At Octane, a trendy independent coffee shop in Atlanta, owner Tony Riffel says sometimes he feels more like he's running a business incubator than a corner hang-out. That's because customers sometimes treat him like a business consultant, seeking his suggestions for a graphic designer, contractor, or skilled craftsperson. "I can just look around the room and point out three or four people," Riffel says. "Atlanta's kind of like a big small town. You run into people you know all the time. It doesn't feel nearly as big as it actually is."
Atlanta is one of the fastest-growing cities in the South and, for much of the last decade, was the fastest-growing metropolitan area in the whole country as its population grew by 20 percent between 2000 and 2006. Business owners and experts tick off the reasons they consider the face of the New South to be a rising star in the business world: among them, the climate, the airport, the univesities and technology incubators, the lack of red tape, and the sense of civic pride.
For those who like Atlanta's lower level of intensity compared to other cities, the future, they say, is promising enough to make the nickname "Hotlanta" apply to more than just the weather. But doing business in Atlanta is not without its share of challenges. Local restaurants are booming and the art scene is vibrant, but several high-profile technology companies have picked up and left town for the West Coast or elsewhere. The sprawling metropolitan area and lack of public transit can make traffic oppressive. So is Atlanta a good fit for your business? Here's what you need to know.
Starting a Business in Atlanta: Why Atlanta?
Ask someone why they do business in Atlanta, and the answer is almost invariably the same: 'It is a confluence of great climate and a relatively low cost of living,' says Michael Blake, an entrepreneur whoco-founded StartupLounge, a non-profit that aims to foster the startup community. 'You still find many of the amenities you'd find in most metropolitan areas.'
To Blake's point about the cost of living, a person earning $40,000 a year in San Francisco, for example, only has to earn a little more than $23,000 for the same standard of living in Atlanta.
Attracted by the low cost of doing business, corporations such as Coca-Cola, Home Depot, UPS, and Delta Air Lines, all have major operations in Atlanta. That concentration of buying power is good news for entrepreneurs. 'If it's a business-to-business type company, you've got a lot of really good potential clients in the backyard,' says Greg Foster, an Atlanta businessman who was a partner with Atlanta venture capital firm Noro-Moseley Partners and formerly ran corporate development for Turner Broadcasting, which is also based in Atlanta.
Hartsfield-Jackson International, the world's busiest airport, makes business travel easy, and attracts international clients, says Gail Margolies Reid, an Atlanta CPA and business consultant who this year wrote the book The Complete Idiot's Guide to Low-Cost Startups. Add onto that the two large Georgia ports out of Savannah and Brunswick, in addition to a train system, and the city becomes very attractive to large corporations. 'It all makes it much easier to move goods in and out of Atlanta,' she says. 'Atlanta is very commonly a distribution center.'
Dig deeper: The Top Ten Metro Areas
Starting a Business in Atlanta: Sprawling Options for Location
With only a small downtown area that doesn't hold much residential housing, the sprawl of the city creates challenges. The city of Atlanta comprises 131 square miles, but the greater metropolitan area extends much farther. Consider that Boston, a city with a comparable population, is only 48 square miles.
Is foot traffic important? If so, the hip, walkable neighborhoods of Virginia Highlands, Little Five Points, and West Midtown are probably your only location options. If space is a more pressing factor, new office construction has popped up out toward the suburbs at a rapid pace.
The stock of office space in Atlanta is at an all-time high, says Richard Bowers, president of Richard Bowers & Co., an Atlanta commercial real estate firm. 'You've got some world-class trophy buildings that have been around Atlanta for almost 20 years,' he says. 'You can make a great deal right now because of the office market and the economy.'
When Bowers first started in Atlanta, the city had just 30 million square feet of office space; in the last three decades, it's increased to 50 million square feet in the urban area and 90 million square feet in the suburban corridors. Two-thirds of all growth right now is in the suburbs, he said.
Some of those suburbs that were once part of Atlanta have broken off and formed their own municipalities. Reid advises new business owners to pay attention to which borders they're crossing: some governments are easier to deal with and more business-friendly than the old bureaucracy of Atlanta proper, she says.
Many large companies prefer the suburban areas such as Alpharetta to be closer to the housing markets, Bowers says.
Dig Deeper: Here Comes the Neighborhood
Starting a Business in Atlanta: Scouting Space
George Frangos lucked out when he found a location for FarmBurger, his farm-to-table grass-fed beef burger joint.
The reason he lucked out? The struggling economy.
