Atlanta, startups, Technology

Atlanta: The Unsurprising Home of the $200 Million Series A

The big news over the weekend was Atlanta’s own Mobile Device Management startup, Airwatch, raising $200 million in its’ first institutional round of funding. That’s an eye-popping Series A round in any market, and no fluke from a founding team that built Manhattan Associates into a public company. Atlanta has enough of the right ingredients for startup success that our near absence of institutional investors spawns startups with the survivability of cockroaches, undaunted by the nuclear apocalypse of the “Series A Crunch”, fed by a steady diet of customer revenue. Georgia’s the regional, national, and international headquarters of many a company, and the crumbs in their budget are meaningful meals for growing, scrappy startups in businesses that many would ignore as “unsexy”.

It’s been pointed out that Atlanta isn’t one of the top ten startup markets, but this is a flaw of measuring only the measurable. When you measure with investment dollars in funding rounds, you don’t count companies like Pardot, that sell for $100 million with NO outside funding. When you only count exits, you miss companies like MailChimp, fully bootstrapped and potentially worth over $1 billion. How do you financially measure a MailChimp?

We have three email marketing startups (possibly four) that send over 3 billion emails per month each. Only ONE of them (Silverpop) has taken measurable outside funding.

Spanx is private with no outside funding, probably worth > $1 billion. InComm has massive market share in the HUGE market of physical and digital gift cards – private with no investors and immensely valuable. I can’t find definitive details, but it certainly appears that Radiant Systems built their business with no reported investments, possibly some strategic investors. Cloud Sherpas leapt to an impressive $40 million Series B after 2 prior rounds that would qualify only as “seed rounds” elsewhere.

This pattern is both nature and nurture. With limited seed capital and even more limited venture capital, many viable Atlanta startups reach sustainability before they ever encounter an interested, appropriate investor. A $200 million Series A isn’t shocking, because it’s been preceded by 8-figure Series A & B rounds, 9-figure acquisitions of bootstrapped startups, and $1 billion+ companies build without outside funding.

And there are fresh, silent, killer startups rising through the ranks in Atlanta. Some have funding, some don’t, few have the sizzle and press of their peers in the top 2 markets. If you’re one of these startups, make some noise along the way – some of our low profile happens because we just don’t seem to know how to highlight our wins along the way. If you’re on the sidelines admiring startups from the “safety” of a corporate job, make the sacrifices to get in the game – big things are happening. If you’re an out of town investor, make like 500 Startups’ Paul Singh and find the hidden gems of Atlanta companies that you can move the needle on. They’re here.

And don’t be surprised when the next few 8 or 9 figure Series A rounds drop in Atlanta. Those companies are here and growing like southern Kudzu, taking over, whether or not you help them.

Atlanta, Badgy, startups, Technology

Proof of Atlanta’s Marketing Tech Startup Hub – 1/2 a Billion Dollars – Pardot, Vitrue, BLiNQ

It’s often said that “good things come in threes”, and today’s announcement that Exact Target is acquiring Pardot for $100 million completes just such a trifecta. The deal caps a theme started by Oracle’s acquisition of Vitrue for $300+ million and Gannett buying BLiNQ Media for up to $92 million. That’s nearly a half billion dollars in Atlanta exits from marketing technology companies in less than 6 months. MailChimp is here, thriving, and possibly worth more than all of them combined. That’s not an accident.

Pardot CEO David Cummings noted this trend 2 years ago, and Half Off Depot COO Lance Weatherby delved into some of the fundamental reasons later that year. We are in an era where the Chief Marketing Officer of major companies can buy technology products and services without the approval or even recommendation of their CTO or CIO. Atlanta is flush with large, consumer-facing companies – they haven’t always been strong customers or acquirers of startups, but their very presence shapes the character and mindset of the town and its’ entrepreneurs.

