Consumer Startups Everywhere Else – Why Silicon Valley Whiffed on the Daily Deals Space

I ran into Michael Tavani last week – after co-founding Scoutmob, he is in the process of ramping up Switchyards, an incubator with the express goal of launching design-led consumer startups in Atlanta. This led to a bigger question – how should non NYC/SF startups approach B2C differently?

Atlanta, like most startup hubs outside the Bay Area and New York, has a better hit rate in B2B startups, with only a few B2C successes and some current companies with good upside potential.

Scoutmob is still in process, powering through a pivot from their roots in the Daily Deal space into Ecommerce, focused on sourcing unique local goods through their Shoppe. This is fascinating because they are actually touching on 2 startup categories that have been least centralized. Groupon started in Chicago. Outside of the fashion category, most big deal sites were elsewhere – Living Social (Washington D.C.), Woot! (Dallas), even late-entrant nCrowd (Knoxville). Except for a fashion deal cluster in NYC, eCommerce is even more decentralized. My startup, PerfectPost, often works well for eCommerce companies, and the number of ecommerce startups doing $20 million or even over $100 million in revenue in some suburban warehouse of any major city is just staggering.

Contrast this with the waves of consumer startup that have thrived in the Bay Area and New York. Social networks (Facebook, LinkedIn, Twitter), Mobile apps (Foursquare, WhatsApp, Instagram), and now emerging, Convenience (AirBNB, Uber, SpoonRocket, HomeJoy, Blue Apron). Young startups thrive on early adopters and effective distribution, and when it comes to consumer startups, it’s about meeting a need for an individual, and often, word of mouth.

The Bay Area in particular is flush with intelligent and curious people who feel the need to be “in the know” and innovative. If there is something new, many people will try it. If it doesn’t suck, they’ll probably tell a friend about it as proof they were inquisitive enough to be there first. You can argue about whether that is a real need, but it is effective and it gives young companies the early adoption and feedback they need to become a meaningful company, even if the initial experience isn’t perfect. Social sites grew this way. Mobile apps combined this dynamic with the world’s highest concentration of iPhones to get a head start, before the App Stores were overcrowded.

I would argue that the “Convenience” category of startup is arising from early adopters and technology with constraints unique to their home cities, and consumers with more money than time. When I first heard of Uber, I couldn’t understand the need to have an expensive black car roll me around town. For early adopters in expensive cities, it wasn’t that expensive for people who were looking to not own a car, or who were already highly paid. Their early adoption got Uber through the initial stage and to a scale where prices on normal cars dispatched through UberX are often worth a look for a less-techie Atlantan. But you can’t start a B2C company at scale.

Blue Apron, Plated, and HelloFresh are all high-end food delivery startups, all started in New York. New York is expensive and crowded, and apparently, grocery shopping in New York is an unpleasant experience. Paying $50 for a box holding the ingredients for 2 organic meals for 2 people seems outrageous when I have a family of 5, a car, and a Publix with a huge parking lot every 3 miles. But they can find enough New Yorkers for whom this sounds like a deal that they can reach new scales, offer new products, and probably get to the point where they can make sense in less expensive, organic-focused cities. Blue Apron offers 6 menus each week. A new startup in the space is only going to be able to offer 2 menus, for logistical reasons. In a price-sensitive market that likes to grocery shop, you can’t catch these guys, not head on.

So why did Silicon Valley whiff on the daily deal space? Because it was entirely about price sensitivity and trying new restaurants/stores based on a deal. These deals weren’t initially in apps – they were on web sites with printable coupons or delivered via email and text message. Chattered about on mature social networks. Distribution channels loved by the suburban set, but probably not sophisticated enough for the technorati, and certainly not worth trying some new restaurant without any FourSquare tips or Yelp reviews. In hindsight, missing this space was only a small mistake in view of its’ implosion, but the theme of finding Bay Area blind spots and exploiting them seems right.

Similarly, ecommerce doesn’t really depend on early adopters – not since most people got comfortable with ordering things on the internet. Country Outfitter sells over $100 million per year in cowboy boots, based out of Northwest Arkansas. The distribution approach is commodity stuff that most normal people use – Google Search/SEO, Adwords, Social Media, Email. They built a brand based on the shift of country style into mainstream culture. They ship product, so there’s no “one place” for early adopters. Also the exit multiples are often not as VC friendly.

