Atlanta Startups: How the City Became a Billion-Dollar Hub

The Rise of the Southeastern Tech Ecosystem

The Southeastern United States, with Atlanta at its forefront, has experienced a remarkable transformation in the technology sector over the last five years.

What was once considered a hidden gem is now a thriving ecosystem, populated by numerous high-growth companies valued at over $1 billion – often referred to as “unicorns” within the investment community.

Significant Venture Capital Growth

Venture capital investments in the region have dramatically increased, reaching $2.1 billion over the past five years.

Notably, $1 billion was invested in the most recent year alone, as reported by Lisa Calhoun, a partner at Atlanta-based Valor Ventures.

Fueling the Growth: Regional Talent

This surge in investment is directly linked to the exceptional entrepreneurial talent emerging from the region’s extensive network of educational institutions.

These include prominent universities such as Georgia Tech, the University of Alabama, Auburn University, the University of Georgia, Vanderbilt University, Emory University, and historically black colleges and universities (HBCUs) like Morehouse College, Spelman College, and Xavier University of Louisiana.

A Reinvestment in Local Entrepreneurship

The growth also signifies a sustained commitment to fostering local entrepreneurship.

This represents a long-term effort to position Atlanta as the central hub of a network of burgeoning startup cities, extending from Miami to Atlanta, and encompassing cities like Birmingham, Nashville, and New Orleans.

Atlanta: A Model for Future Tech Hubs

“Atlanta embodies the characteristics of a next-generation, globally-focused tech hub, moving beyond the traditional Silicon Valley model,” stated Calhoun.

“Our demographic trends are ahead of the national shift towards a majority-minority population.”

• Over 40% of the U.S. population resides in the Southeast.
• The region boasts the highest concentration of founders and executives of color.
• Major tech companies, including AirBnB, are establishing a presence in the area.
• Atlanta possesses a strong legacy of technological innovation and skilled talent.

Calhoun emphasizes that Atlanta’s diverse and expanding population provides a crucial foundation for founders seeking to scale their businesses.

Challenges and Opportunities Ahead

Despite the impressive progress, further development is necessary to solidify the region’s position as a leading driver of economic returns for the venture capital and investment industries.

Currently, the Southeast contributes 24% to the U.S. GDP but receives only 7% of venture investment.

Momentum and Investor Confidence

Blake Patton, founder and general partner of Tech Square Ventures, notes that recent momentum is attracting increased investor attention.

Investors are now actively supporting local fund managers, who are, in turn, investing in the region’s most promising entrepreneurs.

This shift indicates a growing confidence in the Southeastern tech ecosystem’s potential.

Atlanta's Rise and Fall During the Dot-Com Era

Following the 1996 Olympic Games, Atlanta emerged as a prominent contender to become a leading startup center within the United States.

The global exposure gained from hosting the Olympics, coupled with the burgeoning activity and investment surrounding internet firms like America Online in Virginia, prompted Atlanta’s mayor and city council to actively pursue establishing the city as a hub for telecommunications and startups during the initial phase of the first internet boom.

Christy Brown, founder of Launchpad2X and a seasoned entrepreneur deeply connected to Atlanta’s tech community, explains: “The 1996 Olympics significantly elevated Atlanta’s global profile. It transcended our reputation as merely a logistics center.”

Brown continues, “As the dot-com boom gained momentum in the late 1990s, less visible developments occurred. Atlanta Gas Light possessed the nation’s most extensive dark fiber network encircling the city, initially constructed for the Olympics.”

Georgia Tech’s contributions were also crucial, expanding its research into aerospace and incorporating computer engineering programs.

Atlanta experienced early triumphs with several high-growth telecom and networking companies that played a vital role in the first dot-com wave.

However, the later years of these companies were often marked by controversy or acquisition by larger corporations, such as MCI Worldcom and Airtouch Cellular, which was ultimately integrated into Cingular Wireless and then a reformed AT&T.

“Numerous technological advancements were taking place within the city,” Brown stated. “Many founders secured venture capital, but this ultimately contributed to the dot-com bust.”

“This period occurred in the mid to late 1990s, and when the dot-com bubble burst, Atlanta experienced significant failures.”

