Much can be said about the South, one of which is true; we like to grow in our own unique way. There is even a common term for this quality; “the new South” which is more or less describes an idea that either originates in the South or is an adopted idea that has to marinate here for a while until we’re able to serve it with a certain cultural flavor that only comes with time.
To have it any other way, frankly, is a thought that stands about as much chance as a snowball in Hotlanta however there is one growing snowball in the South that is worth noticing; local capital. Now call it what you want; venture capital, fundraising, private equity; your pick for regardless of what term you use, it’ll emerge with our own unique Southern spin. It may be helpful to remember the words of our modern day capital titan, Warren Buffett; “Life is like a snowball. The important thing is finding wet snow and a really long hill.”
As technology companies continue to sprout throughout Atlanta and the Southeast, a significant step forward in the industries evolution will be the continual supply of local capital sources. In short, Atlanta’s start up community appears to be forming the wet snow and long hill that is necessary to sustain local capital but the region has not always been this way.
“Approximately 92 cents of every dollar raised by local start-ups in Atlanta comes from sources outside of Atlanta” shares Pete Santora, a community catalyst at the Atlanta Technology Development Center. In fact, one does not need to speak to too many in the Atlanta technology field before most confirm the historical gap between the angel investor willing to invest less than $1 million and the local ‘$5M-and-up’ type investor for local capital sources but thankfully those in the “new South” have taken note and are serving alternative options.
Take for example organizations such as Atlanta Technology Angels and Venture Atlanta that will continue to gain attention on a national level and help others bridge the financial gap. “The number of funds in Atlanta has doubled over the past twenty-four months;” shares Allyson Eman, the executive director of Venture Atlanta. It has been a “struggle” to find the $1 to $3 million sources of capital locally, shares Sylvan Waller of Alii Healthcare, but “you don’t have to just go to NY or Boston on the east coast to do so.”
Keep in mind, the change is subtle and the prominence of local capital will look differently in Atlanta than in other technology markets. For example, it is just as foolish to compare the local capital market in Atlanta to say Silicon Valley as it is to compare a glass of southern Bourbon to a Napa wine or a Chick-fil-A chicken sandwich to an In-n-Out burger. The South does not need to look just like Silicon Valley for it to be deemed a success.
One dynamic that is important for capital investment is for the source of funds to understand the story of what they are investing in and if there is one thing the South is known for, we tell great stories; the type stories that are being told in relatively new forums such as the Atlanta Technology Development Center, Atlanta Tech Village, Strongbox West, Switchyards, Opportunity Hub and the Alpharetta Technology Commission to name a few.
The story of “here is our strategy and why” is compelling when local companies undergo valuations amidst raising capital, shares attorney Daniel Sineway of Morris, Manning & Martin. Daniel specializes in working with emerging and start-up technology companies and finds that patents can be a “comfort factor” and critical when supporting the grander story of “strategy.”
One metric that may be helpful to track the South’s financial progression is to observe the growing percentage of total capital raised by local start-ups that can be attributed to local capital sources. For example, although only eight cents of every dollar raised by local start-ups is from a local source, eight cents is higher than it was in the past and is a number that will continue to grow.
Furthermore, this growing number will continue to spill into other industries that frequently interact with start-ups that may not initially come to mind but will help Atlanta’s narrative grow in depth of character. Take for example design firms such as B10 Union which creates designer furniture out of East Atlanta; reflective of the open and transparent nature of technology companies with a little grit.
As the tale of local capital continues to emerge from the new South, it confirms that the South’s story has always been a mosaic of themes that simply gets to a particular topic when it wants to and local capital is no exception. One thing is for sure, the story of local capital will continue to be told with its’ own unique Southern flair.
The Author: Andy Roberts lives in Atlanta with his wife and 3 young kids where he is a self-proclaimed “foodie” in constant search for the best “hole in the wall” dining establishments and is a resident expert on which parks to visit with your family on a Saturday. Otherwise, Andy works in commercial real estate at Cresa where he consults clients on how to align their real estate decisions with growing their business.