up plenty of award hardware, including the coveted DEMOgod award at DEMO 09)
• Everyone at the ATDC – including recent graduates (Global Crypto, Emcien, VendorMate, Synthis, ClearLeap, Biofisica, CogentWare, Damballa, Izenda, Invistics, Sentrinsic, Qualtre, etc.)

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

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

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

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

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

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

Here is a breakdown of valuation metrics of these exits:

And finally, a breakdown of the deal sizes:

Some quick observations:

• Atlanta has over twice the number of exits of the San Jose/Silicon Valley region, and slightly more than San Francisco proper.
• Atlanta holds its own even against the aggregate of the larger combined bay area
• Atlanta generated more $1B+ exits than both valley regions, and only slightly less than the larger combined area
• Atlanta generated more total deal value than San Jose/Valley, but less than San Francisco and the larger combined area
• The only sectors where the Valley is clearly far beyond Atlanta in terms of exits is in Healthcare and Information Technology – no surprises there
  
• Atlanta has a commanding lead in several other sectors, though, including Materials, Financials, Industrials, and Consumer
• Atlanta has more sector diversity, which in my view, is healthier in the long-run
• Atlanta has a slightly lower average valuation than the San Jose/Valley region, but less than San Francisco proper and the larger combined bay area

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

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

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

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

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

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

Cheers.