So I think building a B2C startup based on early adoption of technology and “cool” apps or price insensitivity outside of New York and San Francisco borders on suicide. I think you have 2 choices – contend in a space that is mostly geography agnostic (eCommerce), or come with a strategy where your geography gives you early adopters that give you an unfair advantage over other people. An example of this could be Switchyards hackathon company Vacayway, started by one of our advisors, Lance Weatherby. 7 of the top 10 vacation rental markets are in Florida, our southern neighbor, and traffic in this space is probably driven by word-of-mouth, search (Key West Rentals), and AdWords.

Consumer startups elsewhere need to claim local advantages or play on even playing fields instead of trying to beat the Valley at its’ own game.


What Commercial Real Estate Doesn’t Understand About Startups

Between David Cumming’s post on Costs of an Initial Startup Office, the Atlanta Business Chronicle’s article on Buckhead startup real estate (mysterious contents hidden behind the paywall, [edit] at the time of writing, this article’s mysterious contents were hidden behind a paywall – apparently the best social conversations start 30 days after an article is published), and the swarms of CRE agents wooing startups at Venture Atlanta, it’s clear to me that most commercial real estate professionals in most markets have no clue about the needs of startups.

I’m speaking primarily for startups that haven’t yet raised a sizable Series B round or attained scalable profitability. I know because I’ve been on the executive team of 3 prior startups where I searched for office space, and now weigh these decisions now for Badgy.

Here’s what CRE doesn’t understand:

  • We WILL NOT sign a 2-5 year lease – a funded startup is betting on growth or extinction in a very short time frame. Most startups will vacate their initial office space in the first year, due to either growth or death. In growth, the remaining lease can significantly hurt the company. If you make the founders personally rep the lease, you harm them. If not, it’s your own illusion they’ll pay. 6-12 month leases are best. Month to month with a 60-day kickout provision is better and helps YOU while you wait for that big-ticket 5 YEAR lessee that DOES want to spend $10/sq ft on build out.
  • We don’t need a build-out allowance – Cummings cites $30k built into the lease to cover changing carpet and moving walls. Young startups evaluate space on a “take it or leave it” basis. Either the space is adequate, or it isn’t. Open team environments matter. Spending 3% of a $1 million seed round on office build-out is irresponsible. Maybe you want to force lessees to help you modernize the space. Startups don’t care. Now matters. Pretty doesn’t.
  • Flexibility Matters – longer leases CAN make sense for a startup IF you have a nice portfolio of space in the same building and nearby buildings that they can transfer to WITH NO PENALTY (other than larger square footage) if they need to expand. This flexibility can be an asset for owners AND startups. Fluidity is among the most important considerations for a startup.
  • Fiber connectivity IS important – maybe it blows your mind that a company of 10 people will accept old carpet and imperfect office configuration but won’t sign a lease on an office that tops out with a crummy Comcast DSL connection. Welcome to priorities. Startups don’t live or die by pretty offices. They live or die by delivering releases to customers and getting better leverage on their developers and designers. Bandwidth matters. Pretty glass conference rooms don’t.
  • PARKING – For startups, parking is not an allowable profit center. You have empty space in your building. We want to pay for it. We DON’T want to pay an extra 6% because we live in a car-centric city and our employees need to park cars. If your parking deck is nearly full, by all means, charge for it. If not, chill out and give a startup a break. We’ll ditch your parking and walk a few blocks from a surface lot if it’s REALLY that important to you to charge a premium. We see it as just another part of rent.
  • We’re not amused by your never-ending vacancies – some of our companies may not last a long time, but WE do. We know when we are looking for space for one company, are confronted with a 3 year lease, and our next company looks at the SAME space 3 years later. Nobody has occupied the space in that entire time, and you STILL ask for a 3 year lease. It’s a joke. We’re short term. Make money off of us for shorter seasons while you wait for your perfect tenant. Spaces sitting vacant mean we neither trust nor understand your multi-year leases.
  • We don’t often have ‘Sugar Daddies’ – We have had the privilege of setting up shop at Flashpoint and Hypepotamus. In both cases, we’ve benefitted from the benevolence of others willing to make an investment in building startup communities. Commercial brokers have remarked to me that we needed MORE people like Hypepotamus’ Kevin and Heath to bridge the gap between startups and commercial real estate. Betting on benefactors to reserve large chunks of space over several years for  startups is NOT a scalable or dependable business model.
  • We’re not going to trash the place – Do your homework. By the time a company has raised at least a seed round they’ve been through enough vetting that they’re not about to go and throw a college keg party in the space and destroy it. Examples to the contrary are welcome, but likely infrequent and perhaps even spread across companies of all stages.

