You hit it on the head. I'm moving to the Valley. Seriously, I have not read a better article about the funding situation in the Atlanta area. I have a very close friend who is also a angel investor that has almost begged me to move to Calf to get my company off the ground. I've run a start-up into the ground b/c of the lack of funding. Bravo.
Chuck
· 6 months ago
Wow. Incredible piece. Keep it coming.
Russell Jurney
· 6 months ago
Jason: You DO NOT have to move to California. That is not what I am saying. You only need to move to California to pursue the California Model. You can build a great company in Atlanta. You just have to use customer driven development to get an early check from a customer. You're just as likely to completely fail in California using their model. In a sense, its WORSE there because most well funded companies still produce things people do not want, and you may not find that out soon because the money hides it. If you 'get real' and aggressively interact with customers from day zero, and let them change and shape your vision, you can succeed in Atlanta. If I didn't believe that, I wouldn't be here, and I wouldn't be writing these articles.
Scott Lockhart
· 6 months ago
Russ - I would agree with what you have here... the focus for the ATL startup community seems to focus so much on raising money and pitching investors instead of building viable businesses (marketing, pr, product development). Obviously the thinking being that if you can score an investor, you have a viable business. This is not always the case. Maybe some balance would serve the community better.
Jason
· 6 months ago
I was sort of kidding and sort of not kidding about the moving to Calf comment. I'm currently working on two projects, both will be initially based in the Atlanta area. One is Green Tech and the other one is market analysis. (I'd like to talk with you about the demo based one over lunch.) I believe fully in both and know they will fly when launched. I completely understood what you were talking about in your article about how the Calf model does not apply to Atlanta, as of right now and how it's caused some entrepreneurs to crash and burn. I also agree about intensive customer interaction only helps develop a better product. I'm currently in talks with two possible customers about the demo company and some of the features they said would be great were completely off my radar. THEY ARE NOW KEY FEATURES IN THE PRODUCT DESIGN. Bootstrapping takes a little longer but with key customer input, the final product stands a much better chance of hitting a homerun.
Lance
· 6 months ago
Russell: Your trip west matured you a great deal. What you are proclaiming here is a step level function above the average Atlanta entrepreneur. If just one Atlanta entrepreneur heeds your advice then the community investment for your trip is well spent. And BTW, you really know how to type. Prose and code.
Todd
· 6 months ago
There needs to be a place where companies/customers can describe their "pains" so that others (startups) know what problems to focus on. I call this "painstorming" (as opposed to brainstorming). Too many startups have solutions looking for problems.
Jeff Haynie
· 6 months ago
this is the best post i've read in such a long time. great job! this should be mandatory reading tomorrow morning for every person in ATL. In fact
Jeff Haynie
· 6 months ago
My last comment was cut-off for some reason... In fact, this should be on the op-ed page of Sunday's AJC.
Heath Wilkes
· 6 months ago
Your recommendations are spot-on. The concept of moving at the speed-of-profit teaches startups (and anyone in business) to make wiser choices. Too many ideas forget to include customers in the equation. There is that great line in Jurassic Park -- life will find a way. Well products do to, as customers use and change them in ways you never anticipated. Sure, there is a practicality to having a customer-driven development loop that will never be as sexy as CA idealism, but it does makes for more profitable companies. The idea you've hit upon is our 'mojo' can and should be -- we listen. To markets. To customers. And to our own community. I'd love for Atlanta to be known as the city that simply launches solution-based companies that actually meet customer needs. That's how we move past the shadow of the west, and make a name of our own! On a personal note, it was cool to meet you tonight at AWE. Your voice is refreshingly raw and needed. Keep the stories coming...
Mike Schinkel
· 6 months ago
Bravo Russell, Bravo.
Derrick Peavy
· 6 months ago
Amen. "I can’t say that strongly enough. In Georgia, the California State of Mind will try to kill you and will ruin your life. Its not like us. It wants to kill your family. It belongs on the terrorist watch list. " First hand knowledge. We need to spread the word.