He found a site on a main thoroughfare of Atlanta-adjacent Decatur that once held a bakery, with pre-installed restaurant infrastructure.
'There are a lot of opportunities given the economy,' Frangos said. 'We got in really cheap. We bought a lot of used equipment, did a lot of the work ourselves. We didn't have to have the huge backing of mega bucks to get going.'
He feels bad for feeding off other business's failings, but his plan so far has been a hit: Farm Burger has been receiving rave reviews for its sustainable beef burgers from its farm in Athens, Georgia, since it opened in April.
While Atlanta's economy has wobbled recently, office space remains at a relative steal compared to other metropolitan markets.
In the up-and-coming area of Buckhead, office space can be found for as little as $15 per square foot per year, said David Cummings, CEO and co-founder of Pardot, a provider of interactive marketing solutions, which was named Atlanta's fasted growing technology company at the 2010 Atlanta Business Chronicle Pacesetter Awards.
'If you want to go to the suburbs, it's wildly cheaper than New York or San Francisco,' he said. Commercial space occupancy was well above 90 percent in the 1990s; in the last decade, it dropped to 80 percent, Bowers said.
When chef Kevin Rathbun was looking for a place to open his first restaurant in 2004, he scoured all neighborhoods of the city looking for an affordable location. He eventually had a good feeling about an old potbelly stove works facility in the Inman Park neighborhood. The area was unimpressive at the time: only about two or three restaurants and defunct industrial spaces. Now it contains more than a dozen eateries, and Rathbun's has been lauded as the best restaurant in town by Creative Loafing, Atlanta Magazine, in addition to receiving national acclaim from Zagat, Travel & Leisure, and a host of other publications.
'I think this area was up-and-coming. I hit it perfectly,' Rathbun said. 'It was an area that was going to re-gentrify and become the cool area of Atlanta. A whole lot of people have seen the growth and they just keep coming. It's a cute neighborhood, it's got a history.'
Frangos estimates he saved $150,000 alone just by finding his pre-used location. 'Other people's losses might be your opportunity,' he said. 'The barriers to entry dollar wise were a lot lower given this economy.'
Dig Deeper: 7 Recession Stress-Busters
Starting a Business in Atlanta: Traffic Issues
Ask someone to name the biggest problem with doing business in Atlanta, and they don't hesitate: traffic.
'For a lot of people, that is a huge challenge for attracting talent,' says Mike Landman, president of Entrepreneurs' Organization Atlanta and CEO of Ripple, an IT company. 'We're in many ways envious of a New York City or Boston or places where there are legitimate pubic transportation systems.'
The Metropolitan Atlanta Rapid Transit Authority runs trains and busses through the city, linking the airport with outlying areas such as Sandy Spring, but the system is far from comprehensive enough to replace automobiles. 'It can make it prohibitive for people to see face to face,' says Blake.
New businesses have to take things like parking and nighttime safety into account. A coffee shop in another city may be able to survive on foot traffic, but Riffel said Octane has to balance business from students and nearby offices during the week and draw crowds by acting as a bar at night. 'Atlanta is just such a driving city, there aren't many walkable areas,' he says.
Rathbun and other high-end restaurants say offering valet parking is a must: "It's not like New York where you get in a cab and go somewhere."
Some companies try a different approach to work around accessibility issues. Landman's Ripple is one of the companies that adopted a 'results-only' work environment, allowing employees flexible schedules so they can work from home or avoid rush hours. 'Here in Atlanta that's a huge benefit because the whole driving to work thing is a big deal for people,' he said
Dig Deeper: Beyond Flextime
Starting a Business in Atlanta: Recreating Urban Community
Meetups, peer groups and social networking circles have boomed in Atlanta, as business owners have tried to compress the physical sprawl and recreate the dense collegiality of bigger cities. Co-working spaces and shared office arrangements are popular.
Mike Schinkel had early success with Xtras, a mail-order software company he founded in the 90s. But even with $12 million in revenue and 30 employees, he felt isolated in the Atlanta tech scene. So, in 2007, he founded Atlanta Web Entrepreneurs, a group working through the site Meetup.com where people talk about new products and share advice.
'I kind of put myself out there to help others with what I had learned,' he says. 'I felt like I wasn't getting much help from anybody.'
As of this spring, Atlanta was the fifth most active city in the world on Twitter, according to the Atlanta Journal-Constitution. Only London, Los Angeles, Chicago and New York had more active Twitterers.
