Urvaksh over at the Atlanta Business Chronicle recently published an article providing some coverage of the new $250M fund being launched by the State of Florida.  After reading it, I became engulfed in a sea of emotions, ranging from frustration to anger, finally settling on a mix of sadness and reflection.

The short version: This new Florida Growth Fund will not only provide capital to venture capital firms (in the form of Florida being an LP - Limited Partner), it will also co-invest (follow, not lead) directly in technology and growth companies.  The fund will be managed by a private equity firm on behalf of the Florida Retirement Pension Fund.

Georgia is the last state in the Union that does not allow private equity investments out of the state’s pension funds.  “Last.”  Wow.  Now there’s a word that simply emanates innovation.  Nothing says “cutting edge” like being listed as “last”.

“Last.”  That means that North Dakota is ahead of us in terms of allowing private equity investments from state pension funds.  WTF? Pinch me.

For all the hemming and hawing we hear from the state government about how great Georgia is for innovation, we’re really doing a pretty lame job of walking the walk, and leading by example.  We can pass a bill that invites the 2009 Georgia Peach Queen to appear before the House of Representatives, and slash the budget of the ATDC, but we can’t drive through a key piece of legislation to propel the Georgia economy into the 21st century.

“Last”.   You may also recall that Georgia is also “last” (or at least close to being “last”) in another category as well - public education for our children.  It is no coincidence.  We clearly have a remarkably uneducated group of people keeping us from joining the rest of the country in diversifying the state’s investments in the private sector.  Guess that lack of education has already caught up to us.

Does our state government really take these issues seriously?  Certainly there are some - many of whom I’ve met and had great conversations with.  But as a whole, no.  There are those that are hell bent on laying down in the middle of the street and preventing progress.

The most common arguments that I hear from opponents of such legislation is that it is “too risky” and “wouldn’t provide much in the way of economic development for anyone but Altanta.”  Humor me for a moment.

The Georgia Public Policy Foundation, which is a non-profit, independent, public policy think tank, recently published a very interesting article.  In the article, they cite the “lack of diversity” within the investments of the state’s pension funds.   Every investment has risk, but obviously the only defense against market risk is diversification of investments.  “Diversify or die”, as I like to say.  Not diversifying is even riskier. They lay out a pretty compelling case across the board. Read the article - it’s short and worth it.

With respect to the whole notion that Atlanta would be the sole beneficiary of such investments - that is simply ludicrous.  What these pundits fail to realize is that this is an ecosystem, not a one-way street.  All boats rise with the rising tide.  Would those dollars necessarily create direct jobs in rural areas?  Probably not, or certainly not that many.  Companies that attract venture capital and private equity investment tend to be fast-growth and/or high-tech companies, and those require infrastructure and a large labor force.  And those things exist in abundance in Atlanta, but few other places within the state.  But, what those investment dollars would do is create an economic return for the state.  And those additional dollars eventually make their way into port projects in Savannah, highways, schools, agricultural programs, and other projects around the state. Viewing this issue through any other prism is negligent in my view.

Normally, I would tell everyone reading this to contact your local state representative or senator, and tell them why you think passing legislation to allow the state to invest in private equity funds would be a good thing.  But we’ve all done that already.  Several times (SB80, HR249, etc).  I tire of the whole thing.

The only thing that can save us now is the passing of time, and the hope that at some point, enough rational people are voted into office to get us back on the right track.

“Last”.  I hate being last, don’t you?

Cheers.

If you care at all about the Atlanta startup ecosystem, Mike Blake and I humbly request your presence next week at the monthly Atlanta Web Entrepreneurs meeting (18th at the ATDC).  Mike Schinkel and the AWE gang have graciously invited Unblakeable and I to present our views of where Atlanta is right now, where we’re going, and some ideas around how we’re gonna get there. We believe that we are at the end of phase 1 in the rebirth of Atlanta, and that we are entering a very different phase 2.

We are bringing ideas to the table, and we want to hear yours.  And more importantly, we want to recruit you to help in the effort.  The only way we’re going to get there is if we execute together.  Gee, kinda like a startup team.

Click here for full details. Schink does a great job of laying it all out there.

