As one of the founders of Atlanta-based chain Tin Lizzy’s Cantina, Andy McKoski knows the challenges of getting a professional at a moment’s notice to fix broken equipment in a restaurant.
He even started a brick-and-mortar repair business to serve the restaurant industry.
But McKoski said he quickly discovered there were more nuances to repair than he knew as a restaurant owner. His search for a better way led him into Atlanta’s technology startup world and on to create Humrun, a mobile app to help restaurants streamline maintenance communications.
With that, McKoski joined the legion of tech startups burnishing the metro area’s growing image as a startup hub. But the area is still far from being the next Silicon Valley.
According to the National Venture Capital Association, there were 33 deals done for a little more than $204 million in the second quarter of this year in the Atlanta area—putting the region No. 13 on a list of metro areas. In the same period, the San Francisco and Silicon Valley area saw a total of $9.4 billion across 438 deals.
Though there may not be a wealth of local venture capital, a lot of startup funding in the area has come from Silicon Valley.
San Mateo, Calif.-based Emergence Capital Partners led a Series A round of funding for SalesLoft, a sales engagement software startup that grew out of Tech Village. Crunchbase shows SalesLoft has pulled in nearly $26 million, including $14.2 million in Series B funding in January of this year.
Bitpay, another Tech Village alum, has raised more than $30 million, according to Crunchbase, with Hollywood actor Ashton Kutcher among the seed funders for the Bitcoin payment processor. San Francisco-based Founders Fund, which counts billionaire Peter Thiel among its founders, led the seed funding.
Mark Hubbard, CEO of Marietta startup incubator IgniteHQ and others, said that one of the challenges Atlanta has had is the lack of institutional venture capital for technology investment. Historically, Atlanta has been a real estate entrepreneurs town.
“The serious money is in real estate,” Hubbard said. “That had ramifications on the ecosystems. (But) that’s been changing for the past few years.”
David Lightburn, co-founder of Tech Village, said fundraising for Series A and beyond comes mostly from outside Atlanta. But he noted that as founders get bigger exits there’s a growing progression of capital available to reinvest into fueling more startups in Atlanta.
Lightburn cited David Cummings, who founded Tech Village, as an example. Cummings founded the marketing automation company Pardot in 2007 and sold it in 2012 to ExactTarget for $85.5 million in cash and $10 million ExactTarget stock. SalesForce acquired ExactTarget the next year for $2.5 billion.
Cummings bootstrapped Pardot, and Lightburn describes it as one of the largest such exits for a company built with no outside funding.
In addition to opening Tech Village four years ago, Cummings also started Atlanta Ventures, which invests in tech startups.
“He believes in giving back into the ecosystem of Atlanta’s tech community,” Lightburn said.
Last month, real estate firm Cushman & Wakefield ranked Atlanta No. 17 among the top 25 tech-centric cities in the country, based on a combination of factors include higher education, tech workers, venture capital and startup growth.
In a certain respect, Atlanta already is a tech Mecca—but not necessarily the kind where every company has ping pong tables, lounges with beanbag chairs and beer on tap 24 hours.
First Data, NCR, Equifax, WorldPay and others have quietly established the metro area as a financial tech hub. The first internet bank, NetBank, started in Alpharetta during the first internet boom in the late 1990s, for example.
The Atlanta area has become known as “Transaction Alley” because there are so many payment processing companies in the region. They are in some way involved with 70 percent of the payment card transactions in the U.S., according to a Technology Association of Georgia report on the financial technology sector.
Atlanta's startup ecosystem spans from the city to the suburbs. Among the most well known areas in the city is the Atlanta Tech Village, which bills itself as the fourth largest tech entrepreneurial hub in the U.S., counting about 300 startup companies.
Many of the startups at Tech Village and Tech Square focus on business-to-business products. The Switchyards focuses on business-to-consumer.
Tech Village's Lightburn said these startups want the infrastructure, the community and the visibility to capital that comes with the concentration of companies.
“We’re just trying to dump gasoline on it,” Lightburn said of the Village’s role in helping accelerate the startups.
The concentration of companies, whether in Buckhead, Midtown or Downtown, helps with attracting investors, Lightburn said, making it easier for prospective investors to look at companies and decide.
The “northern arc” stretches from Gwinnett County to Marietta and Kennesaw in Cobb County. It tends to foster a different type of tech startup than the areas inside the Perimeter.
Hubbard said the startups tend to be entrepreneurs who worked for a company for a while or owned a non-tech business, saw an opportunity, left and launched a tech business.
There is also the serial entrepreneur who moved from Buckhead or Midtown to the suburbs after selling a company. They marry, have children, want a little more space and move to the suburbs.
“Some of them may be on their third or fourth company,” Hubbard said.
Rather than start up another company inside the Perimeter, they stay close to home. Hubbard believes those startups don’t need the same type of support structure they needed with their first company.
“When you get good street cred, capital comes to you,” said Juan Eduardo Tavares, co-founder and chief strategy office of three-year old fintech startup LendingPoint, based in Kennesaw.
When they launched LendingPoint, going into Buckhead or Midtown wasn’t a consideration, Tavares said.
He noted that they are confident they can draw the talent to the company despite the suburban location.
“It’s worked out well for us,” he said.