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