Almost every major local conference I go to is blanketed with service providers scouting for clients. Commercial Real Estate agents see startups cashing big investor checks, and see a potential solution to their vacant building problems. Startups can be this solution, but you need to understand that they have different needs. These aren’t law or accounting firms that want to make their office super-plush on a long-term lease. For startups, growth is important, and planning for growth is fundamentally incompatible with the stagnant trajectory many commercial leases take.

If you’re in a major startup market, and you need renters for your vacant office space near the startup cores, there is a VERY real opportunity. Understand the needs of startups, craft your lease terms accordingly, and you will quickly gain a reputation that will fill your buildings with smart, energetic, young companies.


Startup Communities are Neighborhoods, Not Cities

When we talk about thriving startup communities, we often talk about “New York” and “the Bay Area” (or less so, “Silicon Valley” and “San Francisco”, but this is lazy shorthand. We don’t mean the Upper West Side, or the Financial District, or Harlem. We don’t mean Outer Sunset, Oakland, or Sausalito. Thriving startups may exist in any of these areas, just as they may exist in North Dakota, but they are not the hubs of activity.

Brad Feld discusses the significance of this, observing that serendipity in Boston’s startup community happens in Cambridge, not in “Boston”. While other, smaller startups hubs exist, Cambridge, with its proximity to Harvard, MIT, and other successful startups creates a critical mass.

You would think that with the massive financial resources of New York, any location in New York would be good for a startup, yet there is a reason that the pulse of the startup community emanates from the Union Square / Flatiron area. Startups weren’t always prominent in the city of San Francisco – for a long time, the locus of innovation sat many miles south in Silicon Valley. When startups crept up into the city, they didn’t start everywhere – they started in SoMa.

Startups need EVERY advantage they can find. It can be easier to work from home. It can be cheaper to work from some outer suburb. When I started working on Badgy full-time last summer, I began spending some days working for free in a local ad agency’s warehouse space in a sparse industrial neighborhood, and some days working from Tech Square, a midtown Atlanta area right next to Georgia Tech and quite close to ATDC, one of the oldest startup accelerators out there. When we spent 5 months in Georgia Tech’s Flashpoint Accelerator, this happened even faster. I still stop through there regularly – there are TONS of serendipitous opportunities, and it’s a 2 minute walk from our HQ.

The difference was night and day. Working from the agency meant a slightly shorter commute and unbelievable proximity to an awesome korean taco joint, but that was about it. When I worked from Tech Square, people who have changed the trajectory of my company passed through shared offices I worked from. I’d run into these people walking down the street, or set up a future meeting with someone I ran into during another lunch meeting.

In a world where email, mobile phones, and video chat connect people instantly, it’s easy to underestimate the value of physical proximity. Boulder, Colorado has a thriving startup community, driven by startup density. In Atlanta, we would just call Boulder a suburb – it’s as close to downtown Denver as many of Atlanta’s outer suburbs are to downtown. I am certain that if an entrepreneur claimed that putting their office in Denver was just as good as setting up in Boulder, they would be roundly chastised, but in Atlanta, we pretend that all locations are equal, and that spreading startups across our metro area’s 8,000 square miles is competitive with Boulder concentrating its startups into 40 square blocks.

Any startup community that wants to replicate Silicon Valley, New York, Cambridge (Boston), or Boulder cannot ignore these facts. Proximity matters. Not linearly. Exponentially. Imagine that raising your seed round isn’t a matter of getting introductions to people you’ve never met. Imagine it’s having follow-up conversations with people you were first introduced to when you met a friend for lunch, then ran into them half a dozen times as you walked down the street to other meetings, then you talked to them about investing.

