Atlanta Startups See Surge in Global VC Funding
Mailchimp's Acquisition by Intuit: A $12 Billion Deal
Intuit is acquiring Mailchimp in a deal with a valuation of $12 billion. This transaction represents a significant achievement, particularly for companies that have grown without relying on venture capital funding. Mailchimp is well-known for its history of bootstrapping.
The success also highlights the growing importance of Atlanta as a hub for startup innovation. Mailchimp was founded in Atlanta, and this exit further solidifies the city’s position in the tech landscape.
Atlanta's Rising Startup Scene
Mailchimp’s substantial exit follows a similar success story for another Atlanta-based company, Calendly. Calendly secured a $350 million funding round earlier this year, resulting in a valuation exceeding $3 billion, according to Crunchbase data.
These two companies demonstrate the increasing feasibility of building substantial startups in locations beyond the traditional tech centers of the United States. Cities like Boston, New York City, and San Francisco are no longer the sole breeding grounds for tech entrepreneurship.
Increased Venture Capital Investment
Data from CB Insights, covering the first half of 2021, reveals a surge in fundraising activity among Atlanta-based startups. The total capital raised has already surpassed the figures for all of 2020.
This acceleration in venture capital investment mirrors similar trends observed in other emerging markets, such as Chicago.
Insights from Atlanta Startup Leaders
To gain a deeper understanding of the Atlanta market, The Exchange consulted with several key figures in the local startup ecosystem.
- Sean McCormick, CEO of SingleOps
- A.T. Gimbel of Atlanta Ventures
- Ashish Mistry of BLH Venture Partners
- Paul Noble, CEO of Verusen
These leaders shared their perspectives on the sustainability of the current fundraising momentum and the level of external interest in Atlanta-based startups.
Local Dynamics and Future Optimism
The consensus is that Atlanta is experiencing a period of robust venture activity. Certain local factors may be contributing to more cost-effective scaling for early-stage companies compared to other major markets.
There is considerable optimism regarding the near-term future of the Atlanta startup scene. The city’s unique advantages and growing investor interest suggest continued growth and innovation.
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Significant Increase in Funding
The observation that a specific geographic area is witnessing unprecedented venture capital activity has become commonplace; numerous cities, regions, and nations are experiencing accelerated inflows of startup capital. However, certain markets continue to demonstrate exceptional growth even within this favorable environment for private capital investments.
Atlanta represents one such market. According to data from CB Insights, the city recorded a total investment of $2.17 billion in 2020. During the first quarter of 2021, Atlanta nearly equaled its 2020 total, with its startups securing approximately $2.07 billion in capital.
An additional $953 million was invested in the second quarter of that year. It’s important to remember that venture capital data often has a delay, meaning an apparent decrease could be offset by subsequent reports.
With roughly $3 billion invested in the first half of 2021, representing a gain of around 50% compared to 2020’s full-year results, it is evident that the city is experiencing an extraordinary surge in venture investment.
However, investment volume is only one aspect of venture capital activity. The other crucial metric is deal volume. Atlanta’s performance in this area is less remarkable; the first quarter of 2021 saw 57 deals for Atlanta startups, the second-highest figure in our dataset, slightly trailing the 59 deals recorded in the third quarter of 2017.
The second quarter of 2021 witnessed a decline in Atlanta’s reported venture deal volume to 42, a number slightly below the average quarterly deal volume observed in 2020. The aforementioned caveat regarding data reporting delays applies here as well, though it may not be sufficient to fully bridge the gap between expectations and the actual Q2 deal volume following the city’s strong Q1 performance.
Despite the relatively slower Q2 2021 deal count, current data clearly indicates that Atlanta is receiving record levels of venture capital attention. The question then becomes: what factors are fueling this increase?
Exploring the Drivers
Let's investigate the reasons behind this surge in investment.
- Growing Startup Ecosystem: Atlanta has fostered a thriving environment for startups, attracting entrepreneurs and innovators.
