Twitpay was founded about 15 months ago at Atlanta Startup Weekend 2, and was recently acquired for $100k (and an additional $1 million committed to move Twitpay forward as a non-profit fundraising tool).  The acquisition was widely hailed with congratulations to the founders and touted as a success story and evidence of the strength of a “payment cluster” of startups in Atlanta.  Now I think very highly of Twitpay’s founders, know they had some great buzz, great advisors, and that everyone congratulating them was genuine in recognizing this as the payoff for hard work by everyone involved.

All of the positives aside, it appears to me that the facts are that several talented Atlanta/Southeast regional entrepreneurs worked full-time for over a year on a disruptive technology that was developing good partnerships and good press and got bought out for small change.  Lance Weatherby put it well, “There are three types of successful exits for startup founders.  You get a new car, you get a new house, or you get a new life.”  It looks like the Twitpay deal sits in “new car” territory, with “new job” thrown in since I imagine they’ll get to draw a salary as they work with investors including Acculynk CEO Ashish Bahl to refocus the technology.  I’m not privy to any details, but I maintain some hope that the Twitpay team has enough of a stake in the new entity to push up into “new house” or “new life” territory.

There are a number of issues with the whole deal that I think put a bit of a damper on Atlanta’s startup ecosystem:

• What Cluster? – There is indeed a solid bench of payment processing technology companies in Atlanta, but it’s hard to see much benefits from this in Twitpay’s story.  With the acquirers in the payments space, the best I can say is that participating in this cluster may have meant the difference between “new car” and “no car”.  It’s small wonder entrepreneurs often ignore our local clusters.  Many local entrepreneurs who are fully dedicated to their startup just end up in “new 2nd mortgage” territory.
• The Series A acquisition – Atlanta is not “The Valley”, and this deal rubs that fact in.  A “success story” version of this situation would have seen the $1 million invested in Twitpay and used to give the company strategic investors and a couple more iterations to “get it right”.  Buying startups after their initial model is “busted” and funding their additional experiments after the fact is not an appealing outcome for entrepreneurs.
• The compensation sucks – If our version of a success story is that a founding team of entrepreneurs goes without salary for a year and a “good” outcome is that they get to split $100k 3 ways, and THEN get to draw a real salary as an employee, we have a real problem.  New Georgia Tech CS grads can make twice that much, fresh out of school, guaranteed.  This sends a message to talented potential technical co-founders to just go get a J.O.B.
• Few Lasting Benefits – these guys have “new car” money.  They’re not going to be the next partners in Shotput Ventures, they’re not going to be a part of the next big angel deal or have large amounts of time on their hands to re-invest into other startups and entrepreneurs.  Furthermore, they’re now employees, which means they’re not spending much time starting their NEXT company.  They do have some domain knowledge and credibility to bring into their next startup.  Who knows?  They may even co-found something awesome that does benefit from Atlanta’s strength in payment processing.

Let me be very clear that I may have a number of facts wrong about compensation, deal terms, etc.  I’m a total outsider to this deal so I know little more than the publicly stated facts (the rest are educated guesses), but that also means that the way the deal looks to me may very well be the way it appears to other outsiders in the Atlanta startup ecosystem.  I also have the utmost respect for everyone involved in this situation.  The Twitpay team rocks.  I am sure their acquirers have great intentions and solid potential to do great things with Twitpay.

If I’ve got something wrong, let me know.

An ongoing message and lesson I take with me is that Atlanta is for bootstrappers unless you are fundable on reputation and track record alone, or you are one heck of a fundraiser.  Don’t quit your day job.  Let customers fund your growth.