The collapse of early internet companies during the dot-com bubble burst in 2000 had a substantial impact on Atlanta’s tech landscape.

Early progress was undone, initiating a decade of rebuilding characterized by limited successes from companies that persevered through the downturn.

Navigating Challenging Economic Periods

MailChimp stands as an example of a company that persevered through difficult times. Established in 2001, following the collapse of the technology bubble, this privately owned email marketing venture originated as one of several projects within the web development company founded by Ben Chestnut and Dan Kurzius.

Chestnut and Kurzius initially connected while working on an early MP3-related product at Cox Interactive Media. After this project ended, both individuals experienced job loss and subsequently collaborated to establish their own business.

They constructed MailChimp utilizing generated revenue, opting for a bootstrapping approach without external venture capital. This self-funded model became highly sought after by other tech entrepreneurs in the region.

In 2003, John Marshall initiated a separate entrepreneurial endeavor, focusing on the installation of internet hotspots in hospitality establishments. His Wandering WiFi service expanded to encompass the monitoring and management of diverse network infrastructures. This venture ultimately contributed to another significant tech exit in Atlanta with AirWatch.

For the initial six years, MailChimp operated as a secondary project. The co-founders continued to develop the service, but it didn't become their primary focus. It wasn't until 2007, upon reaching 10,000 users, that the company transitioned into a full-time commitment for both founders.

This initially modest startup ultimately led to substantial wealth for its founders. A 2018 Forbes assessment valued the company at $4.2 billion, based on approximately $600 million in revenue.

The year 2006 potentially marked the beginning of Atlanta’s tech resurgence. This occurred a few years before the global financial crisis, when the tech sector was becoming a more appealing investment opportunity. Internet Security Systems, a prominent Atlanta-based dot-com company that went public in the late 1990s, was acquired by IBM for $1.3 billion that year.

Tom Noonan and Chris Klaus, the co-founders of Internet Security Systems, also faced a lengthy development process. Their company began as a venture started while Klaus resided above Noonan’s garage in Atlanta during the mid-1990s. It evolved into a business generating $400 million in annual revenue prior to its acquisition by IBM.

As investment capital began to flow into Atlanta and the city re-established its position in the tech landscape, founders who had previously exited their companies started reinvesting funds locally. Simultaneously, the city implemented initiatives to promote entrepreneurship through increased event offerings. The launch of Venture Atlanta in 2006, a conference designed to highlight emerging talent and startups from the region, served as a catalyst for numerous entrepreneurs who would subsequently shape Atlanta’s technology sector.

The Rise of Atlanta's Startup Ecosystem

2006 marked a pivotal year for Atlanta, not just for company exits, but as the catalyst for a surge in entrepreneurial ventures. This period laid the groundwork for the now-flourishing startup landscape, consistently producing billion-dollar tech companies.

That year saw the establishment of Pardot by David Cummings and Adam Blitzer, a firm specializing in marketing and sales automation software. Its rapid growth quickly garnered attention from industry leaders such as ExactTarget. Simultaneously, Alan Dabbiere, formerly of Manhattan Associates, joined Marshall and Wandering WiFi evolved into AirWatch, a provider of mobile enterprise network management and security solutions.

Early Growth and Key Players

The subsequent years witnessed increased activity from MailChimp. Cloud Sherpas, founded by Michael Cohn – now a co-founder of Overline Ventures alongside Sean O’Brien – also began operations.

Further innovations emerged, including ClearLeap, a video streaming technology firm acquired by IBM in 2015 for a valuation exceeding $110 million. Damballa, a security company, was launched (later acquired by Core Security) and Cardlytics, powering customer rewards programs for major banks, entered the market (currently trading on Nasdaq with a $4 billion market capitalization).

Expansion and Diversification

The success of these initial tech companies encouraged further entrepreneurial activity. Kabbage (acquired for $850 million), Calendly (valued at $3 billion currently), and Pindrop, a voice identification technology developer (having raised $90 million in 2018), all emerged around the same timeframe.

These companies established a foundation for a diverse range of startups, primarily concentrating on payments and financial services, cloud-based business solutions, and internet security. A shift occurred away from the hardware-focused telecom and networking companies, like Scientific Atlanta, which previously defined the city’s high-tech sector – mirroring Hewlett Packard’s impact on Silicon Valley in the 1950s.