Russell - an excellent and well written article that has basically gone to the fundamental aspect of all product/service creation. New products/services fall into one of two categories. They are either "technology push" or "market pull" and the "technology push" category is the opiate that drives the entrepreneur to ruin or reward again and again and again. Having been involved in 3 start-ups, I am well aware of the high of coming up with a new idea, writing business plan upon business plan and making presentation after presentation in the hope of landing the funding to make the company go. Balancing funding and development with the right amount of growth and pursing sales as if they were the mirage on the desert horizon, only to realize that the world was not yet ready for your product or service. What has made Silicon Valley such a hotbed for the "technology push" model was the initial success of so many great companies like HP, Intel, Apple, Adobe, Atari, and then in the internet age Yahoo, EBay, and Google. To understand why this "California Model" continues to work in the Valley and not in Atlanta or Boca Raton or Austin is due in large part to the mentality of the suppliers of the capital. With the VC firms and start-up angels that inhabit Sand Creek Road what drives them is not the promise of investing in a successful start-up, but rather the fear of not being in on the next "Google", so they are willing to fund 20 losers that may never amount to anything, because what will get them marquis status is that they were behind that one big winner. Further, if you follow the money trail, an early investment in Apple or Google will in the long run have an ROI that will far exceed the losses in the 20 losers that never made it. They aren't remembered for those, but they will gladly tell you that they were behind the big successes. Thus, the fear of not being on the winning team drives them to keep the coffers open. And the financial success of the Apples and Googles has filled the coffers deep. This hasn't happened in Atlanta. Thus your observation that the entrepreneur should focus on the customer, the "market pull" side of product/service development is spot on. And one only has to look at a few examples of success in cities known for many other things other than start-up capital to see that the "market pull" model is doable almost anywhere there is a customer. The two most prominent examples to me are "Domino's Pizza" which was started in Detroit and a small little company called "FEDEX" which was started in Memphis. Neither location was the hotbed of venture money, yet both companies addressed a market need and succeeded. Your observation that Atlanta could become the hotbed of the "market pull" approach is 100% correct and setting up the infrastructure via the customer base of large corporations that reside in Atlanta is long overdue.
Mark Wood
· 6 months ago
Mea Culpa - in my previous post, I referred to VC companies being on "Sand Creek Road" and obviously I should have said "Sand Hill Road". Got carried away with my typing.
Amro Mousa
· 6 months ago
Well said, Russel
Amro Mousa
· 6 months ago
Well said
Bryon
· 6 months ago
As a founder in the thick of it (and it's pretty damn thick right now) I haven't felt compelled either by time or effort to comment on such articles. For a long time now I've understood that the ecosystem for a tech startup in Atlanta "Is what it is". I spend zero time pitching to investors and lots of time building relationships. I think there is more value in that for now and in the future. If, or when the time comes to actively seek outside funding, it will depend largely on whether the company has the need to scale large. In the meantime, I couldn't agree with you more that if you're going to stay in Atlanta, the Sand Hill model is not one to follow. That being said, in my opinion there seems to be a circular reference between the ubiquitous group of tech investors, large corporate sponsors and great resources such as TAG, GRA, ATDC and others which generally promote the Sand Hill Model. Until we see some of the focus shift from the "fundable" startup to the startup that can generate customer traction (even if it starts out as a lifestyle business) for better or worse Atlanta will remain as it is.
Alan Pinstein
· 6 months ago
Nice work, Russell! What a great scouting report to bring back to Atlanta. Hopefully your post will act as a beacon for local entrepreneurs to try the "right" type of startup in Atlanta.