Atlanta thinks about problems that large, growing, and huge companies have – information security is one class of problem Atlanta rose to solve quite well. Now it is marketing technology’s turn to join the conversation. We have fresh generations of founders and companies focused on these problems. We have the talent to start these companies and the talent to grow them – as these companies grow, they pluck some of the best talent from Atlanta’s thriving marketing agencies and consumer brands, and form the foundation for the following generation of founders.

I first started working on Badgy around the time Lance and David started having this conversation. Feedback from many mentors, investors, and others was that marketing wasn’t an area for technology startups, and that I should focus on “something Atlanta is good at, like Health Care IT or Information Security”, both of which I find about as appealing as pink slime, with all respect to the founders who love such things (slime, health care, or security). Starting a company requires a balance of taking advice and completely ignoring it. I’m glad some of us ignored such advice.

We’re just getting started on this. This is the moment where people stop just thinking that Vitrue was a fluke or that BLiNQ was a coincident echo. Marketing Tech is real in Atlanta. We have exited founders and early employees equipped to invest in and start new companies. This is the time for Georgia’s advocacy groups to begin drawing up the maps of companies in Atlanta’s marketing technology cluster. This is the time for our local, large public and private companies to get serious about tapping into the local technology that can help their business and spur innovation, and it’s also the time for them to dive into the ecosystem and buy some companies where it makes sense.

Kudos to David Cummings, Reggie Bradford, Dave Williams, and their teams on building outstanding companies and outcomes. Let’s do a great job telling these stories and building a narrative going forward. This very week, someone from a local marketing agency said to me, “it’s a shame there’s not much going on with startups in Atlanta.” Nothing could be more false, but it is the perception because we can be pretty terrible about building these narratives. Great things are happening, Let’s keep talking about it.

Atlanta, Badgy, FlashpointGT, startups, Technology

Comparing Accelerator Classes, and the Evolution of Flashpoint

It’s inevitable that successive classes of startup accelerators will be compared, and so, with this week’s demo day for the second class of Flashpoint, Georgia Tech’s startup accelerator, I’ve heard countless comparisons to the first class, which I was a part of. So how do you compare different classes from a startup accelerator?

Comparing startup accelerator classes can be as misleading as comparing children. Comparing a class of 9 month old startups to a class of 3 month old startups is as absurd as comparing 9 month old and 3 month old babies. You may think you remember what those 9 month olds were like, but without photos, video, and careful note taking, the comparisons are likely to be wrong. Further, Survivorship Bias means we’re likely to recall the successful survivors of each accelerator class while forgetting the failures.

So what empirical criteria exist to evaluate startup accelerator classes? I would suggest that initial quality of companies entering a class, viability of graduating companies after 6-12 months, and funding outcomes are all plausible metrics for evaluating startup accelerator classes.

Incoming Company Reputation – How hot are the companies even before they start the accelerator? This can be an indicator of the reputation of the accelerator. Any new accelerator will do well to cherry-pick a bit on their first class and pick some known commodities. Success takes time. Picking companies closer to success helps the early reputation of the accelerator. Our first class had local brand-names in Pindrop Security, CodeGuard, RideCell, and SportsCrunch, who had all raised real-deal rounds. The new class’ only known company was We & Co, with some funding in the bank, and a west coast swagger that confused some locals.

Founder Pedigree – I’ll naively examine this from a perspective of previous startup exits. The first Flashpoint class had Pindrop’s Paul Judge as Chairman and a couple of founders with 8-figure exits in their past. This second class has been impressive. 3 companies have founders who have built $100M+ companies, and at least one other company has founders with an 8-figure exit. Flashpoint attracted more proven founders in its’ 2nd class, which is a good thing for everyone involved. Flashpoint attracted more proven founders in its’ 2nd class, which is a good thing for everyone involved.

Survival – Long term viability is not comparable for a newly graduated accelerator class. Few will mention it, but 3 companies from Flashpoint’s 1st class have effectively folded (moving on from an unviable business is a good thing).

