Considering the venture capital history of Atlanta would be replete without mentioning the impact of Noro-Moseley Partners. Through 32 years, the early-growth stage investment firm has provided entrepreneurs with the opportunities and expertise to build world-class companies. In its corner for 18 years is General Partner Alan Taetle, who has become one of the South’s most successful VCs.
For Hypepotamus, Taetle reflects on the evolving Atlanta ecosystem, how entrepreneurs can peeve potential investors, and what makes early-stage companies viable for funding.
You’ve become one of the most prolific and successful investors in Atlanta. Can you share a little bit about your road to this point?
I took an entrepreneurial finance class when I was in business school and I really enjoyed it. In the back of my mind, I really wanted to be a venture capitalist, although I really don’t think I fully understood what it was.
I came down here in ‘92 and worked for a startup that didn’t do very well. We had a hard time making payroll. I was the director of product management. I ran its customer service. I left there and was one of the early employees in MindSpring, and I was fortunate enough to be asked to be included in the board meetings. There, I got to see Cam Lanier, Bill Scott and Gene Gabbard who are some of the best all-time investors in this area. I got to see how they operated on a board level. So, I had one failure and one success, and I kind of got to see the pressures of both.
This gave me a good operational foundation for becoming a venture capitalist. I’d known Chuck Johnson a partner at Noro-Moseley from working at his start-up as summer intern. When Noro-Moseley decided they wanted to move into internet technology, it was a really nice fit overall. I think I’ve been able to be good at the business because I’ve seen both sides of that coin. What it’s like to be in a really struggling startup and what it’s like to be in a high growth startup. Both have different kinds of pressure.
In the two decades since you have been in venture capital, what has the evolution of the Atlanta ecosystem looked like?
We took it hard on the chin in the .COM period, of course; maybe even more so than others. We’ve also lost some of our big corporate headquarters, which I don’t think has been helpful on the tech side. We have to make that up, and we still have a long way to go in that regard. The city is really taking for a moment — the number of people, the perspective, and the interest in entrepreneurship and number of investors. It was all a good thing.What would you say is your take on the Atlanta market right now? What are some trends that are emerging here, setting the city apart from others in the nation?
This city in many ways is a true meritocracy. If you look at Tom Noonan and Tripp Rackley and David Cummings, none of them come from storied backgrounds. That’s what we have going for us. We have a fantastic cost of living and are starting to get more character built in the city. And I still think we need a lot more.
I think some of the challenges are that it’s a really big city, it’s really hard to get around. Where you base yourself is where you recruit from, which can sometimes be a challenge. Of course, Tech Square has been a fantastic addition and a big difference, as well as what David’s doing [at the Atlanta Tech Village], and more recently what’s happening at Ponce City Market [with Techstars Atlanta and startup and technology companies].
You also do a lot of investments outside of Atlanta, can you speak to that a bit?
Yeah, I’ve been doing this 18 years, and, in the 2006-7 timeframe, our partnership had a transition Allen Moseley, Mike Elliott and I assumed the helm of the firm. And we asked ourselves, “What are we good at and what are we not good at?”
What makes it an institutionally funded firm versus a family office funded firm of scale, one of the things we got constant feedback about was, how do you know that this security firm is the best in the country if you are only investing in one region?
We decided that we were going to start to look outside the region. Also, the fact that we wanted to move a little bit upstream, so there aren’t as many opportunities to look at in the Southeast or in Atlanta that are two-million dollars in recurring revenue. That, with the fact that several large firms were in markets like Austin, like Denver, faded away and created an opportunity to partner with funds of our size in those markets and it’s been terrifically fruitful.
What qualities make a startup or early stage company viable for investment?
It’s the proof of the revenue model, that it’s not in a proof of concept phase, [and] that they’re actually showing the core economics of the business. We understand how it’s differentiated, then it’s about the team that is there. It doesn’t have to be a complete team, but it has to be one that we can build around.
Is there anything that you are excited about within this cycle?
