Atlanta Tries To Carve Out A Niche In Tech : All Tech Considered Many local startups say their biggest hurdle is cash. It's such a common complaint, Atlanta's mayor is launching a venture capital fund to help tech companies get off the ground.
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Atlanta Tries To Carve Out A Niche In Tech

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Atlanta Tries To Carve Out A Niche In Tech

Atlanta Tries To Carve Out A Niche In Tech

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You might have heard of Silicon Valley spinoffs, like New York's Silicon Alley or Silicon Prairie in several Midwestern cities. Well, now Atlanta wants to join in as the Silicon Valley of the South. Tasnim Shamma of member station WABE reports.

TASNIM SHAMMA, BYLINE: On the 18th floor of the Atlanta Financial Center, tech entrepreneurs make their pitch to potential investors over wine and brie.


BOB RATHBUN: Well, good evening, everybody. I'm Bob Rathbun, and we've got the corporate shark attack coming your way tonight.

SHAMMA: Moderator Bob Rathbun invites a startup called Cooleaf to the podium. Cooleaf makes a software program and mobile app for employee engagement. Cofounder John Duisberg tells the crowd he needs a half million dollars to double the size of his company. It's got most of that money secured. Two years ago, it was a different story.

JOHN DUISBERG: We went to San Francisco and met with a few different firms out there. People were much more interested in the idea itself, how large it can be. Here in Atlanta it's much more about the balance sheet and the income statement.

SHAMMA: But that's changing in Atlanta. More wealthy individuals or angel investors are placing big bets on local startups and investing in incubator programs. John Yates is a technology lawyer in Atlanta. He's watched Silicon Valley grow since the 1970s, when his sister started a tech company there. Back then...

JOHN YATES: People didn't know if I was from Atlanta or Atlantic City.

SHAMMA: Yates says Atlanta has come a long way since the '70s. But the Valley has three key advantages - easy access to capital, a network of seasoned entrepreneurs, and...

YATES: Maybe this is a cultural difference in the rest of the world versus the Valley. But it's the idea that in the Valley, it's OK to fail. As a matter of fact, if you haven't failed once or twice, you probably haven't earned your striped to become one of the key leaders there.

SHAMMA: But investors in Silicon Valley like Somesh Dash are looking at Atlanta more seriously.

SOMESH DASH: The DNA of the city for me has always been one of disruption, one of kind of questioning the status quo. You feel it when you walk around. You visit the historic sites and you're on campuses like Georgia Tech and others.

SHAMMA: Dash was named to the board of directors of Atlanta-based fraud detection company Pindrop Security earlier this year. His firm, Institutional Venture Partners, helped Pindrop raise $35 million so it can operate globally. He says going back to business fundamentals is crucial, like paying attention to the boring stuff, gross margins and free cash flow.

DASH: We're at a stage where a lot of companies are getting funded by unsophisticated investors at really high valuations. And once the music stops and that part of the financing market dries up, there's going to be a lot of down rounds, lots of layoffs. And there's going to be a lot of broken glass everywhere.

SHAMMA: This is where a city like Atlanta shines. Having less money makes you more risk averse. It forces startups to focus on great ideas and solid business plans. Everett Steele is the founder of a delivery startup in Atlanta called Kanga. Steele says, sure, there's more money on the West Coast. But startups that make it through the hunger games of Atlanta are more likely to be homeruns here. He says he's seeing more companies move back to Atlanta because of the high cost of living in Silicon Valley.

EVERETT STEELE: It's always frustrating when, you know - I feel like I hear sometimes people say, you know, Atlanta doesn't have a good investment scene. There's not money flowing here. And it sounds harsh to say, but I think the answer is there is money, maybe just not for the idea that you have right now.

SHAMMA: The city is getting a lot better at taking risks. Last year, firms invested about a half billion dollars in Atlanta companies, the most in a decade. And the mayor says he's launching a fund. So when tech startups need cash, they're not immediately buying tickets for the next flight to San Francisco. For NPR News, I'm Tasnim Shamma in Atlanta.

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