- Talent Pool: The city boasts a skilled workforce, particularly in technology and related fields.
- Lower Costs: Compared to other major tech hubs, Atlanta offers a more affordable cost of living and doing business.
- Increased Investor Interest: Investors are recognizing the potential of Atlanta's burgeoning startup scene.
These factors, combined with broader trends in the venture capital market, are contributing to the unprecedented investment activity in Atlanta.
Insights from the Founder
SingleOps publicized a $6 million funding round in April 2020. This Atlanta-based company develops software solutions for the sector it defines as the “green industry.” It’s important to note this designation doesn't relate to cannabis production.
Instead, SingleOps caters to the broader landscaping and outdoor maintenance market. This market segment may not be frequently considered, but the company was experiencing annual recurring revenue (ARR) growth exceeding 100% at the time of its last reported figures.
This growth helped facilitate the securing of its funding. The Exchange sought an update from SingleOps CEO Sean McCormick regarding investor engagement following the Series B funding round.
According to McCormick, investor outreach has been consistently increasing since the last funding event. He explained via email that each new ARR achievement unlocks a new tier of investor interest.
The CEO attributed this heightened interest, in part, to the growing involvement of private equity firms and the company’s unique business model. This model combines software revenue with integrated payment processing capabilities.
McCormick also highlighted Atlanta as an advantageous location for a SaaS business, specifically noting its prominence in the payments industry. He stated there is “no superior location globally” for payments-related ventures.
The influx of private equity into Atlanta is a significant factor, but external investors are also contributing to the region’s venture capital activity. We inquired whether SingleOps was observing increased interest from local investors or those based elsewhere.
McCormick indicated they are receiving “considerably more inquiries from venture capital firms in other markets.” This represents a shift from the company’s founding in 2014.
A Perspective on Atlanta’s Growth
Paul Noble, founder and CEO of Verusen, an Atlanta-based supply chain startup that has secured approximately $14 million in funding, proposed another explanation for the city’s increasing venture capital appeal.
Noble believes it stems from “a wealth of diversity in talent, experience, and perspectives,” coupled with “a robust technological foundation provided by leading academic institutions.” These institutions are actively training and empowering individuals to innovate and serve the extensive customer base within the city.
Noble’s emphasis on education aligns with observations from investors and founders in the Boston area. A key indicator of a startup hub’s potential for long-term success or growth appears to be the density of its universities.
The higher the concentration of universities per capita, the more favorable the outlook seems to be.
- Key Takeaway: A strong university presence is crucial for fostering innovation and attracting venture capital.
- Another Factor: The combination of software revenue and payment processing is attracting investor attention.
Optimistic Investment Trends
According to A.T. Gimbel, a partner at Atlanta Ventures, the timing of events is a key factor in Atlanta’s record-breaking performance during 2021.
He explained that the current level of venture investment stems from companies established five to ten years prior. Furthermore, awareness of Atlanta’s capabilities is increasing. “The recognition that impactful software companies originate within Atlanta is spreading,” Gimbel stated, highlighting the emergence of multiple unicorn companies from the city.
Similar to other thriving hubs, this growth, coupled with the increased prevalence of remote investing via platforms like Zoom, has attracted significant capital from external sources. Firms such as Base10 and Tiger Global have participated in substantial deals.
This influx of funding benefits local entrepreneurs. However, it doesn’t necessarily disadvantage local venture capital firms like BLH Venture Partners. Ashish Mistry of BLH Venture Partners shared with TechCrunch that external firms often strategically include local partners in deals.
He emphasized the value of having local expertise, stating it’s a sensible approach. Mistry also noted the positive trend of expanding local firms, citing examples like Knoll and Tech Square Ventures.
Interestingly, external investment isn’t solely focused on undervalued companies or those with lower operating costs, as these advantages are expected to diminish. “While establishing a business here remains comparatively affordable compared to more established markets, that gap is rapidly closing.”
