Observations on Observations

My friend Jeff Haynie wrote a nice missive on why he moved to the Valley entitled "What’s wrong with the Atlanta startup ecosystem and how to fix it."  It’s a pretty long post and a worthy read.  Jeff’s a smart guy and I generally agree with him on most things.  I have some observations of Jeff’s musings.

"My parents personally invested $250,000 of their own money as well."

Jeff hit up his relatives for early stage funding.  Have you?  If you can’t get your Mom to write you a check (I don’t care for how much) how can you expect a stranger to do so.

"I didn’t want to raise outside investment until we had a product, revenue and customers."

Like I said, Jeff is a smart guy.  Waiting until have have a product before raising capital significantly increases valuation.  Waiting until you have revenue before raising capital significantly increases valuation.

"Local VC money is mostly non-existant. It’s a supply-demand problem essentially. Low supply of great startups and some big hits, very little demand. (Note: I didn’t say lack of money)"

I agree 100% with this statement.  And this is not the "fault" of the people that invest.

"The local community is a relationship-based economy. It’s who you know … The ‘ole boy network. The valley is a meritocracy."

I disagree 50% with this statement.  As I said last week, if you have a good idea and a good team you can get funded in Atlanta.  The valley is indeed a meritocracy.  So is Atlanta, but you gotta perform.

"We have no real track record of big successes we can tout."

100% disagree.  See here.  And regardless of who funded them they count.

"What few winners we’ve had, they don’t feel compelled (or even obliged) to re-invest / give-back to the local community."

With the exception of Tom Noonan lately this is pretty much the case.  His and John Imlay’s commitment to giving back has spawned too many startups to count.  Stephen Fleming and I were talking the other day how we need to create a culture of successful entrepreneurs that compete with each other to get in on the best startup deals so they have bragging rights.  There are about five four people in Atlanta that could make a huge difference here.  Tom, Tripp Rackley, Chris Klaus, Marc Fluery and Jeff Arnold  immediately come to mind.  Goading them will not increase their involvement.

"We don’t have any real early stage venture investors in Atlanta."

But we do.  I was sitting in a room of about 50 of them on Thursday.  Mike Eckert, Tom Noonan, and Mitch Free all actively do pre-product/pre-revenue deals.  So does Imlay.  Clearleap, Endgame, Damballa, Flux Media, Global Crypto, Pramana, Purewire, Qoil, Qualtre, SparkIP, Suniva, and WorthPoint were all funded as early stage companies.

"Nor would they (NMP) have done the deal if it was 3 guys just out of GA tech with no experience."

I can’t speak for NMP and wish that they would speak for themselves.  But I think that if you removed Nolan and Jeff from the equation and replaced it with somebody like Paul Stamatiou and another equally savvy person I don’t think it would have changed the interest level much.  They just would want to bring in some experienced members to the team.  And BTW, a quick look through Storm’s portfolio does not show any such beasts.   

"The problem with Noro isn’t that they’re not a good firm. They are not experienced early stage investors. They haven’t had a great track record and most of their partners haven’t had any amount of reasonable success."

Before this all sprung up I was having lunch with Greg Foster.  He told me that NMP could expect to do about 20 deals with their current fund.  Of these deals they expect around 30% to be pre-revenue.  I can’t speak to the level of success that they have had with early versus late and would welcome seeing the analysis of such things.  All I know is Alan Taetle lives in a nicer house than mine. 

"West coast money specifically told me they did not want local money involved."

The comment stream would indicate that this is not the case.

"All the local events (that are meaningful) are being driven almost exclusively by entrepreneurs (myself included). The burden is heavy. Everyone needs to participate. Everyone needs to be involved."

First my creds on this.  Spearheaded Startup Weekend, give BarCamp a little push and helped out, PitchCamp mentor, and too many ATDC related activities to mention.  Younger entrepreneurs are driving a lot of the new events in town.  Everyone does indeed need to participate.  But some of the calls that I have seen demanding that investors and VCs fund things is just misguided.  More on this later but as an entrepreneur, and I am speaking as an entrepreneur, the investor is your customer.  You have to treat them as such.  Go look at the BarCamp SF sponsors.  VCs are not funding such things there, why should they here (except of course Startup Weekend: ))?

I don’t have a horse in this race. I sit right in the middle.  At the intersection of entrepreneurs wanting to get funding and investors looking for deals.  What I see is people talking on two different planes. I will close with this thought.  In the world of biology species adopt to their ecosystem in order to thrive and only after they thrive do they significantly impact the ecosystem.  The same holds true for Atlanta technology.

August 9, 2008  |  Comments  |  Tweet  |  Posted in Angels, Entrepreneurship, Venture Capital