Career Entreprenuer
· 6 months ago
Fundamentally your article makes a lot of sense. Regardless of your Geography a compelling product will eventually find its way. As a career entrepreneur myself, growing up in Atlanta and building companies there, I can say without any reservation that it is MUCH EASIER to build a technology company on the west coast rather than Atlanta - without investment money! Which is why I live in San Francisco now. Let me back up that statement by saying I believe that you are missing a few very large components in your comparison. Money and investment (though extremely notable) are NOT the only problems that start ups face- (1) The environment in which you grow your start up has a huge impact on chances of success. (2) You seem to assume everyone is building a product focused on the Fortune 500. To address the first issue: Environment Atlanta has historically been 5-8 years behind the curve relative to adoption of new technology. This is painful for a start up as companies are simply not open to new ideas. At best they are not adopting anything new until their competitors do. The eco-system in the valley is simply more conducive to growing technology based start ups. It has nothing to do with proximity to investment or cash. Proximity to some of the smartest and globally educated technology people in the world should count for something. A start up is as much about the team as it is about the product/service it produces. Second Issue: What do Fortune 500's have to do with anything? Another major problem with Atlanta is the community seems to believe that the only way to build a start up is to focus on B2B plays. This is just not true. There are many success stories in the B2C world. However, let's assume for a moment that you want to focus in this arena (which your article suggests)... your stats regarding Georgia appear to come from a 2006 Fortune magazine article that show's Georgia as the #3 city for Fortune 500 companies. According to this article, Georgia represents a grand total of 14 companies (out of 500 obviously). That means Atlanta has 2.8% of the the Fortune 500's in the country. Not very good odds for a "non-funded" start up. To further add insult to injury, does anyone know how hard it is to get a Fortune 500 company to adopt a new technology from an unproven, pre-revenue, non-funded startup? Not very likely. In Atlanta, you have to know someone. These two factors alone make the task of a B2B play in Atlanta nearly impossible for the average start up. Finally... to quote from your article: "If the de facto product for an Atlanta startup founded by twenty something hackers arose not from social media developments in California, but from early and aggressive contact with Atlanta’s economic powerhouses, who actively participated in the creation of the solution because it solves a serious problem they are having, our funding problem would not matter. We wouldn’t have a funding problem." The keyword here being "IF" that were true. It's not. Unfortunately the defacto standard IS coming out of California. Reading Jeff Haynie's blog post/response to this article I found it interesting that eventually you will move to the valley. I also appreciate his parting words of advice... either move to the valley, or build from Atlanta and shut up! Ultimately no one disputes the fact that you should be able to grow a $1M-$2M "lifestyle" company from anywhere on the planet. But if you are going to build a multi-million dollar technology company, you are much more likely to succeed in Silicon Valley, California than any other place. It's just that simple.
Jason Brett
· 6 months ago
Hell of a piece, Russell. I think some of the folks at last night's AWE meeting were flirting around the edges of some of your call to action here, but it didn't quit connect. I am thrilled with the commentary and perspective you offer, and am frankly blown away by the obvious impact that your visit to SV brought to your thinking. Thanks for your contribution, and welcome home!
Bill Braasch
· 6 months ago
Eric Reis, white courtesy telephone. Eric worked with Steve Blank's ideas at his startup and has developed the ideas into a set of practices. Here's a link to his blog: <a href="http://startuplessonslearned.blogspot.com/" target="_blank">http://startuplessonslearned.blogspot.com/ The Lean Startup model is a more efficient way to invest in the idea. Eric integrates continuous deployment and a fail fast approach. It's a race to best iterate the idea more often than it's an idea nobody else has. From there, it's about learning and executing.
Celia Dyer
· 6 months ago
I just ordered Steve Blank's '4 Steps to the Epiphany.' After I've read it, I'm glad to lend it out.
Ajai Karthikeyan
· 6 months ago
Props to Russell on a well written post - great content. I am with Celia on the 4 Steps to the Epiphany and ordered a copy myself.
Jason
· 6 months ago
Actually getting a team up right now to address this situation, we are looking for other interested in getting this going too. Drop me a line at jason.erik.green@gmail.com
Kumar
· 6 months ago
Great Post. Twitter-no revenue model- gets VC funded. What happens in Silicon Valley stays in Silicon Valley. Atlanta is not a silicon valley, and we shouldn't try to make it one. Atlanta has great brain capital. It lacks Community hub and Connectors. Simple Exercise: How many startups can you name? In 10 words or less what does the ATDC do? What is Atlanta's industry?(ie. oil & gas, financial, biotech, energy, nanotech) See what I mean?