If you currently play a current role in the Atlanta startup scene, want to play a role in it, or give a crap about it at all, you need to be there.  We are going to try and record the session for a slidecast/podcast for those that can’t make it - but no guarantees.

If you have ideas, bring ‘em on.  But don’t forget to bring your spirit of volunteerism with you as well.  Because you are quite likely going to be put to work.  Sitting in the crowd like a knot on a log is going to add zero value.  Throwing out ideas and not stepping in to help bring them to fruition adds only marginal value.  We want those people who are ready to step up and play their part as a software developer, web developer, mentor/advisor, educator, marketer, public relations guru, etc.

Let’s get it on.

Caveat: my wife and I are expecting our 2nd daughter to arrive at any point in the next week or so.  There is a possibility that either Unblakeable will have to go it alone, or that the event gets moved to another time.  Or, that I will run screaming from the building in a panic to get to the hospital right in the middle of something important 

Cheers.

We get a TON of applications every time we put together a CapitalLounge event. While most of the applications have some degree of merit, and eventually get accepted, there are many that don’t.  Historically, we have a non-invitation rate of anywhere from 20-30%.   Despite the enormous level of detail that we’ve published as to our selection criteria and process, invariably, we get a flood of emails the week or so leading up to the event with people appealing and arguing with us (or trying to) about why their deal was rejected.

Here is a tongue-in-cheek look at some reasons why the event applications for some entrepreneurs and investors get rejected.  If you don’t find any of this at all funny, then you most likely fall into one of these categories.

JorgeDubyaBoosh@wytehowse.guv

We can’t bloody well deliver a confirmation (or rejection) email to you if you can’t even type in your own email address properly.  Please be sure to double-check your email address before submitting a company profile or application!  There have been some really interesting looking startups that have excluded themselves because we just couldn’t reach them.

The Gettysburg Haiku Tapes

Your “pitch” comes across as a rather arcane series of mutterings that is reminiscent of an amalgam of Haiku, the Gettysburg Address, and the WaterGate Tapes.

Four score and seven
I was not a criminal
You must invest now

Seriously - here are a few gems that were rejected (no, I’m not kidding):

COMPANY works closely with our clients to ensure they are dealing with only the best.

We innovate technologies to creation for selected markets within the U.S. and abroad.

We are a leading consumer products company that is seeking angel funding.

Our firm is about MAJOR ROI while innovating the solutions that are needed.

We need angel funding to get our first customers that will be Microsoft and possibly Oracle.

We are a subscription based SaaS company that is vertically focused for maximum ROI.

We are passionate about the overall benefits of our product.

COMPANY is the innovator that will bring many industries to the next level.

Apologies to those who actually submitted these pitches - I was careful not to reveal your company name.  If you recognize any of these pitches, well … now you know at least one reason why you were rejected.  That’s progress in and of itself!

The good news is, these types of pitches are outliers - our educational efforts with PitchCamp (for example) seem to be of value to the broader community, which is cool.

The Great Zorba says you are a SaaS company, no?

If you decide that providing a “short pitch” is not worth your time and leave it blank, or you completely half-ass it, well, you aren’t likely going to get approved.  We aren’t mind readers, and we don’t have time to chase you all over the internet to try and figure out what it is you do.  Luckily for us, The Great Zorba doesn’t approve CapitalLounge applications; we do.

Meaningless Wall of Text Syndrome

We ask all entrepreneurs who have attended CapitalLounge before to provide a brief “progress report” when they apply to the CapitalLounge event.  The idea is simple.  Deals that seem to making tangible progress in between events are going to score higher and move ahead on the list.  Those that are stale, or just flopping around waiting for someone to write them a check, are going to get rejected. If your “progress report” on the application is a copy/paste text version of your business plan, or doesn’t actually mention any recent milestones for your venture, you turn our vetting process (at least in terms of looking at your deal) into a very simple one.  Fail.

According to GoDaddy, my Venture is Coming Soon!

If you have no web site, and you are using an email address of bizguy@hotmail.com, you have relegated the status of your deal to a split second, one-way decision on our part.  Sorry, but in this day and age, there is no excuse.  Even a simple teaser web site goes a long way.  And get your own domain for email, for the love of Pete.

Stealth Company That Will Change the World!
If you are in stealth mode, we understand.  Sometimes you don’t want to reveal what you’re doing until you are ready.  We get it.  But if you apply as a “stealth mode” company, you have to give us something better than these for your pitch:

Early stage stealth startup.