Fundability & Exits – 7 companies from the 1st class have more funding behind them (), and 6 more companies are still active without new funding. 6 months from now, we’ll see how this fresh class has done, even though the thriving survivors from the first class will be even more advanced by then, and presumably some of the new grads will have moved on.

Atlanta can be a tough town for young startups. Few graduates from either Flashpoint class have their entire business sorted out. If they did, few of them would be asking for investor money. If you compare 6 month graduates to fresh graduates, the older class looks better. Comparing incoming momentum, my Flashpoint class had a certain shimmer, but the fresh crop has a nice track record. Over the long term, we’ll all help each other succeed.

Some people were harsh on the new graduates. The hard truth for Atlanta critics is that people who have seen Flashpoint demo days AND demo days of other cities have said that our startups are much BETTER both in pitch and in company quality than other demo days (with the notable possible exceptions of TechStars, 500 Startups, and YCombinator). I’m encouraged by the current Flashpoint class teams that are carving out their funding rounds with messages refined in the fire of Flashpoint. I’m discouraged by teams that aren’t seeing as much traction. Most of these teams are chasing big markets with plausible plans hatched from real conversations with real customers, and the willingness to admit when their assumptions are wrong and adjust course. They’re good startups working hard to become good companies. It may take more cycles of creating companies, selling, and reinvesting, but Atlanta should be finding ways for these companies to thrive.

Atlanta, Badgy, FlashpointGT, startups, Technology

Pivoting without Passion

For web startups, the “pivot” has become a nearly universally applauded badge of honor. There is much to be said for having the boldness to admit you’re wrong about some aspects of your startup and adjust course. Far too many startups have failed by following the same failing strategy into the ground. I’ll use the term “pivot” loosely, even allowing for a change in vision, but a pivot into an area where a team has no vision is a recipe for failure.

The pivot-madness has grown so strong that the pivot-backlash has begun. The Harvard Business Review slams a YCombinator founder for “Too Many Pivots, Too Little Passion“, but they’ve read the situation exactly wrong. They present the story of Brandon Ballinger, who vacillated between 5 different ideas before settling in on one for YCombinator’s demo day. Startup founders ought to be people of passion – perhaps even people of many diverse passions. If a YCombinator founder explores several markets they’re interested in before identifying one that shows some traction, that’s not a bad thing. In fact, it’s far BETTER than picking one of their passions, chasing it for 12 weeks, and hoping for the best. Having multiple passions doesn’t indicate a lack of passion.

In my time at Georgia Tech’s Flashpoint Startup Accelerator, we saw a number of pivots in our class. We had a company pivot from helping people buy cars to resolving family conflicts, from digital publishing to corporate newsletters, from deals for nerds to deals for churches, and many more. All pivots were rooted in Customer Development, and showed some degree of market traction. In the long run, the success of these teams seems to have been more rooted in passionate the team was about their validated business than about the degree of traction.

My company, Badgy, was pressured heavily and repeatedly to pivot. My passion for Badgy comes from previous work in social networks and social games. While many mentors assumed my strongest passion was for social apps, I knew when they pressured me toward building social analytics or social conversation management solutions, that just wasn’t my passion. My passion is ultimately in a fascination with human behavior and motivation, with finding ways for people to find unexpected joy in activities they haven’t seen or done before. We pivoted to broaden our channels. We pivoted our value proposition from “engagement” to increasing distribution of social content, and eventually to driving sales – all of this still perfectly aligned with my passion around human behavior.

Much ado has been made of YCombinator’s invitation to accept companies with no idea. While this may seem insane at first, and it has been defended as a bet on the team, I believe it’s deeper than that. I believe they are looking for talented teams with things they are passionate about. Vision comes from passion, and I believe that every talented team with things they are passionate about can find a way to build those passions into a high growth startup if they are willing to throw away their assumptions and find the path to connect that passion to a market.