It’s easy to look at the Bay Area with its multiple startup communities and believe that your city can accomplish that same thing. In reality, you can get there, but before you can succeed in multiple areas, you have to find a way to succeed in one neighborhood. Series of serendipitous meetings add up to meaningful outcomes. Stubbornly trying to succeed 5 minutes from your house isn’t startup suicide, but your chances of success are remarkably higher in a thriving startup community.

If you’re near a startup hub neighborhood, embrace it. If you’re not in a startup hub, help lead your community by identifying a neighborhood with a chance to become a hub and embrace it. Don’t work from your neighborhood, an irrelevant suburb, or a slightly cheaper vacuum. Your startup needs serendipity – communities accelerate serendipity.


Hopeful For Atlanta, Even After We tspLOST

The partisan pundits will be out in force today, each with their own opinions on the 2:1 defeat of a proposed 1% regional sales tax to support Atlanta transportation.

Conservatives will thump their chest at some supposed rejection of big government.

Progressives will thumb their nose at the backwards suburbs who lack the sophistication to understand the need for strategic regional transit.

I, for one, am hopeful and optimistic that this sound rejection will lead to better policy and projects. The entire T-SPLOST process was established by the Georgia legislature. They chopped the state into 12 regions, each of which had the option to pass a 1% sales tax to fund transportation initiatives. The first evidence that this process is more about pork and cost-shifting is that EVERY SINGLE REGION in Georgia asked their citizens to pass this tax. It’s easy to understand how Atlanta has critical transportation needs. It’s less clear how EVERY other region in Georgia has such pressing needs, unfundable from federal highway dollars, gas taxes, and property taxes.

How did every region decide to propose this tax? The law creating this process makes the counties in each region responsible for proposing the list of projects, and here begins the problem. Counties are not going to turn down a chance for extra revenue, so they all got together and proposed lists of projects, some of which are strategic, but in many, many cases, are merely local projects.

T-SPLOST proponents pointed out that money from this tax could ONLY be used for allotted transit projects, which is true, but the remainder of their budget is fungible. This allowed counties to plan to take already scheduled projects, throw them on the project list to force neighboring counties to help fund them, and then plan to allocate the county money elsewhere. This also means that a number of T-SPLOST projects are going to happen even though the tax failed.

One of the worst offenders in this was Clayton County. Clayton de-funded their county bus service in 2010. They then added a $100 million “project” to pay to re-instate this bus service and pay for ongoing operations. Asking citizens of Cherokee County to chip in to revive local bus service for a county 60 miles away that already decided it didn’t need that service and calling it “strategic” is insulting. It’s pork. It’s cost-shifting. It’s wasteful.

In case you would assume that Georgia is just a bunch of rednecks who hate taxes, consider that 3 of the regions in Georgia DID pass their T-SPLOST. One of these regions, “Heart of Georgia”, is overwhelmingly Republican. I don’t know the details of their proposals, but I imagine they were more strategic and focused on legitimate projects.

Proponents of the Atlanta T-SPLOST were never able to build a strong factual case for the tax. For every game-changing, strategic project like the Beltline, there was a ridiculous non-infrastructure project such as “enhanced bus service” to somewhere, and dozens of single-county bridge and road projects that should obviously just be funded by their county. At this point, proponents resorted to hyperbole and fear-mongering. The suspiciously well-funded “Untie Atlanta” campaign promised to fix all of our problems if we would just vote “Yes”, without substantiating anything – a remixed version of Obama’s 2008 “Hope” and “Change” sloganeering – too optimistic to ever deliver on the catchphrases. Much like the 2008 election, some were sucked in by the slogans, but many more simply believed that this action was better than deferred action.

The other non-logical tactic was one of fear. Ideas like “If we don’t pass this now, we never will.”, or “If we don’t pass this now, other cities like Nashville will steal our economic crown.” If that’s true, we’re really in trouble. Nashville has a 9% sales tax and NO income tax. They don’t have some big rail transit system. Why are they going to eat our lunch? The fact is, counties can increase their sales taxes, property taxes, and (I think) gas taxes if they want to buy local bridges and roads. There is no proof, only wild speculation, that rejecting T-SPLOST dooms Atlanta economically. Few sensible policies are enacted from the basis of fear. We can consider a new, hopefully less selfish and more strategic vote in 2014. While perfect may be the enemy of good, mediocre is the executioner of good. Poor proposals, once enacted, create even further distrust and solve few problems.

