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EXCLUSIVE: THE Recipe for Attracting Silicon Valley Funding

by Carey Tucker

When it comes to technology law, to say that Atlanta-based attorney John Yates is an authority on the subject would be a tremendous understatement. A seasoned lawyer who has focused exclusively on the field for over 30 years, Yates currently serves as Chair of the Technology Group at the Atlanta-based firm, Morris, Manning, & Martin, LLP, and has also co-founded and served on the board of the Southeastern Medical Device Association, Southeastern Software Association, Technology Association of Georgia, Technology Executives Roundtable, and Atlanta CEO Council. He also serves on the Board of the Metro Atlanta Chamber, co-chairs its Technology Leadership Group, and chairs its political action committee.

He recently returned from a trip to Silicon Valley, a place he knows intimately due to his personal history with the area (in 1981, his sister founded a tech company there and visiting her inspired him to practice technology law). While millennials might know the region due to the HBO series of the same name, the Valley has been, and continues to be, the epicenter of the tech world – hosting most of the planet’s premier tech companies and venture capital firms. For entrepreneurs, securing funding from Sand Hill Road is the ultimate stamp of approval and consequently, many Georgia-based entrepreneurs look West when in search of that coveted Series A round.

The region accounts for one-third of all of the venture capital investment in the United States. Its legendary status has led to the creation of myths surrounding what Valley-based VCs are looking for in choosing to invest. While in the Bay Area, Yates met with multiple venture funds and asked them about their thoughts on some of these myths, how Atlanta-based startups can make themselves more attractive, and what Georgia’s capital has that makes it stand out.

“There’s an allure to Silicon Valley that is tantalizing to entrepreneurs and gives them the feeling that their money is better, greener, and could be more effective in growing a company. There is some truth to that, principally because the ecosystem is so much more developed and extensive than in any other part of the world. If you can get money from the Valley and you can get plugged into the ecosystem there, you have a huge advantage over elsewhere,” says Yates. “However, the vast majority of the leading funds in the valley are looking to make investments in the Valley or in San Francisco because it gives them a much greater ability to control and assist the company as opposed to someone who’s geographically dispersed.”

Misconceptions about raising money from the Valley by John Yates

You can go to the Valley and raise money easily if you’ve got a great idea.

That’s not necessarily the case. Entrepreneurs need to take certain steps to increase the likelihood of being able to raise money in Silicon Valley. Most of the funds said to me, “Listen, we’re concerned about investing in a company from outside the Valley, even if we’ve invested in the region before. We want to have some eyes and ears close to that company so that we have the ability to get early warning signals if there are problems or more importantly, if there are ways that we as a fund can provide value.”

If an entrepreneur selects a market that has multiple competitors (who have already raised lots of money), he/she will not be of interest to venture funds.

I recently had the opportunity to interview a fellow from Bessemer Venture Partners in a fireside chat. When I presented this myth to him, the point he made was, “That doesn’t bother us. In fact, that may be attractive to us because it may be a big market, there may be multiple players in the market, and that entrepreneur may have a different angle to actually attract the market, so we actually like that. We would be especially interested if a company located outside of the Valley was to come up with a different angle, that would be appealing to us.”

On top of that, if you have several competitors who have raised a lot of money and you build a company that may be complementary, you’ve got several potential targets to acquire you. So, it actually highlights the fact that there is a market there. What that suggests to entrepreneurs in Atlanta is: do your homework. The Bessemer partner continued by saying, “Make sure that when Atlanta entrepreneurs are talking to us, they have really scoured the market and understand it as well as we do. Because if our knowledge of their market is greater than their knowledge, there’s something wrong.” It’s amazing how many entrepreneurs fail to do that homework and become enamored by their own shiny thing.

Ways Atlanta entrepreneurs/startups can make themselves more attractive

Valley-based VCs are particularly interested in companies that have been able to attract a senior executive from a large company that would potentially be a customer of the entrepreneur’s business.

If you’re a digital media company that has a digital media platform and you can attract a former senior executive from Turner to be apart of your company (not just on your board, but an officer within the company) it is a huge positive signal to funders. It suggests that the executive did extensive due diligence on the company and is willing to be heavily involved on a daily basis.

Find a fund that’s already invested in Atlanta or the Southeast.

It doesn’t have to be a current investment, just find a partner in the fund that may have some affiliation with the Southeast. That’s actually fairly easy to do, but a lot of entrepreneurs don’t think to do that. It means that VC will be here in Atlanta or in the Southeast at board meetings. Being able to meet with them while they’re here means that you don’t have to travel to California. Also, many of them have extra time and can meet you at the airport. Most entrepreneurs don’t take advantage of that, even though they probably should.

What is it that makes Atlanta attractive to Valley-based VCs?

Atlanta has connections with traditional businesses, something just about no other city in the country has.

In the B2B entrepreneurial model, this allows the entrepreneur to have immediate market research about whether the product or service they’re creating will have value. We, in Atlanta, are sitting here, literally in the middle of the field with all these beautiful flowers around us and we need to take a whiff of them more often. As the entrepreneurs are developing these tech enabled products/services, we have an environment here to effectively pilot and test the market. The beauty today is that the Metro Atlanta Chamber is now serving as a great conduit for entrepreneurs to connect with those Fortune 1000 companies. There are very few cities in the country that have that opportunity.

Because we have so many Fortune 1000 companies and because our Metro Chamber is building this bridge between traditional businesses and entrepreneurs, we have a natural ecosystem that could be utilized. That is something they don’t have in the Valley. They may have money in the Valley, they have their own ecosystem, but we’ve got an ecosystem that is full of prospective customers and that makes us extremely unique and attractive to the funds out there.

Check out our previous cover on John Yates where he expresses his thoughts on Atlanta’s current technology ecosystem and how it compares and contrasts from the dot-com bubble of 15 years ago.

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