A current Flashpoint company I know, We&Co, is passionate about the service industry, restaurant servers, bartenders, retail workers, etc, and they’ve masterfully experimented in that space to find a growth market. Another killer Atlanta startup, Mowgli Games, is passionate about democratizing the creation of creative content. Although this started as a social game to create music that would monetize their users, they’ve moved beyond initial assumptions and have transcended the mundane label of “social game”.

So if you’re thinking about a “pivot”, take a step back. Figure out what pieces of your startup you are passionate about. “The whole thing” is not an option. “I’m passionate about doing a startup” is the worst option – startup-fever is not a passion, it’s just going along with the crowd. In basketball, once you stop dribbling, you have to keep one foot planted and you can move the other foot around to find an angle at a shot or a pass. If you don’t have any feet planted, you’re just spinning in a circle and looking silly. That’s what pivoting without passion looks like. It looks pointless, and it looks ineffective, because it is. First, figure out what you’re passionate about, then iterate around that passion to discover a business.

Atlanta, Badgy, startups, Technology

Why Midtown must be the center of Atlanta’s Startup Community

I recently discussed how Startup Communities are Neighborhoods, Not Cities, building on Brad Feld’s thoughts on the role of “Entrepreneurial Population Density” in accelerating startup activity and success. The SalesLoft team, fresh back from TechStars and Boulder’s vibrant startup community, have been riffing on these topics as well.

The clear truth is that cities with the most effective startup communities are build around physical hubs. Atlanta, consistent with its’ urban sprawl, has attempted to scattershot its startups across the city and drive around and hit meetups to build community, but three potential startup cores have been identified – Buckhead, Westside, and Midtown. I’ve done startups in all three areas, so I can speak with some knowledge on all 3.

Let’s first take a look at criteria that can make a great startup community:

  • Density – Feld suggests that the “total number of entrepreneurs and employees of entrepreneurial companies divided by the total number of all employees in a region” divided by the size of the region. More entrepreneurs surrounded by fewer non-entrepreneurs in a small area gives much more opportunity for intentional and serendipitous events that help startups. Related but separate is:
  • Walkability (within the community) – being close together is more effective if there are reasons and room for people to walk around and meet people beyond just people they have specifically scheduled time with. People often walk to:
  • Meeting Spaces – formal and informal. Free or cheap spaces for small meetings and preferably for larger meetups make it easy to gather people who are just a walk away. Coffee shops, preferably good ones, and affordable, decent restaurants are good for meetings and helpful in recruiting. Some of the people you want to recruit are:
  • College Students – Proximity to young talent can help startups staff up, but proximity to startups can also help students get excited about awesome career options besides larger corporate jobs. Colleges are a home of future founders. Some college kids have cars, some don’t. Either way,
  • Transit and Transportation – are important. Students and many younger potential startup workers prefer to walk, bike or take transit (preferably trains rather than buses). In a city where some people choose to live 45+ minutes from most startup jobs, you can’t please everyone who drives their commute, but the more people who can do a <30 minute commute, the better. Some work can be remote, but before product-market fit, it helps to have good:
  • Work Spaces – Companies need room to start, and room to grow. A variety of office space, preferably creative space, older buildings, higher ceilings is nice. Flexible lease terms are nice, but challenging in a town where few commercial real estate agents understand startups and insist on a 2 year minimum lease. Free space is nice, but startups who will choose free workspace outside of a community rather than paying a few bucks a month for space within a community just don’t understand the value of community. Free and cheap space within a community is best, but in Atlanta, most of our rents are cheap compared to other startup hubs.

So where does this leave Atlanta? Some thoughts based on my experience:

Buckhead is a finance and real estate neighborhood that tolerates startups. The best office space is designed for high-end law firms. Lesser office space is designed for lesser law firms, and still feels oppressive for startups. There are some great companies, solid transit access for intowners and college kids, but a crummy commute for most drivers. Meetings spaces are corporate and overpriced, and ultimately, any startup density is overpowered by those seeking to set up shop in Atlanta’s most prestigious business district. In my 2 years working in Buckhead, even walking to meetings and lunch, I don’t think I ever encountered someone from the startup ecosystem unless I planned it.