You’d have to be crazy not to be kind of excited about watching Pokemon Go and what it did in ten days, and just thinking about what the potential could be, not just on the consumer side, but on the business side of augmented reality. I don’t know what that looks like or how it looks, that was, to get more users in ten day than Snapchat has? That just makes the whole thing show how dynamic these markets are and what the possibilities are. But I don’t know where that leads us, I’m not enough of a visionary to know that, but that was incredibly encouraging. You’ll be walking down the street and their eyes are all glued. And the social implications that you would never think of, like, of course you’re not going to do Pokemon Go in the sensitive spots like memorials…Things like that that create a lot of opportunities to figure out how to fence things.
Also, virtual reality. I haven’t spent enough time with it, but that’s plausible. I’m excited to see where that goes. I’m not sure exactly, right now, as it’s very expensive.
Noro-Moseley has had a really big impact on Atlanta. Can you speak a little bit about its history, as well as how it has affected the city?
To have the venture firm be doing well after 32 years kind of proves the overall viability of the Atlanta market. That combined with deep ties with Georgia Tech — Charlie Moseley went there and is still very active with the school. I am on the college of computing advisory board, so we have a real passion for Georgia Tech, in particular, and making sure that technologies continue to be commercialized out of that school. We really care.
I’m chairing Venture Atlanta this year, as well. It has been great, but we still have some more work today and want to continue to do that. So, for Venture Atlanta, for example, we’ve had a lot of people roll off the board and we’ve brought on more. We’ve brought on some younger folks like Michael Cohn from Techstars, Kyle Porter from Salesloft and Andrew Dorman from Knoll Ventures. It’s up to us to start to make this whole city less formal, to change the dress code, make it more accessible for millennials so they feel included in the venture system.
In other words, it’s the longevity of what we do and I think we want to continue to make a push to make this place as viable entrepreneurially as we can.Venture Atlanta is a fantastic example. Watching it hit over a billion dollars in impact and how massive it’s going to be this year really speaks a lot to what’s happening in Atlanta.
Well, you know Allen Moseley helped found it, right? He got the CEO Council, the Metro Chamber and TAG together because they all had overlapping separate events. He helped hire Allyson [its current executive director]. So, here we are, nine years later and it’s going strong.
You have to be an advocate for your own city, right?
You really do.
Do you have any advice to entrepreneurs seeking funding?
That’s a loaded question. I just don’t want to give you a trite answer.
I am continually amazed at . . . there’s just some fundamentals, 101, that I think entrepreneurs really need to do. Like before I meet with you, I read your LinkedIn profile. You would be amazed at the entrepreneurs coming in here. They might have been to our website, and our website is fine, but they don’t really know about the person that they’re meeting with. At least look at the investments that they’ve made. The initial presentation piece is always key, and always, I think, underestimated. We really want them to know about us, just as they expect us to be prepared to have gone through their deck and thought about it. Founders need to see the perspective from the other way around.
Do you find that startups, sometimes, are just pitching and don’t do enough research on the firm that they’re propositioning?
Yeah, and the other thing, which is really hard, is to look in the mirror and be clear about what success is. It’s fine to have a 30 or 40 million dollar exit – that can change your life, but that’s not going to be what we’re interested in. It doesn’t have to be a billion, but it’s got to be a couple hundred million dollar opportunity, and that has to make sense for the entrepreneur. It has to be like, Okay, if I go with a smaller round of funding and sell for $40 million I may do better. Versus, taking this more aggressive path. It’s always good to have thought through that.
Then, we see a lot of companies that may be features and not companies. That’s a hard thing to hear from somebody — are you a feature or are you a company?
What’s the definition, in terms of thinking about our audience, of a feature versus a company? How are you able to immediately be like, this is one and this is the other?
Some real thoughtfulness about why this is a big market opportunity is really important to me. Unique and differentiated. Some of that also has to do with some of the nature of the incubator phenomenon. It’s really hard to come up with a huge idea in 90 days or 120, which is really going to change the world. Sometimes there are artificial time limits placed on incubators that make the ideas, that force the ideas to be something that is too small.
Some believe that if you have a fantastic idea, it could be potentially viable to get some funding. Nowadays, you have to make sure that it’s already proven before you even get to the next steps.
Yeah, that’s right. . . everyone from Y Combinator to Techstars now has the funds to fund further research because they understand that it’s not the same as it once in the Airbnb days, where you go for 90 days and come up with a multi-billion dollar idea. They are not gone, but they’re very scarce.