Mike Schinkel
· 6 months ago
Not to be contrary as I do believe Russel made a great post and agree with you on that, but as you asked for how many startups in Atlanta, how about 157 early stage[1] & 26 later stage[2]? [1] <a href="http://atllogos.com/index.html?tab=early" target="_blank">http://atllogos.com/index.html?tab=early [2] <a href="http://atllogos.com/index.html?tab=later" target="_blank">http://atllogos.com/index.html?tab=later
Chris Morris
· 6 months ago
Russell, I realized something about the ATL scene when I started asking establish players what three ATL startups I should try to go work at, maybe for free, if I wanted to learn something about being successful in Atlanta. This list is short but most people refused to answer it. If you are working on a startup that is not using a customer development model, stop coding, right now. Make a customer pitch deck and pitch customers. I did this with SeatSnack. I had nothing that we were pitching, but we found a customer that would build it with us. A local established company that was already doing concessions. They were willing to go deep on their side of the equation if we would do the tech side and grow the business after it was built at their establishment. We also learned a TON about the industry and identified that our dreams of quick meaningful revenue were out of touch with how the industry works. Then it was personal decision time, did I think I could get the support behind me and my team that I would need to make this work, to any extent? Short answer: no. SeatSnack simply is not the type of company people in ATL seem to be very excited about. Maybe that never would have matter but I did not wank to find out for $10k a month. So now I work for a fast growing manufacturing company a hour away from the city. Everyday I get to focus on making the business better not raising money, not growing outside support. We simply execute and refine to execute better. I may not be living the dream I think but this is a much better use of my time then the last year I spent writing code that no one really cared about.
Russell Jurney
· 6 months ago
Chirs - one clarification - are you still building a startup, or are you an employee at that company?
Chris Morris
· 6 months ago
I am an employee now. The company has been around for one year. So it is still basically a startup, just not a tech one.
Russell Jurney
· 6 months ago
I see, so you were able to translate your vision and hard work into an equity stake and a salary at an existing startup? There's all kinds of happy endings, and new beginnings like that happening, and its a great, great thing.
Russell Jurney
· 6 months ago
Kumar: Atlanta has great brain capital, and it has lacked a community hub in the past. But now we have that hub at Tech square, and we have many connectors that are willing to help. You've just got to seek the help out. Its available. The help I'm receiving right now from entrepreneurs older and more experienced than me is more valuable than any amount of money an investor could give me. Pop Quiz Answers: 1) I can name 150+ startups, thanks to Paul Freet. 2) ATDC is a technology incubator that helps make great startups. 3) Atlanta's industries... I'll get into that in my next article. You're onto something ;) What if we identified them, and then made sure to get their help in crafting products they and others in their industries would buy?
Chris Morris
· 6 months ago
I have no idea how you got that. I don't have any equity in the company I currently work at. I did Servinity as a partner and SeatSnack as the CEO. With SeatSnack we tried to follow the four steps model. From that I discovered that you really can go and get a customer without a product, something I did not believe when working on Servinity. However, even with one local arena to build with us, I did not think we had something that I could get the ATL scene to support. For various reasons including some of the thought leaders in the ATL scene not thinking it was a "good idea". So both companys have been shut down. So I went and got a job.
Russell Jurney
· 6 months ago
I see. I thought that is what you meant by, "They were willing to go deep on their side of the equation if we would do the tech side."
Mike Schinkel
· 6 months ago
Chris: That's really depressing. I for one thought SeatSnack was a great idea; hopefully I have you that impression when you explained it to me. If you any reason I didn't I deeply regret that. That said, at least you've got a salary now and I hope this doesn't mean you are forever gone from the Atlanta Startup scene. I always thought your energy was infectious. Maybe you were just too early in the startup phases for Atlanta? -Mike
Mike Schinkel
· 6 months ago
Damn typos. First paragraph was supposed to be (w/asterisks marking typos): "That's really depressing. I for one thought SeatSnack was a great idea; hopefully I *gave* you that impression when you explained it to me. If *for* any reason I didn't I deeply regret that."