Changing the way we work.

Early idea still.

Mulling my next trick.

While we “get” the importance of stealth mode at times, we also “get” our need to figure out what it is that you do.  Otherwise, we’ll just assume you’re a job seeker, consultant, service-provider, etc., and you get a quick trip to File 13.  And no, we aren’t going to sign an NDA in order to learn about what you do (yes, we get asked that from time to time).

Everyone Will Want to Buy a Thin Llama Wearing Raybans!

If your startup focuses on establishing a chain of weight loss clinics, Llama ranches, or Sunglass Huts, the closest you’re going to get to our event will be the coffee shop across the street.  Come on, already.  Have you not read the event details?  The blog posts?  The rants and raves on our podcast about the criteria for getting in?  If you use the words franchise, consulting, clients, strip mall (”mall” in general), or  importer, that is almost a guaranteed rejection.  Nothing wrong with those businesses, mind you.  Just not a fit for CapitalLounge.  Talk to the SBA or your bank.  They are probably going to turn you down, because that is what banks are supposed to do.  But,

And for the love of Pete - don’t send an email telling us how “we just don’t get it” because we didn’t put your REI or franchise opportunity on a pedestal.  Trust me.  We do.  That is why you aren’t allowed to come.

Have you been injured on the job? Suffered a car accident?

If you are an attorney, accountant, consultant, etc. , wow … you must be completely incapable of comprehending simple English.   We realize that lots of entrepreneurs (would-be or otherwise) work for service providers.  We really do.  But when you apply to attend our event as an “entrepreneur”, and then we research you online, only to find out that you really work for a marketing consulting company, a financial services advisory firm, etc., we have to stick true to our vision and reject your application.

Additionally, we have to be respectful of our small stalwart band of sponsors who pay us money to offset our costs.  We give them exclusivity in terms of attending the event (e.g. we have a legal sponsor, and they are the only law firm in the room).  Works 0ut well for everyone, except you.

Um.  Jimmy works for our startup.  Yeah, that’s the ticket.

If we reject someone’s application to attend, and then you apply and list that person as your “guest” - not so good.  There is a reason we try and vet the attendees for this event.  If you can’t be respectful of this, then you can’t come and play.

Confucious say “man who have bad reputation, doesn’t get to attend CapitalLounge”

If you are known around town as a slimeball, predator, shyster, trickster, slickster, spinmeister, or just someone who “loves me some me”, you can sit outside and pat yourself on the back all night long - because, well, this is America, and you can do that if you so desire. But if you’ve ever taken advantage of an entrepreneur or investor, asked people to pay to pitch, have a reputation for taking but not giving, provide introductions for a “fee”, or  served hard time because you got caught up in one of Mike Blake’s “schemes”, you aren’t getting in.

You don’t know me, but I was the guy who invested first in Google.

If you claim to be an investor of any level, but:

• no one has heard of you
• no one can vouch for you
• you can’t cite or refer to any past deals that you’ve done
• you don’t have a web site (in the case of VCs)
• trying to find you is like trying to infiltrate the Witness Protection Program
• you wear a seersucker suit, put three gallons of Vitalis on your hair every morning, and live out of a 1974 Chevy Vega

… you can sit outside and invest in the guy who is patting himself on the back, while he tries to take advantage of the entrepreneur peddling the Llama ranch PPM.  I will admit, VCs are pretty easy to vet.  If you are a VC, you have a web site, and have raised money from LPs.  If you are a “corporate venture” type - we’ve heard of your company.  If you claim to be an angel investor, well, you better come strong with your pitch and application, or be referred to us by someone - because out of the box, we just assume angels are service providers, consultants, etc.  It’s much quicker than playing the Google game for 30 minutes trying to figure you out.

Oh man, I’m so messed up.

Any combination of one or more of the above is going to be an insta-fail.  We’re happy to be proven wrong …. we just haven’t been yet.

Cheers.