While critics like to simply call out suburban Atlantans as racist and paranoid, there is ample reason for skepticism. Our existing transit system doesn’t run to our baseball stadium because the city was afraid of losing parking revenue. In spite of spending millions of dollars on strategic transit authorities that are supposed to be thinking about how to make Atlanta transit work, it was a Georgia Tech grad student that noticed miles of disused rail line encircling the core of Atlanta that will become the Beltline, arguably Atlanta’s most defining transit project. What were the MARTA and GRTA employees doing?

I am hopeful and optimistic that metro Atlanta voters have the sense to reject a corrupt and flawed transit proposal. Some suggest that our T-SPLOST rejection signals to the nation and potential corporate HQ relocations that we are clueless. I believe it signals that we are not sheep. We will not accept naive and selfish proposals backed by catchy slogans that are only barely strategic in nature. One T-SPLOST proponent I read bemoaned that “rejection of the T-SPLOST is rejection of the process” as some tragic outcome. We SHOULD reject this process. It rewards counties for masking local projects as regional ones. It is tactical and adversarial, not strategic. Companies should embrace a workforce able to resist fancy marketing to reject such a flawed proposal.

I am more hopeful that the most impactful or necessary projects will still be funded. The already scheduled local projects that counties tried to spew into the T-SPLOST will happen like clockwork. In my opinion, THE most important project in the mix is the Beltline. I am hopeful that Atlanta mayor Kasim Reed will not allow the T-SPLOST rejection to be an obstacle. The benefits of light rail encircling the city are indisputable – development will surround Beltline stations and build property tax revenue that should more than cover the cost to build. Fulton and Dekalb counties need to stop begging other counties for support on the Beltline – they should lead, make it happen, and reap the tax rewards from growth.

I used to agree with those who believe that Atlanta needs to build transit to reach the outermost suburbs. I now disagree. Atlanta needs to build more internal communities with friendly commutes on transit. If that’s what people want, they will move to these areas, and I think they will. If people want to live 20 miles outside of town and rot in traffic, that’t their choice. If in-town transit doesn’t drive growth and increase population density, it certainly isn’t going to work along 20-mile long rail lines to the suburbs.

Atlanta was smart to reject the deeply flawed T-SPLOST. We should now be defined by how our leaders move forward. I hope the Beltline is funded. I hope Dekalb builds a rail line out to the hopelessly inaccessible Emory area. I hope other counties cooperate to fund necessary inter-county initiatives, and I hope counties figure out how to fund their own road, bridge, and bus projects they wanted to foist upon neighboring counties.


Cheap, Last-minute SXSW Interactive Tickets for the Busy Entrepreneur

As a startup founder, I found it hard to commit to attending SXSW until the past week, and I don’t have the time to spend goofing around hunting for a cheap ticket. I need the purchase to be transactional. SXSW will gladly sell you a last-minute pass for $950. But that’s expensive, and I’d rather spend my money building Badgy than on inflated ticket prices.

Time for our old friend eBay. A quick search for “SXSW Interactive” tickets with the “Buy it Now” option brings up several $600 options. Quick $350 savings. Amazingly, that’s just $5 more than what people paid if they committed to the “early bird” rate before September 23rd. I did this yesterday afternoon, swapped emails with the seller while I was at the gym, and had the pass transferred by 6 pm. Fast, transactional, cheap.

If the supply of $600 passes dies out on eBay, $700 seems like the going rate on CraigsList. A little more expensive, and less transactional, but still doable.

I can’t really help you with cheap airfare or lodging. The cheapest option for lodging would probably be to rent a van and sleep in it. And you can probably stay pretty close to all of the happenings. For next year, and really for any big event, a great option is to pre-book a room with a loose cancellation policy on AirBNB long before the renters and everyone else realize they need to book and jack up the rates for that week. If you decide you’re not going on the trip, you’ll only lose the AirBNB booking fee (10% of the overall price) when you cancel. I did this for the Super Bowl and was able to stay walking distance from all of the festivities in Indianapolis.