Chris Morris
· 6 months ago
I should be clear there were a few people that did think it was a good idea. You were one of them. However most people thought it had too many "moving pieces" or was not a technology company. (ie: what am I going to protect on the IP side) But really the issue for me was the way that technology/new offerings end up in stadiums. The concessionaires don't drive the process. Instead the owners mandate the changes on their contracts. So this would mean we have to build it, get it working somewhere and then shop the venue owners as they renew their contracts. Multiple large venue owners told us they would be willing to mandate it on their contract renew but that time frame is 1 - 2 years away. After all that was done we would begin to discover if people in stadiums would actually use it. Really I see it as a perfect type of idea that someone like me (no public success) could never get working in Atlanta. As far as the Atlanta startup scene, I have no idea what it will look like in the future. Most days I feel like most people involved in it are struggling to put food on the table for their families. I have always said the thing that would move this community forward the fastest would be the startups that are currently “making it” (if there are any) to get the failed startup folks jobs where they can learn what success looks like. Naturally you have to have a filter for the, simply not qualified people, but at the end of the day there are a few smart people that have shown potential in other fields have tried to do a startup in Atlanta and were no where close. It would be more of a “community” if instead of losing those people we actively tried to find them roles in working startups. (I realize it sounds like I am talking about myself, really I am not. I did not even try to get a job in a startup here.)
Nancy Chambers
· 6 months ago
I will have to admit that the lack of attention to market needs as a MAJOR consideration in product design and feature prioritization is amazing among Atlanta companies. Our firm does market validation studies, which measure how well new concepts meet market needs, and we have done very few studies of this type for Atlanta companies. Most of our business of this type has come from other regions where development by trial and error is considered a waste of resources.
Marc Nathan
· 6 months ago
Russell,
I am extremely impressed with this post since it describes the startup community situation in Houston, Texas with 98% accuracy. The only differences are basically cosmetic - we have a more active angel community, via the Houston Angel Network (http://www.houstonangelnetwork.org) and we have the second highest number (instead of the third highest for Atlanta) of Fortune 500 headquarters in the US, with 23. The point that I'm agreeing with is that it is both foolish and wasteful to try to replicate the culture and infrastructure of a region that is built exclusively on one industry - that is a little like trying start a marathon when the leader is 20 miles ahead of you already. Certain areas have a built-in expertise - it's in their DNA. The simple truth is Silicon Valley is to startups, just as Hollywood is to entertainment, Detroit is to automobiles and Houston is to the energy industry. Building a vibrant, diverse and most of all profitable startup community has to be created just like an individual startup company - one customer at a time. Customer Driven Development applies to economic regions as well - who are the potential clients (current industries)? what do they need (really, what do their own clients need)? what can they pay (does the market exist)? I believe that more non-Silicon Valley communities are starting to realize that high growth and wealth generation can and will happen via the 'Creative Class' workers including web startups. We are also starting to see a grassroots effort to collaborate and share best practices - in our case Houston and Atlanta share a couple of passionate and community focused guys like Paul Stamatiou and Kumar Thangudu (currently my intern for the summer at the Houston Technology Center).
Overall, I welcome the chance to keep this conversation going and I personally want to make sure that we can all put our web-based startups on the map in the global marketplace of ideas regardless of the fact that we don't have California Zip codes on our letterheads.
Marc Nathan
Director of Entrepreneur Development, Information Technology Sector
P.S. Houston Technology Center is very similar to ATDC, but we recognize that as a 'formal' established organization we have to partner with more 'informal' grassroots organizations like coworking sites and IT-related meetup groups like OpenCoffee Club and NetSquared in order to truly be called a startup community.
Mike Schinkel
· 6 months ago
Thanks for clarifying. Starting a business is hard. Deciding to stop something you've invested your heart and soul into can be even harder. I completely get where you are coming from regarding the difficult of finding customers who can say yes and say it now. Here's hoping your current stint will prepare you for your next venture and that it won't be too far into the future.
Charles Lumpkin
· 6 months ago
This echos my thoughts in a much more elegant way. Keep it coming.