Lately I’ve been getting some blog comments and Skribit “suggestions” from an anonymous visitor.  Let’s just say the comments haven’t been terribly “engaging” - some of them have actually been quite nasty. And look, I’ll be the first to admit this - I cuss like a sailor (well, a former soldier), and believe me, I can carry my weight in a bar, but I try to have at least some modicum of class when it comes to what I post on the Internet.  Nothing says “class act” like posting an anonymous comment on someone’s site and using an email address of “dickbastard@gmail.com”.

I normally would not engage in a dialog over these types of comments, but today I am going to make an exception.  I just received this comment from Captain Anonymous:

any successful startups in Atlanta?  Seems like alot of “talk” and no meat.  When was the last exit?

Wow, where do I begin?

For starters, we don’t claim to be on the same playing field as Silicon Valley.  Everyone here in Atlanta realizes that Silicon Valley is an outlier when it comes to startup ecosystems.  As has been pointed out by many (including me), the Valley is a second (some would say third) generation capital market.  Atlanta is still a first-generation market.  You had the semi-conductor revolution and built a cool ecosystem around it.  Great.  We get it.  We also realize that Atlanta, and every other metro area in the country, will likely never reach the level of innovation and high-tech capital investment that occurs in the Valley.  And no one here is saying that we can, should, or will, ever achieve that.  In fact, if we did achieve that, I would leave - because along the way, we would most likely lose focus of the things that do make Atlanta such as a great place to be.  But we do know that given the amount of innovation that does occur here, we can be a better Atlanta, and that is an admirable goal.

Much effort has been put into the startup scene in Atlanta over the past couple of years.  I sold my last venture in 2005.  When I came up for air, I realized that the ecosystem here for startups was practically non-existent.  So a small group of us got to work to try and improve things. Since that time, countless initiatives, group, funds, and other vehicles have surfaced - all of which have provided the foundation of a real startup community here in Atlanta.  Consider this really profound slide (see the animated version) that Stephen Fleming at Georgia Tech’s VentureLab put together, which illustrates just how many components of our startup infrastructure were not even around just a few years ago.

All of these new funds, events, groups, communities, and educational opportunities have been funneled through social media, which has effectively resulted in a completely new startup ecosystem here.

So, Captain Anonymous, I’d rather talk about what is happening, rather than what you think isn’t happening.  You aren’t even here.

Curious as to exactly what part of the world Captain Anonymous hails from, I looked up his known IP addresses from his various “contributions” to my blog.   While I have no way to verify this, it would appear that the posts were made from IP addresses belonging to Yahoo!’s corporate campus.  Hmm.  They are a pretty big company the last time I checked.  Yahoo! hasn’t been a “startup” in years.  If you are such a startup guru, Captain Anonymous, quit your job at the 600 pound gorilla, venture out on your own, and take some risk.  Then let’s talk again.  For all I know, you are a serial entrepreneur with 10 exits under your belt.  You see, that’s the downside of hiding behind an anonymous moniker - I’m just going to assume that you are an uninitiated troll.

Captain Anonymous wanted to know what exits have occured here in Atlanta.  Well, off the top of my head, here are some that come to mind (a definitive list would be longer, I’m sure - these are just people that I know or deals that everyone knows about - except for Captain Anonymous):

• Scientific-Atlanta: acquired by Cisco for almost $7B
• ISS: sold to IBM for $1.3B
• Jungledisk: acquired by Rackspace
• AirDefense: acquired by Motorola
• CoreHarbor: acquired by USI/AT&T
• Harbor Payments: acquired by American Express
• Digital Insight: acquired by Intuit for $1.33B
• CipherTrust: soldto Secure Computing Corporation for $295M
• Witness Systems: sold to Verint for nearly $1B in cash
• Firethorn (Tripp Rackley, one of SP’s board members) sold to Qualcomm for $210M
• APEX Analytix (1/3 of Fortune 100 companies as customers, Noro company, sold to PNC Equity Partners)
• Engineous Software (sold to Dassault Systèmes)
• Gametap: founded by my friend Blake Lewin, acquired by Turner, then sold to Metaboli
• JBOSS: snapped up by Redhat for $350M
• N2 Broadband: Acquired by Tandberg for north of $100M
• Firearms Training Systems (FATS): Sold to Meggitt, a U.K. based defense contractor for $144M
• Weather Channel: acquired by Bain Capital ($3.5B)
• Sciele Pharma acquired for $1.3B
• Procuri: acquired by Ariba for $425M