If you’re going to SXSW, let’s meet up! Give me a call or text at 404-663-9945, or email rob@bad.gy.


Always Know Your Startup’s Momentum

Entrepreneur-turned-VC Mark Suster has a great blog post explaining that he invests in “lines, not dots”. Especially outside of “frothy” markets, tech startups are unlikely to find big ticket investors or customers who will throw money at them after a 30 minute meeting. Customers and investors need momentum to motivate them to write you a check NOW instead of waiting until later when the price may be higher. The discount gambit applies to both.

The first time you meet someone, you get to tell someone what you’re working on, and they get to decide whether the idea is cool. The second time you meet them, they expect to hear progress, and you had better be prepared to give it to them. If you see someone a few times over the course of a few months, and you cannot give them specific updates on progress your startup is making, you’re working on a hobby, not a company. They probably also expect to hear updates on some of the things you were working on last time you talked.

I do recommend that startups get out of their cave more often. Every week, as I consider the events I’m going to that week, I also think about who I’m going to see, and what the few interesting things are that I can share about the progress Badgy is making. A few years ago, I learned how awkward and pointless it feels to tell people that your company update is that your “product is coming along nicely”. That means nothing, and unless you’re VERY early-stage, nobody cares. If you’re in “stealth mode”, your secrecy means people don’t even have an opportunity to share expertise or contacts that could help you figure out your product. (I hope you’re good at guessing what people want.)

Here are some examples of company momentum I’ve heard lately:

  • We have new customer X, they are a great use of feature Y
  • Potential partner X wants to put us in front of all of their customers
  • We’re finishing up Feature Y, which many potential customers have asked for
  • We just got coverage from News Outlet Blah, and that generated X total new leads
  • [talking to investors] This smart investor who knows our space is funding our current round
One entrepreneur I have the privilege of seeing regularly keeps a close gauge on his momentum, and if he sees momentum slowing, he course-corrects quickly. The last time he “course-corrected”, he earned himself an article in USA Today. THAT is how you draw a line of momentum, not by banging out one more feature in the dark.
The REALLY nice part about all of this is that if you come into any meeting or event knowing what you’re updates are, you’re more confident, and people (especially YOU) will see a really nice line of progress. I recently had an interview for a YCombinator-like incubator, and I found that the story of Badgy is really expressed as the sum of the updates I’ve given over the last 8 months or so. So what progress have you made on your startup lately? What are you going to in the weeks ahead to make sure that story keeps building?

Your Startup Needs to Get Out More

I previously wrote about the importance of “tent pole events” for building community. But you’re busy building your startup. Selfishly, you might not feel like you have time to build community. Selfishly, you still need to get out to events with regularity for the sake of your startup.

One thing I have rapidly learned in the process of building Badgy is how important and helpful people outside of your company can be in helping your company succeed. In the early stages, you need people who will point out the parts of your plan and product that suck. At any stage, you need to meet prospective customers, prospective investors, prospective advisors, future employees/employers, future acquirers, and other startups addressing similar or different problems to share lessons and tips. Starting a company is hard. Starting a consumer-based startup in your basement without ever talking to anyone else and hoping people show up to your site is impossible.

Very few people will want to join you as an investor, advisor, customer, employee, or introduce you to people who can fill those roles, the first time they meet you. VC Mark Suster often quips that he invests “in lines, not dots“, which is to say that he forms his opinion of companies based on the momentum and behavior of companies and people over time. Many people you need to invest social or financial capital in your company are the same way – they’ll give you any introduction you want, but they have to trust you first.

You can’t get some of these relationships when you need them. You need to cultivate them in advance. In the past couple of weeks, I have been blessed with face/phone time from some successful Atlanta entrepreneurs who are possibly THE best people to guide Badgy toward success. I can trace the origin of these introductions to the first Atlanta Startup Weekend in 2007, relationships that emerged from that weekend, and the incubation of those relationships over countless events and meetings since then.