Charlie Hubbard
· 6 months ago
So I just recently attended the Atl Web Entrepreneur meeting where Scott Burkett and Unblakeable outlined the same sort of issues they saw with Atl startup community. They, very much like you, pointed to the fact the model is different here in the South, and that we aren't the valley. However, they claimed that there are funding sources to be had now, and that funding IS NOT the problem. However, you're article suggests otherwise if I read it correctly. And, in fact this lack of funding leads to poor choices to funding startups. This sounds right to me. I think your point of customer driven development is a practical approach to overcoming our differences with Silicon Valley. In fact, I think it's probably more efficient to think about the problem that way as opposed to Silicon Valley model. Find customers. If you can do that then you have a business. I think Scott and Blake were suggesting this as well albeit through a slightly different approach. They wanted to engage startups and successful entrepreneurs. I suggested a "Adopt a Startup" campaign model. Find companies that are willing to provide some minimal resources, office space, servers, etc, for them the startup get off the ground. That would connect the startup and industry together. Give the startup access to industry experience and potentially provide industry with access to fresh ideas. If we can get our companies incubating startups that might complement their markets then we could accomplish what you are suggesting. Help start ups find customers in their potential markets and help identify problems industry faces faster. The only way is to get the dialog between them going.
Mike Schinkel
· 6 months ago
Charlie, Thanks for attending AWE on the 18th. "Adopt a Startup" is a great idea. Any chance you want to take the lead in coordinating that? I will definitely help you with it if so. -Mike
telanon
· 6 months ago
Very well written article, Russ. I'm looking forward to the next in the series.
Nick
· 6 months ago
Maybe I'm misunderstanding but wouldn't this method create a system in which companies can only survive if they latch onto the Fortune 500s? Wouldn't this limit the potential businesses that are ABLE to start up? This doesn't exactly get at the fact that money is dry here... What you're arguing for is "non-flexible dollars" in which dollars are achieved only if they have successful partners that unevenly have a say in the business/product direction. If you ask me, this still damns Atlanta to mediocrity if I understand your prescription well enough.
Mike Schinkel
· 5 months ago
It doesn't have to be Fortune 500's, it just has to be paying customers. "Paying customers" can be "small businesses", "medium-sized businesses", "government agencies", "military installations", "non-profit organizations", or even "consumers." The bottom line is that the requirement to find customers doesn't damn us to mediocrity, it actually ensures superiority. You don't have to stop shooting for the stars, you just need to be able to eat during the journey. But don't take my reply to assume I'm saying it will be easy; it will be damn hard. Ask any funded CEO in the valley and my guess is they will all say they worked/are working their a**es off. And that's the fun of it all.
All Comments
I am extremely impressed with this post since it describes the startup community situation in Houston, Texas with 98% accuracy. The only differences are basically cosmetic - we have a more active angel community, via the Houston Angel Network (http://www.houstonangelnetwork.org) and we have the second highest number (instead of the third highest for Atlanta) of Fortune 500 headquarters in the US, with 23. The point that I'm agreeing with is that it is both foolish and wasteful to try to replicate the culture and infrastructure of a region that is built exclusively on one industry - that is a little like trying start a marathon when the leader is 20 miles ahead of you already. Certain areas have a built-in expertise - it's in their DNA. The simple truth is Silicon Valley is to startups, just as Hollywood is to entertainment, Detroit is to automobiles and Houston is to the energy industry. Building a vibrant, diverse and most of all profitable startup community has to be created just like an individual startup company - one customer at a time. Customer Driven Development applies to economic regions as well - who are the potential clients (current industries)? what do they need (really, what do their own clients need)? what can they pay (does the market exist)? I believe that more non-Silicon Valley communities are starting to realize that high growth and wealth generation can and will happen via the 'Creative Class' workers including web startups. We are also starting to see a grassroots effort to collaborate and share best practices - in our case Houston and Atlanta share a couple of passionate and community focused guys like Paul Stamatiou and Kumar Thangudu (currently my intern for the summer at the Houston Technology Center).
Overall, I welcome the chance to keep this conversation going and I personally want to make sure that we can all put our web-based startups on the map in the global marketplace of ideas regardless of the fact that we don't have California Zip codes on our letterheads.
Marc Nathan
Director of Entrepreneur Development, Information Technology Sector
Houston Technology Center
http://www.houstontech.org
P.S. Houston Technology Center is very similar to ATDC, but we recognize that as a 'formal' established organization we have to partner with more 'informal' grassroots organizations like coworking sites and IT-related meetup groups like OpenCoffee Club and NetSquared in order to truly be called a startup community.