More importantly, let’s take a look at a list of successful (current) Atlanta startups that have been funded AND are growing (again, off the top of my head - there are plenty of others):

• MFG.com: Completely changed the global manufacturing landscape - invested in heavily by Jeff Bezos and the Samwer Brothers.
• Suniva: seriously revolutionary photovoltaic technology out of Georgia Tech - recently secured a half billion dollar order from their first major customer)
• Vocalocity: A fellow Atlanta VOIP player (to what we’re doing at StarPound), a large customer base, and recently pulled in another round of growth capital
• CCP Games: Developers and operators of EVE Online, one of the most popular (and profitable) MMO’s in existence
• PureWire: Security in the cloud (already snatching up plenty of award hardware, including the coveted DEMOgod award at DEMO 09)
• Everyone at the ATDC - including recent graduates (Global Crypto, Emcien, VendorMate, Synthis, ClearLeap, Biofisica, CogentWare, Damballa, Izenda, Invistics, Sentrinsic, Qualtre, etc.)

It is only a matter of time before we start seeing successful exits from these companies as well.    Considering we’re a first-generation capital market, and still a city that is still shedding it’s industrial legacy, it  isn’t bad at all.  These deals above all happened here in Atlanta, and are all technology companies. Many were acquired by companies located in California, by the way.  If we add the non-technology startups to the mix, the list would obviously get a lot longer.  If you expand the grid to include our closest startup ecosystem neighbor in Research Triangle Park/North Carolina, the list gets even longer.

Is this on par with what is happening in the Valley?  Common wisdom would say it isn’t. But keep reading.

Out of curiosity, I asked Mike Blake, my StartupLounge co-founder (and valuation guru over at HA&W)  to pull some data from S&P (Standard & Poor’s).  I wanted to know how many successful acquisitions or public offerings there were in both the Atlanta and San Francisco bay areas.  We ran the report to cover transactions across all industries (after all, a startup is a startup), and excluded bankruptcies, spinoffs, etc. The timeframe used was from January, 2007 through today (6/3/2009), or just about two and a half years.

There were 754 such transactions in the Atlanta metro area during that time frame.  There were 700 such transactions in the San Francisco bay area.  Expanding the search southward into Silicon Valley reveals an additional 317 such transactions.  So, Atlanta has more than either one of those areas.  Even when you combine the two areas to form the broader bay area, Atlanta has still performed pretty well (700 in Atlanta, and 1,017 in the bay area, or roughly 69% in a straight comparison).

Caveat: There are two categories where San Jose had no exits at all.  Since you can’t technically calculate a percentage against a zero value, I cheated a bit, and in the formula gave them a value of “1″.

Here is a breakdown of valuation metrics of these exits:

And finally, a breakdown of the deal sizes:

Some quick observations:

• Atlanta has over twice the number of exits of the San Jose/Silicon Valley region, and slightly more than San Francisco proper.
• Atlanta holds its own even against the aggregate of the larger combined bay area
• Atlanta generated more exits $1B+ exits than both valley regions, and only slightly less than the larger combined area
• Atlanta generated more total deal value than San Jose/Valley, but less than San Francisco and the larger combined area
• The only sectors where the Valley is clearly far beyond Atlanta in terms of exits is in Healthcare and Information Technology - no surprises there
  
• Atlanta has a commanding lead in several other sectors, though, including Materials, Financials, Industrials, and Consumer
• Atlanta has more sector diversity, which in my view, is healthier in the long-run
• Atlanta has a slightly lower average valuation than the San Jose/Valley region, but less than San Francisco proper and the larger combined bay area

Now, we all know that numbers are like clay in an artist’s hands — they can be molded to represent practically anything you want.  But I think it is safe to say that there is exit activity here in Georgia.  Yes, the $1B+ exits were not all startups a few years ago - most, if not all, were older companies. But the same can be said of the Valley.  Every company is a startup at some point.  And when companies sell, that creates a lot of new economic development when those dollars begin to be deployed into new deals.