If you’re starting a company, YES, you’re busy. If you have a wife, a daughter, and a second daughter coming soon like me, you’re even busier. I also spend a great deal of time at Cumberland Community Church and related events, because I believe in serving people and our community to encourage people to know and serve God. I work well much more than the “full-time” tally of 40 hours/week. Amidst all of that, I make it a priority to get out to a startup event roughly once a week. It’s important. Setting that standard gets me out enough to hit the important events, but also forces me to be selective and avoid the diminishing returns that definitely exist if you hit 4 events per week.

I talk to FAR too many tech startup founders who attend zero events. They work for months on their startup. If they’re lucky, they sometimes talk to customers. Sometimes, not even that. Building product without building a network around your company to help you succeed is a recipe for failure. You MUST find time to find the people who can help you succeed.

This week, Atlanta Startup Drinks is Tuesday night from 5-10 pm at 5 Seasons Westside. I think it’s the best event of the week in Atlanta, and one of the best events each month. I love this event because, much like Twitter, it is an place where serendipitous relationships and introductions are accelerated.  I hope you’ll be there.

How many events do you go to? Which events are crucial to you? How have you benefitted from getting out of the “office” and into community?


ATDC Startup Showcase – Just Go

ATDC’s Startup Showcase will take place this Monday, May 9th, 2011. At $10 for a ticket, I recommend you take the afternoon and figure out a way to attend. I’ve enjoyed this event the past 2 years, and if I weren’t travelling next week, would absolutely be there. Some of the great reasons to attend:

  • Affordable – At $10/ticket ($15 walk up), it’s a lot easier buy than many conferences. Not only do you not need your company to pay for your ticket, you can actually pay for a ticket from cash in your waller.
  • Great Graduate Companies – A great class of companies is being recognized. I’ve had contact with graduates PlayOn Sports, BLiNQ Media, and Solohealth, and think very highly of them. Great startups, great momentum, and I expect the other graduates hold to a similar standard.
  • The Showcase – want to see what several dozen awesome Georgia startups are working on, and get the chance to actually talk to them instead of just staring at press releases and web sites? Lots of companies will have tables set up to show off and talk to you. If you want a startup job, this can be a good place to find a company that’s hiring.
  • Community – If you’re working on a startup, you need help, and you probably haven’t met everyone who could help you, or whom you could help with their company. Spend a few hours meeting other entrepreneurs, get some feedback on your ideas, pitch, strategies. Find someone to help. Good chance you’ll find someone you can help too.

Losing the Talent War

Make no mistake about it. When it comes to entrepreneurial technical talent, Atlanta is losing the talent war on a daily basis.

Buried in an article about booming tech jobs is a mention of Brian Gorby. Brian’s a Georgia Tech grad who was working for Modosports, an Atlanta gaming company that folded due to funding issues, when I met him. He was pretty well versed in Adobe Flash & Flex development, and digging into iPhone development – he had the intellectual curiosity and internal drive that startups need & crave. I was at Xeko Elf Island – we liked Brian a lot, but because of our own funding challenges, couldn’t move fast enough to offer him a job before he was snapped up by Moxie, a prominent marketing agency (and he may or may not have joined us either way). He spent a brief turn after that in consulting, then built up iOS experience at Sapient before his apparent move to San Francisco – he’s now a Senior Mobile Developer at EventBrite, a pretty darn hot startup focused around event registration.

There are MASSIVE startup opportunities right now in the area of mobile and social. Now ask yourself… what hot Atlanta startup should a talented, entrepreneurial iOS developer have joined? Pretty limited options. After a couple of years at EventBrite, a solid senior engineer will probably be well-positioned to start their own company. What comparable opportunity is there in Atlanta?

Let’s look at the criteria many investors apply to startups – Stanford provides a nice framework of team, product, and market. Momentum is often a 4th criteria. Startup uber-incubator YCombinator focuses primarily on team, presumably because if you have a great team that handles feedback well, an investor can help a great team build the right product for the right market. So what is the crisis of conscience in Atlanta? There is NO lack of talent. We have founder-quality talent moving across the country to accept lesser roles than they would have as Silicon Valley natives. Do our investors lack the confidence that they can help companies find the right market and product? Perhaps.