Regarding company valuations, Mistry concluded, “We are swiftly approaching a point where we will no longer represent the most cost-effective market we once were.”
As these cost benefits fade, Atlanta will increasingly rely on its strengths: its skilled workforce and robust startup ecosystem. “The presence of a leading engineering institution, Georgia Tech, alongside strong management programs at Emory and other universities, is crucial.
Beyond academia, a cycle of experienced entrepreneurs and talent is developing. There’s a growing pool of individuals launching their third or fourth ventures, with experienced professionals re-entering the startup landscape,” Gimbel added.
Atlanta: A Hub for Innovation Across Multiple Sectors
Atlanta, well-known as the home of Coca-Cola – famously described as a “successful company packaged in a little red can” by Gimbel – boasts a thriving startup ecosystem extending into related fields.
Several companies, including MailChimp, Calendly, Salesloft, and Terminus, have significantly elevated Atlanta’s profile in the sales and marketing technology landscape. Coke’s renowned branding expertise further contributes to this strength, as Mistry pointed out, highlighting martech as a particularly dynamic sector within the city.
Fintech Dominance and Digital Payments
A robust fintech presence is also a defining characteristic of Atlanta’s startup community. McCormick explained this is largely due to the concentration of major payments companies headquartered in the area.
Remarkably, nearly 70% of global digital payment transactions are processed through systems located in Atlanta. This fact was previously reported by WABE, a local NPR affiliate, in 2016, noting that most card swipes, taps, and mobile payments are likely processed in Georgia.
Ideal Environment for Specific Businesses
This environment makes Atlanta particularly suitable for companies like SingleOps, which offers digital payment solutions. McCormick also emphasized additional factors contributing to the team’s satisfaction with being based in Atlanta.
These include a strong presence of successful vertical SaaS businesses, providing ample networking and learning opportunities. Furthermore, Atlanta is a leading metropolitan area for the green industry, aligning perfectly with SingleOps’ target market.
Diverse and Expanding Sectors
Beyond martech and fintech, Mistry identified several other strong sectors in Atlanta. These include HR and recruiting, cyber and data security, compliance, as well as supply chain and logistics.
Verusen underscores the advantages Atlanta offers to supply chain and logistics startups. Noble stated that Atlanta “has all the right elements to be the world’s epicenter for supply chain technology and digital transformation,” expressing the company’s strong commitment to the city.
Digital Health and Billion-Dollar Potential
Digital health is another growing area, exemplified by Reframe, an Atlanta-based startup featured in Y Combinator’s recent cohort. Reframe focuses on assisting individuals in reducing their alcohol consumption.
However, Gimbel’s observation perhaps best encapsulates the city’s potential: companies like Greenlight, FullStory, OneTrust, and Flock Safety have consistently demonstrated that billion-dollar businesses can be successfully established in Atlanta, irrespective of the specific industry.
Future Outlook for Atlanta Startups
The forecast for the Atlanta startup ecosystem remains largely positive, with few significant challenges anticipated in the near future.
According to Mistry, substantial external macroeconomic disruptions would be the primary factor capable of slowing venture capital investment. Essentially, as long as the broader economic climate remains stable, funding will likely continue at its current rate.
He further anticipates a continued influx of capital, provided startups maintain strong performance and funds continue to be reinvested within the ecosystem.
Gimbel shares this optimistic view, suggesting that Atlanta startups are well-positioned to maintain their fundraising momentum from the first half of the year. He notes a growing number of new startups emerging each month, increasing the opportunities for investment.
Increased angel investor activity is also contributing to this positive trend. As we move further into the third quarter of 2021, the initial half-year data becomes less current.
A renewed analysis of venture capital performance is forthcoming. However, Atlanta’s current data and prevailing optimism align with observations from other startup hubs. The startup landscape is experiencing a period of robust growth, expanding across a wider geographical area.