Westside oozes cool. I wish I could crown West Midtown as Atlanta’s startup epicenter. I’d save 2 hours a week on my commute, have awesome office space, and enjoy some of Atlanta’s best food at my lunch meetings. This neighborhood is NOT walkable. Not without a concealed carry permit. Apart form being sketchier, there are geographic factors that make density VERY difficult in this area. You could pack most of the office space over here into a single office building in midtown or Buckhead. Octane Coffee might be THE best serendipitously cool meeting spot in town, with great coffee. Transit access is awful. Meeting space for larger meetings is hard to come by without ponying up.

Midtown is anchored by Georgia Tech and ATDC. Some people wish that we could escape from the state-sponsored influences, and while ATDC’s office space is suffocating and sterile, it also concentrates some of the best startup talent in Atlanta, including tentatively acquired BLiNQ Media and $3.75 million funded consumer health care revolutionaries PatientCo, as well as so many other companies I expect, GREAT meetups, and excellent mentors and advisors. Atlanta’s marquis startup accelerator, Flashpoint, is down here. I’ve chosen to run Badgy out of Hypepotamus, one of THE best free working spaces and meetups spots I’ve seen. Georgia Tech students can walk to this area. Whenever I walk to a meeting in this area, I see people, especially at the Tech Square Starbucks. I wish we had better coffee shops with better coffee and without long lines of students, but I truly believe that this would be the best spot in Atlanta for an unfunded, hungry entrepreneur to spend a week working and meeting people. The casual relationships built in this neighborhood, over time, are undeniable.

Thoughts on other areas:

Decatur – driving to Decatur from anywhere else in town is a horrible experience. Game over.

Dunwoody – lots of other businesses, unwalkable, limited student access, and horrible commutes for many

Galleria / Vinings – NO transit, not walkable, very corporate, no students. (I worked here too, LOVED the commute, but it’s not a startup area)

Technology” Park – Undrivable, unwalkable, no students, no meetings, no density. I don’t understand.

Alpharetta – 30-60 minutes from everywhere else in town. Could become a secondary startup core, but we need a first core first.

Old Fourth Ward – MAYBE in 10 years, if Atlanta has the courage to build comprehensive rail around the Beltline

This analysis is ALL about finding the best advantage for young startups that need every advantage they can find. Proximity to knowledge, resources, and people is a MASSIVE advantage. Startups that have found product-market fit often relocate outside of the core startup neighborhoods, and that’s fine and expected.

So what do you think is the best neighborhood for Atlanta startups to rally in and thrive? Why? What criteria did I miss?

Atlanta, Badgy, FlashpointGT, startups, Technology

Insider Thoughts on Flashpoint – Georgia Tech’s Startup Accelerator

My startup, Badgy, just finished as part of the first class of Georgia Tech’s startup accelerator. Flashpoint is taking applications for its summer class, and since plenty of people have asked for thoughts and advice, I thought I’d share them in a more public format. Apply by March 18th.

First, Flashpoint is the best thing going in the early-stage Atlanta Startup Community. Many programs exist and continue to emerge. Flashpoint provided the best workspace, mentors, guest speakers, peer group, and curriculum of ANYTHING I have seen in Atlanta. If I were starting a new tech startup in Atlanta today, I would apply to Flashpoint tomorrow. I think they will do a better job this class setting expectations that teams should work in the Flashpoint space, because teams can learn a lot from each other.

Second, companies should know what it is that the LOVE about their startup. Flashpoint will push and prod at every assumption you have about your startup, what it does, how it should work, distribution, you name it. Many of the passions for your startup will form the core of what you are, and Flashpoint will help you tweak every non-essential part of it on the path to finding product-market fit. I think that some of the teams with weaker convictions were somewhat set adrift by this pressure-cooker process. If you just want to start a startup and don’t know why, this may not be the place for you. I do think that some of the feedback can be a bit harsh, and could have been more constructive and rooted in industry knowledge. But bring a thick skin and you’ll be okay – we were getting hammered to pivot until a month before demo day.