As a point of reference, the bay area in California has a total population of around 7M people, whereas the Atlanta metro area has around 5M.  Also consider this side-by-side comparison of the two geographies from the air at night.  Notice something?  As I’ve pointed out in some of my presentations, Atlanta is effectively an “island”.  We don’t have the benefit of large, adjacent metro areas in our ecosystem.  Not that I’m complaining mind you - the traffic here is bad enough as it is.  It’s just an observation, but an important one.  An angel investor from Cupertino is not going to have a problem doing a deal up in San Francisco (and vice-versa).  We have to make do with the limited resources we have available - there are no other substantive angel investors around us.

Click on the image below and you’ll see what I’m talking about.  In California, it is one big light from San Francisco all the way down to Los Angeles.  Same for Boston and the Northeast corridor.

We have a number of growth sectors here - and they probably aren’t the sectors that would typically come to mind (e.g. enterprise software) when one thinks of Atlanta.  The stretch from Atlanta up to RTP in  North Carolina has more biotech wet labs than most anywhere else in the world.  Digital Entertainment/Gaming is really coming on strong here - Atlanta is home to four MMOs (that I know of), and has an incredibly vibrant community around interactive content, game development, etc.  We have a lot of stuff popping up around nanotech and cleantech as well.

With all of that said, is Silicon Valley a great place to start a company?  Sure.  But so is Atlanta - for lots of reasons.  Are they evenly comparable?  Of course not.  But there are plenty of things happening here in the startup scene.

In my view, the comments from Mr. Anonymous belittle the hard work that has gone on here in Atlanta to improve the ecosystem for startups. Stop hiding behind an “anonymous” moniker - be a part of the solution, not a sideshow distraction.  I invite you to join in the conversation and play a constructive/productive role.  What can we learn from you?  What can you share with us that can help us evolve? All boats rise with the rising tide, as they say.  Doing anything less just makes you look like an asshat.

Cheers.

June is going to be a busy time in Atlanta for startups.   Here is a quick roundup of a few events that are worth taking a look at:

CapitalLounge

Being a co-founder of StartupLounge, I’m naturally biased.  But hey, at least I’m being honest about it. :)  Our next CapitalLounge gathering is coming up next week, Wednesday, June 10th.  Should be another awesome party for entrepreneurs and investors in Atlanta.  Our old friends J-Cap and DJ from Southern Capitol Ventures (yes, an “o”, not an “a”) are making the trek down from Raleigh, NC, as will the folks from Intersouth (also in NC).  Local investors will be out in full force as well, including Noro-Moseley, Fulcrum Ventures, Kinetic Ventures, Croft & Bender Capital, Arcapita, Grey Ghost Ventures, CEO Ventures, TechOperators, and even the Weather Channel’s venture arm.  And of course, a nice smattering of local angel investors.

If you are interested, you can check it out here.   Cost is free, but there is a vetting process.

Calling All Entrepreneurs: Atlanta!

Speaking of J-Cap and DJ from SCV … they will be in town on the 10th and the 11th.  In addition to hanging out at CapitalLounge on the night of the 10th, they are holding their “Calling All Entrepreneurs” sessions here in Atlanta.  Awesome.  I wish more VCs would do this.  No pressures, no pitching.  Just getting a chance to pick the brain of an investor over coffee.  Very cool.    From Jason:

David and I will be down in Atlanta next week on June 10 and 11. We were an original sponsor of CapitalLounge and will be at that the night of June 10th.

On June 11, we will have Calling All Entrepreneurs in Atlanta from 7-10am. We will find a place close to the ATDC. Again, any entrepreneur or aspiring entrepreneur is welcome to set up a time to come meet with us for 10 minutes. We will try and pack in as many meetings as possible and the coffee is on us! Read my prior post on this so you understand the structure and background. We did  this down in Atlanta a while back and filled it up quickly.

Just email me jason AT southerncapitolventures.com to schedule a time.

CapVenture

Also, don’t forget that the ATDC’s deadline for applications for their annual CapVenture program is on June 16th (the actual sessions are later in the year).  If you aren’t familiar with CapVenture, you should be.  It is an awesome program that aims to educate and equip early-stage entrepreneurs (primarily those seeking their first round of funding).  I have personally talked to several startup CEOs that have gone through the program and they rave about it.  Definitely check it out.

Of course, there are a ton of other events going on, some formal, some informal.   Feel free to drop a note here if you know of another great startup event happening here in Atlanta in June, or tune into the Twitterverse to get plugged in.

Cheers.