Over the past five years, the Southeastern region, led by Atlanta, has gone from being “one of the best kept secrets” in tech, to a vibrant ecosystem teeming with a herd of the billion dollar tech businesses that are referred to in the investment world as “unicorns” (thanks to their supposed rarity). Read the article about look atlanta techshiebertechcrunch.
In those five years venture capital investments surged to $2.1 billion in the region, with $1 billion invested in the last year alone, according to Lisa Calhoun, a partner with the Atlanta based investment firm, Valor Ventures.
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It’s indicative of the entrepreneurial talent coming from the network of private and public schools across the region like Georgia Tech, the University of Alabama, Auburn, the University of Georgia, Vanderbilt, Emory, and the historically black colleges and universities like Morehouse, Spelman, and Xavier. And it’s also a sign of a reinvestment in local entrepreneurship — a decades-long campaign to turn Atlanta into the center of a hub-and-spoke network of startup cities that spans Miami to Atlanta, with stops in Birmingham, Nashville, New Orleans,
“Atlanta is what a next generation, global, post-Silicon Valley tech hub looks like. Our demographics are ten years ahead of the U.S.’s transformation into a majority minority society,” wrote Calhoun in an email. “With over 40% of the U.S. population in the Southeast, the greatest density of founders and executives of color, rafts of tech companies like AirBnB locating here, and our own legacy of top tech and talent, Atlanta sets the tone for what’s next. We have the growing, diverse population base all strong founders need to scale.”
There’s still a lot of work to be done for the region to establish itself as one of the next engines of economic return for the venture capital and investment business, though.
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“The Southeast is 24% of the US GDP, but only accounts for 7% of the venture investment,” noted Blake Patton, the founder and general partner of the Atlanta-based investment firm, Tech Square Ventures. “With the recent momentum in the region, that is changing and investors are taking notice and backing local managers who in turn are investing the region’s best and brightest entrepreneurs.”
The Internet boom and bust in Atlanta
In the years after the 1996 Olympics, Atlanta was a high-flying contender for the title of one of the next big startup hubs in the United States.
The Olympics had put the city on the world’s stage, and seeing the wave of activity, excitement, and investment that came with the advent of internet companies like Virginia’s America Online, Atlanta’s city council and mayor were making a push for the city to become a telecom and startup hub in the early days of the first Internet boom.
“Something happened in the mid-90s driven by the Olympics where Atlanta hit the map worldwide. It wasn’t just that we were a supply and logistics hub. In the late 90s as the dot-com boom really evolved, things happened underground that aren’t as transparent as they should be. Atlanta Gas Light had the largest dark fiber ring in the country surrounding Atlanta. That was built solely with the Olympics in mind. We had Georgia Tech working on the next generation of aerospace, and they added computer engineering,” said Christy Brown, the founder of the Atlanta based non-profit Launchpad2X and a serial entrepreneur and executive with deep ties to the Atlanta ecosystem.
Atlanta also had its fair share of early successes — high flying telecom and networking companies that were critical to the evolution of the first dot com era whose later years were either mired in scandal or who were acquired by much larger entities. These are companies like MCI Worldcom and Airtouch Cellular, which was gobbled up by Cingular Wireless and would eventually become part of a restructured AT&T.
“There were all kinds of tech things happening in the city. A lot of these founders were getting venture on paper which evolved into the dot-bomb,” said Brown. “All of this was happening mid to late nineties, when the dot-bomb happened there was a lot of failure in the Atlanta area.”
The implosion of early internet companies that came with the bursting of the dot-com bubble in 2000 reverberated through Atlanta’s tech ecosystem, erasing the early gains that companies made and setting the stage for a decade-long period of reconstruction punctuated by a few successes from holdouts that managed to make their way through the wreckage.
Through the lean years
One of those companies was MailChimp. Launched in 2001, in the early aftermath of the bursting of the tech bubble, the privately held email marketing startup was one of a number of projects at Ben Chestnut’s and Dan Kurzius’ web development firm.
The two men met at Cox Interactive Media to work on an early MP3 product. When that fizzled both men eventually lost their jobs and went into business together. They built MailChimp off of revenue, bootstrapping the business without venture capital in a model that many other tech founders in the area would seek to replicate.
A few years later, in 2003, another entrepreneur named John Marshall began installing internet hotspots at hospitality businesses, eventually expanding his Wandering WiFi service to include monitoring and managing other kinds of network infrastructure. This foray into startup land would eventually create another big Atlanta tech exit in AirWatch.
For the first six years MailChimp remained a side hustle, a product that the two co-founders continued to work on, but didn’t devote themselves to full time. It wasn’t until 2007, when the service hit 10,000 users, that the company became the full-time job for both founders.
Their once-scrappy startup turned them into billionaires. A 2018 Forbes profile put the company’s valuation at $4.2 billion on roughly $600 million in revenue.
If there was a starting gun for the Atlanta tech renaissance, it might be 2006, a few years before the global financial crisis and a time when the broader tech industry was finding itself a less financially precarious prospect for investors. Internet Security Systems, an Atlanta area dot-com darling that held an initial public offering in the late 90s sold to IBM for $1.3 billion that year.
Tom Noonan and Chris Klaus, the co-founders at Internet Security Systems, had an equally long road. What had started out as a company built when Klaus lived above Noonan’s garage in Atlanta in the mid-90s, morphed into a company pulling in $400 million in annual revenue before its acquisition by IBM.
As capital started flowing into Atlanta and the city regained some of its footing in the tech world, founders who had exited their companies began to reinvest money locally. And the city moved to create more events to foster entrepreneurship. 2006 saw the launch of Venture Atlanta, a conference designed to showcase early talent and startups coming from the region that served as a launchpad for several entrepreneurs that would shape the future of the city’s technology industry.