Atlanta’s Southern Hospitality Is Winning Venture Investors

Editor’s Note: This is a repost of a TechCrunch article by Christine Magee.

Atlanta is home to the world’s largest drive-in, some of rap music’s greatest minds, and 71 streets named Peachtree. It’s also the center of a thriving startup scene, as we saw at last night’s Meetup + Pitch-Off.

Over the past five years, venture investors have committed $1.2 billion in venture capital to Atlanta-based startups, according to CrunchBase data. Annual deal count grew by 25% in 2014, and capital committed more than tripled the $110M recorded in 2010.

Local investors are leading the charge, participating in 29 of the 51 rounds tracked last year. Atlanta-based firms comprise 9 of the 10 most active investors in Atlanta-based startups.

Lately, Silicon Valley’s biggest VCs are doubling down on cybersecurity in the ATL. Andreessen Horowitz led Pindrop’s $35 million Series B last week, and both Google Ventures and KPCB got in on Ionic Security’s $40 million Series C last month.

Atlanta may also have its first consumer unicorn with YikYak, which raised Atlanta’s largest venture round in 2014 — a $62 million Series B led by Sequoia.

“For the right kind of deals and the right teams, West Coast VCs have been coming here for a long time,” says Glenn McGonnigle, partner at Atlanta-based firm TechOperators. “But what’s changed is that now we have a very vibrant ecosystem and talent, and increasingly we have local capital.”

TechOperators has closed five deals for Atlanta-based B2B startups in the past five years. “That’s what this region is best known for — sales, marketing tech, payments, cybersecurity, to name a few,” says McGonnigle. “It’s a historical strength.”

It’s no surprise that B2B companies flourish in A-Town — the city has the sixth-highest concentration of Fortune 500 companies in the U.S.

“When it comes to getting early customers from really big corporate logos, Atlanta is awesome because all of these big companies are supportive and they will take meetings,” says Ashish Mistry, Managing Partner at top Atlanta firm BLH Venture Partners. “You can meet with the CIO of Equifax, or Suntrust, or Coke — people who control budgets and who can give you feedback from a customer’s perspective so you can really build your business.”

Along with providing a corporate customer base, these Fortune 500 companies serve as the Google and Facebook of the South when it comes to providing a local talent pool.

And Georgia Tech, home to the fourth best Undergraduate Engineering program in the country, serves as Atlanta’s Stanford.

“The talent pool here is amazing, and the startup density is nowhere near the Bay Area or New York, so we don’t have as much turnover or attrition,” says local angel investor and entrepreneur Paul Judge. “That allows us to stay heads down and focus on building and growing instead of worrying that every time someone goes to Starbucks they’re getting five job offers,” says Judge.

Judge is among a handful of successful Atlanta entrepreneurs who have launched programs to kickstart the region’s startup scene. His latest venture, TechSquare Labs, is a blend of an incubator, seed fund and co-working space that’s located largely on Georgia Tech’s campus.

TechSquare Labs is in the process of building a brand new Innovation Lab across the street from a 45-story apartment building that will house 600 entrepreneurial-minded students upon completion. “Literally on the application to live in this building, it asks ‘do you have a startup or want to have a startup?’ “, Judge says.

This growing support system for young entrepreneurs and little competition on the venture side makes Atlanta a win-win for local investors.

“I could’ve gone and done this wherever, but there’s a ton more upside here in the sense that it’s a medium-sized pond and you can be a medium-sized fish, versus being in those markets where everybody’s got venture something on their business card and you’re breaking down the door to get into some of these companies,” says Mistry.

And then there’s the quality of life question. As the median price of a one-bedroom rental shoots above $3,400 per month in San Francisco’s most central neighborhoods, jumping ship is an increasingly attractive option. “I’ve got a 4-bedroom house in the city, 6 minutes from anything, and my mortgage is half that,” Mistry says. “It’s nuts.”

  • Originally published February 25, 2015, updated April 26, 2023