Next, Flashpoint is not going to get you “funded”. Yes, the Flashpoint investment fund will probably offer you some cash (up to $25k) to fund some of what you need to do. Yes, we went to awesome demo days at Union Square Ventures in New York and Andreessen Horowitz in Silicon Valley, but the companies with the best funding results so far were the companies that already had the best funding prospects heading into the program. The first classes of any accelerator are an unknown commodity, and will be treated as such. The funding rate of our class will be lower that TechStars/YC, and will probable be lower than future classes of FlashPoint. I think the next class of Flashpoint will see more VC firms send partners instead of associates to FP demo days. I think there will be many success stories from Flashpoint Fall 2011. Flashpoint will make you more fundable, and I credit it for preparing me better for investor conversations that have started even after and outside of demo days.

Also, Flashpoint is not a part-time job. Teams that were distracted by day-jobs and college responsibilities seemed to make less progress than companies that were “all-in”. This is a function of both attention and urgency. I’m skeptical of the idea of bringing corporate teams into the Spring 2012 class, but it’s an experiment and I’m sure Flashpoint will measure it by its outcome.

Lastly, understand that Flashpoint is itself a startup. Flashpoint is following the customer discovery and lean startup principles it puts its own companies through. That means that not everything will be planned, and that things will change in unexpected ways, just like you would expect in your own startup. Just like your own startup becomes better organized, planned, and successful as you iterate, Flashpoint is learning how to succeed in Atlanta, with out community and surrounding resources. The Flashpoint team cares tremendously about their companies’ success, because that’s ultimately how their success will be measured.

Comment with other questions. What do you want to know?

Atlanta, Badgy, startups, Technology

Full-time startup: Badgy

Today is my first day working full-time on my startup, Badgy, and I’m excited to fully apply the lessons learned from building social games to the digital marketing world.

Badgy started about a year ago when I tried a simple experiment – I gave digital badges on Twitter to 100 people who mentioned the word “Badge”, and asked them to retweet me for another badge. I ran this experiment many times over a weekend, and when 20-25% of people did retweet me each time, I knew I had something, but I didn’t know what it was yet. In more recent months, as Badgy’s market became more clear, a few really talented Atlanta entrepreneurs joined the Badgy team to help build and sell our products.

We’ve discovered that Badgy is tremendously effective at helping consumer brands and the marketing agencies that often manage their social presence grow their audience of engaged users. We worked with a major toilet paper brand and boosted their Twitter followers by 700% over 10 weeks, while also improving the quality of interaction from their fans. More recently, we’ve added features that bring similar power to Facebook using the most effective tools popularized by social games like Zynga’s Farmville and Cityville, and are signing on 2 more customers. If you’re serious about building up the digital marketing program of a product people love, drop me an email at rob at bad dot gy and we’ll put together a plan for how Badgy can amplify your digital marketing efforts.

For me and a several other sharp people, our time making social games at Menue Americas wrapped up a bit sooner than expected. If you need an excellent creative director or 2D artists, let me know and I’ll get you connected. Some very good developers are now available. They’re taking their time finding their next great career move, but if you have some project work that needs to get done properly, especially Facebook development, PHP, Java, or Ruby on Rails web apps, drop me an email and I’ll pass it along if it’s a fit.

Does this mean I’m not going to “Join a Startup“? I’ve done that several times before, and will almost certainly do so again when a good opportunity arrives and makes sense, but that’s not something to rush into. Right now, I’ve got a great startup that has shipped product, shown traction, and generated revenue. That’s 3 steps further than many companies ever get. We’re in a great market – digital marketing has room to grow at least another $50 billion per year in spending. Here’s to the ride.