At Xeko, we lost any chance we had of hiring Brian Gorby because our funding was in flux, and no other social gaming startup in Atlanta was ready to hire a developer with all of the right skills at a time when social gaming was a prime market opportunity (mid-2009).

Atlanta startup founders are often faced with the question of “Are you working on the business full time?” For technical founders, this question is a joke. Any technical founder with 2+ years of experience can pull down $80-120k per year, easy. Suggesting they should go for broke before their startup finds product-market fit is insane and makes no sense from an opportunity-cost perspective, especially when they start families and need insurance and the ability to provide for their family in a town where seed-stage cash is scarce. Once a startup finds traction, they should be able to find funding without being disqualified because they still have a day job they want to quit.

This isn’t a small problem. Atlanta has founder-quality entrepreneurs moving across the country to take staff-level jobs because we can’t recognize the OBVIOUS market opportunities. Mobile, social, gaming – HUGE opportunities. How many investor-driven startups are in Atlanta in this space? Do investors believe our teams aren’t equal to the task? Are investors uncertain in their ability to help great teams find the right market and product? Many investors seem to just want financial projections that imply a guarantee of success. That attitude leads to more brain drain. I hope we can do better, and retain more “Brians”.


Tent Poles

Growing communities need rallying points, and Atlanta’s startup community is no exception. 

I joined the Atlanta startup community a little over 10 years ago as a developer at Air2Web.  I missed most of the dot-com free-flowing cash, but my experience at the TechJournal Deck Party in 2007 was that a lot of people flooded into startups in Atlanta and washed out when the money dried up.

Things were pretty quiet until around 2007, when events like Atlanta Startup Weekend (which spawned Skribit) and a couple of other events helped us all realize that we weren’t alone in wanting to build great new companies. I’ve hired 2 people I met that weekend, have worked with many more people, and keep in touch with many more people that that from 2007. Before this, I didn’t know of Atlanta startup events, and this was a great awakening.

A couple of years ago, there was a great debate over whether there were “too many” events. We had multiple startup events every week, and nobody knew which ones were important enough to go to. We still have numerous events each week. Some people go to most events, some people go to zero events, nobody knows which events they “should” go to.

I am suggesting that some events should be “can’t miss” events, but they need to be big enough that “important” people can blend in. Some friends we visited this past weekend attend a huge church in Nashville. Several fairly major celebrities such as country music star Brad Paisley attend this church because the event is big enough that they can blend in and not be noticed. Until we outgrow it, I’m suggesting that Atlanta needs some “tent pole” events that form the basis of our community, where successful and aspiring entrepreneurs, VCs, angel investors, and anyone else interesting can mingle without the event being so small that they feel like a target.

I am suggesting that Atlanta Startup Drinks and ATDC Entrepreneur’s Night should be “can’t miss” events each month. I think Startup Drinks needs to grow up a bit, but is up to the task. It needs to look more like the Mashable/Regator mixer, every month. Sponsored, big, in an event space. At this month’s Startup Drinks, we were kicked out at 8 pm – the hospitality and free food/drink were great, but the early ending was just too… early. $5k/month in sponsorships would give sponsors great exposure to some of the smartest, most innovative people in Atlanta and make for a KILLER monthly event.

I give great credit to ATDC for starting Entrepreneurs’ Night, apparently on the 3rd Thursday of each month. I’ve been to 2 of the 3 meetings so far, and assuming Cloud Sherpas doesn’t announce they are leaving town on April 21st, it should be a great event. If your startup isn’t willing to pony up $50/year for some of the best advice and networking in Atlanta, I question how serious you are about your startup. I don’t know if ATDC opens this event to angels and VCs, but I hope they do.

A tent without poles looks like a messy blanket. Atlanta needs some tent pole events to move our community forward. We have too many struggling one-person startups, too many people who NEVER show up to ANY event, too many existing entrepreneurs with “FU Money” working on vanity projects, too many investors afraid of attending an event for fear of spending  an hour talking to a biz dev guy who wants to build a daily deal site but can’t find a developer to build it for them for 1% of the company.

What do YOU think? Could a couple of highly intentional monthly events plus a few annual/quarterly events do a better job of building community and success among Atlanta startups? Are there better monthly events to anchor community? What annual/quarterly events are key to the community?