Investment and Future Growth

Concurrently, a new wave of investors began to focus on Atlanta, signaled by the 2006 launch of BIP Capital. This development proved particularly significant for the city’s growing number of entrepreneurs.

• Pardot: Founded in 2006, focused on marketing automation.
• AirWatch: Evolved from Wandering WiFi, specializing in mobile security.
• Cardlytics: Powers bank rewards programs, now a publicly traded company.

The influx of investment and the emergence of successful startups created a positive feedback loop, fostering continued growth and innovation within the Atlanta tech ecosystem.

Atlanta’s Emerging Startup Landscape

A growing number of entrepreneurs establishing themselves in Atlanta has significantly revitalized the city’s investment sector. Following the downturn caused by the dot-com bubble burst, Atlanta-based investment firms that persevered began focusing on more mature businesses and seeking startups beyond the local tech ecosystem, as evidenced by CrunchBase data and investor/founder interviews.

Noro-Moseley Partners stands out as the most prolific Atlanta-based investor. Throughout its history, the firm has completed over 123 deals, according to Crunchbase. However, in the past five years, only four of these investments were directed towards companies located in Atlanta.

Conversely, BIP’s newcomers have been actively deploying capital and securing increasingly substantial funding since their arrival. Over the last five years, the firm has invested in at least 15 Atlanta-area ventures. Now operating as Panoramic Ventures, they are aiming to raise a $300 million early-stage fund for investments throughout the Southeast and Midwest.

“Historically, securing capital presented challenges for founders in Atlanta and the broader Southeast. Being based outside of established innovation centers like Silicon Valley or the Northeast was often seen as a disadvantage for tech companies due to difficulties in attracting investment. This stemmed from the concentration of large funds within those hubs and the abundance of local investment opportunities,” explained Mark Buffington, co-founder and CEO of BIP Capital, in an email to TechCrunch. “While these traditional hubs remain significant in terms of overall capital, the necessity for startups to be physically located within them is diminishing. Venture funds are increasingly establishing a presence in other regions where innovation is flourishing. Simultaneously, the availability of capital from local and regional investors is expanding, largely due to increased capital flow into private markets.”

New Investors Fuel Growth

Patton is another key figure among the new generation of investors reshaping Atlanta’s investment landscape. Their work with Tech Square Ventures and Engage – a corporate venture capital initiative leveraging the resources of major Atlanta corporations – has spurred both entrepreneurship and heightened interest in startup tech companies.

“The current momentum in the region is driven by enhanced connectivity within the innovation ecosystem and a substantial influx of entrepreneurs and skilled talent emerging from the region’s successful startups. With corporations prioritizing digital transformation and innovation, all major companies are, to some extent, becoming tech companies, fostering connectivity as talent moves between startups and established tech firms,” Patton stated. “Our greatest asset may be our diversity, being home to four prominent HBCUs. I anticipate that within the next five years, the Southeast will become a leader in cultivating successful startups founded by diverse entrepreneurs and built with diverse teams. This isn’t merely a matter of ethics – given that half of the nation’s Black population resides in the Southeast, the region must succeed in engaging underserved entrepreneurs to lead, and national diversity efforts cannot succeed without addressing the Southeast.”

However, additional elements were crucial for the revitalization of startup activity within the city. These included co-working spaces such as David Cummings’ launch of Atlanta Tech Village in 2012, the continued importance of the Advanced Technology Development Center, the Venture Atlanta conference, and the Hypepotamus platform – which remains the primary source for Southern startup news.

Entrepreneurs and investors consistently highlighted Cummings’ decision to reinvest in the city and establish the Tech Village near Buckhead as a pivotal moment in Atlanta’s entrepreneurial resurgence. Following the sale of Pardot, Cummings and David Lightburn founded Atlanta Tech Village as a co-working space for entrepreneurs. It quickly attracted a new cohort of founders who would launch the next generation of successful startups. “David Cummings, after selling Pardot, envisioned a community space for entrepreneurs,” remarked a long-standing member of the Atlanta tech community. “They hosted ‘startup chow down’ lunches and provided substantial support to entrepreneurs building their businesses.”