'Eight years ago, when I moved here, (the technology scene) was pretty non-existent,' says Cummings, of Pardot. 'It's amazing how the advent of social media has enabled a lot of people who didn't connect before to connect in a more passive way. Those passive connections turned into more active connections with meetups and other things.'
Groups such as StartupLounge, Startup Riot, Youth Entrepreneurs of Atlanta and StartupChicks connect like-minded people and share ideas. Meetup.com groups have evolved from broad categories to specific business topics over the past five years, said Foster, the venture capitalist.
'If you're a start-up, you really want to get invited to that, get in the door,' he says. 'It kind of fosters that ever more with the lack of urban normal density. It's the equivalent of kind of bumping into someone, which might happen in New York, but wouldn't happen here. '
Dig Deeper: Going Beyond Facebook, YouTube, and Twitter
Starting a Business in Atlanta: Lack of Venture Capital
Jeff Haynie was a rising superstar in the Atlanta startup scene, having co-founded or worked on several successful ventures over the years including Vocalocity, a voice-data communications firm, and Appcelerator, his current mobile-application development platform.
His decision two years ago to pick up his family and company to move to Silicone Valley created a huge stir — some called him traitorous for leaving his hometown; some were jealous. His main criticisms were the lack of local venture capital funding in Atlanta, and the absence of reinvestment in the community from companies who've had breakout success.
'After living through the previous kind of crazy trend and sort of the bust after that, and trying to run a company so far away from where the action is, I should've moved earlier,' he says.
Haynie assumed he'd move to the Bay Area to get his business going and eventually return to Atlanta. Now, even though he lives in a smaller house and faces a cost of living that is between 10 and 15 percent higher than Atlanta, he can't ever picture leaving the collaborative atmosphere of California.
'If you want to be an actor, you go to Hollywood. If you want to be a technologist and change the world, you go to the valley,' he says. 'A lot of people say Atlanta is a two-Cadillacs-and-boat kind of town. When you get money, you can live comfortably. There's not this insatiable desire to keep creating and contributing to the community.'
Even those sticking it out in Atlanta share Haynie's concerns. The city is lacking in success stories, according to Foster, who adds that the total investment dollars-per-capita in Atlanta is far lower than that of Boston, Washington, D.C., or Dallas.
'The problem is that once a business gets to that point where there is a need for instant capital, there are just not enough firms that have enough money under management to do enough deals,' he says. 'We get a ton of outside investors. That is never going to solve that fundamental resource problem We need more venture capital guys in the city.'
But things could be changing for the better. A state law passed in June gives a tax credit up to $50,000 for angel investors who give money to small startup companies. Georgia's agrarian history made it a very land-based economy, says Blake of StartupLounge. Real estate crowded out potential venture capital dollars. But since the real estate market crashed, people are looking for alternative investments.
Just in the past six months, Blake has seen more investment deals than in the past three years combined.
Dig Deeper: An Insider's Guide to Venture Capital Financing
Starting a Business in Atlanta: Resources and Staffing
Atlanta benefits most from being an urban magnet that draws young professionals and students who don't want to leave the Southeast. 'They literally just moves to Atlanta because that's the hub or that's where their friend lives and then look for a job,' says Pardot's Cummings.
Atlanta is home to Emory University, Spellman College, Georgia State University and other schools. But it's also the home of the Georgia Institute of Technology and that school's Advanced Technology Development Center, a start-up accelerator and business incubator that Atlantans treat like a business oracle. The city is home to a handful of small business development centers based out of schools and the local government. The site Atlanta Startup Entrepreneurs provides links to info about startups, investment funds, mentoring programs and other resources. The Atlanta Entrepreneurs' Organization is one of the largest in the world.
The city's evolution has spurred a music culture, a growing restaurant and bar scene and the conversion of old industrial spaces into loft apartments.
But sometimes success boils down to picking the right area and rolling the dice. Rathbun opened his first restaurant in 2004, not sure whether customers would join him. Within six months, he had purchased another location nearby to create Krog Bar, a Spanish tapas and wine bar. By 2007, he had opened another restaurant, Kevin Rathbun Steak, just a block and a half away. He expected to pay off his investors in four years; he did it instead in seven months.
The success came from networking with people around town and having a product that overcame the physical challenges of Atlanta.
"All the marketing in the world gets you there, but it's nice that you know some people and you have a core base," he says. "Be true to your area and the area will be true to you."
Dig Deeper: The Idea Factories