Equally important was the longstanding role of the Advanced Technology Development Center, affiliated with Georgia Tech, as noted by entrepreneurs and investors. Venture Atlanta also played a role, attracting investors from across the country to showcase the region’s top talent. Collectively, these four initiatives and workspaces for early-stage entrepreneurs fostered the growth of companies like PartPic, Greenlight (now valued at $2.3 billion), Kabbage, FullStory, and Pindrop.

A Hub for Diverse Entrepreneurs and Investors

In the formative years of Atlanta’s startup scene, Hypepotamus distinguished itself as a particularly welcoming environment for founders from diverse backgrounds and women-led businesses – offering both co-working spaces and dedicated offices.

Monique Mills, a seasoned entrepreneur, was a frequent presence there. Jewel Burks Solomon, who successfully sold her company PartPic to Amazon in 2016 and currently serves as Head of Google for Startups in the U.S., also benefited from the Hypepotamus community.

Burks Solomon recalls receiving crucial early support from Hypepotamus, stating, “My initial office space was provided by Hypepotamus through their complimentary program, which was essential given my limited funds at the time.” She continued, “Following a funding round, I secured space at ATDC – Georgia’s state-sponsored incubator, which offered subsidized rates, an entrepreneur-in-residence program, and comprehensive support for Atlanta-based tech startups.”

Several founders and investors credit the Hypepotamus space, along with subsequent venues like Opportunity Hub and The Gathering Spot, with being instrumental in fostering the growth of Atlanta’s Black entrepreneurial community.

While Hypepotamus, initially established within National Builder Supply, served as a key catalyst, angel investor Mike Ross played an equally vital role.

“Mike’s investments have been pivotal to the success of numerous Black-led startups in Atlanta, and our current standing wouldn’t be possible without his support,” asserts entrepreneur Candace Mitchell Harris in a recent UrbanGeekz profile. “He consistently provided funding and encouragement to founders, even when others offered only empty promises or outright rejections.”

Ross, an alumnus of Morehouse College, built his wealth through consulting in the construction and contracting sectors. He has provided backing to a diverse range of Black founders and investors, including: Luma, Partpic, Monsieur, Axis Replay, Myavana, TechSquare Labs, Opportunity Hub, and The Gathering Spot.

The investment support from Ross directly benefited individuals such as Paul Judge, Joey Womack, Barry Givens, and Mitchell Harris.

Mitchell Harris, co-founder and CEO of the beauty tech startup Myavana, shared with UrbanGeekz, “Mike was the foundational investor in our company’s success. I vividly remember our first meeting at the Black Founders Conference in June 2012, where he demonstrated a genuine enthusiasm for the burgeoning tech startup movement in Atlanta.”

Ross’s early investments paved the way for other investors, including the Fearless Fund – a venture capital firm led by Arian Simone, Ayanna Parsons, and Keshia Knight Pulliam, launched in 2019 – and Collab Capital, which debuted last year and is spearheaded by Burks Solomon, Justin Dawkins, and Barry Givens.

Simone emphasized the importance of funding women of color, stating, “Currently, women of color are starting businesses at a high rate, yet receive the least amount of funding.” She further declared, “Atlanta is a central hub for Black entrepreneurship, and we need a strong venture capital and tech presence here. I urge the city of Atlanta, the state of Georgia, and financial institutions to actively support our efforts, as it is critically needed.”

This support is demonstrably effective. According to TechCrunch’s research, 41% of the 36 venture capital firms focused on early-stage investments in Atlanta meet at least one of these criteria: a stated focus on diversity in investments, a diverse fund management team, or both, based on data from Crunchbase.

Furthermore, a study of 158 Atlanta-based startups in the Pre-Seed, Seed, or Series A stages – included in TechCrunch’s research – revealed that 48% had at least one of the following characteristics: a sex-diverse founding team, a racially-diverse founding team, or both. It’s important to note that publicly available data may underestimate the true number of diverse founders, as many teams do not self-identify.

UrbanGeekz highlights that approximately 25% of Atlanta’s tech workforce is Black, a significant contrast to the 6% figure in San Francisco.