I enjoy reading Paul Graham’s essays on startups. If you’re thinking of starting a tech startup, read his essays, first. They’re chock-full of wisdom for entrepreneurs.
Recently, however, he wrote on essay on The Future of Startups, where he states, “Atlanta is Hosed”, because it is not world-renown as a “Startup Hub”. Startup hubs, being places where startup venture funding is a bit easier to come by; Boston, D.C., Silicon Valley. This comment has sparked some sharp rebuttals from my fellow Atlantans, and I’m here to tell you from personal experience Paul is right, and they are wrong… Atlanta really is hosed.
I’ve been meaning to blog on this subject for a while now, but was afraid to ruffle the local feathers… Okay, seriously, when have I cared about offending anyone? Here goes…
1. Atlanta VC funds: I’ve met and talked to a good deal of them. I’ve found they all have one thing in common… they couldn’t see a good technology startup/investment, even if it punched them in the face. You’ll have better luck with them funding a plumbing company than a tech startup – They don’t get tech -They don’t embrace innovation – They’re risk averse.
2. Atlanta “incubators”/seed funds: These are the same people that turned down JBoss back in the day. Need I say more? Okay, I will… Good job guys. A $350m exit later and you’re still missing other great local opportunities, and funding the stupid ones. Keep up the good work, as you slide in to obscurity.
3. Atlanta Executives: Its no wonder why JBoss, which happened to have the best executive team I’ve ever had the pleasure to work with, was made up of people outside of Atlanta (all except for one). Local companies I’ve worked for seem to hire executives right off the turnip truck… and from the bottom of the pile, at that.
4. Yeehaw! Good-ole-boys!: This is no joke, and most likely explains all of the points above. Business in this town works on the good-old-boys principle; If you’re in, you’re in. If you’re out, you’ll never get in. If you’re unwilling to play by the rules, you will not pass Go and you will not collect $200. I was thrown out because I have an annoying habit of being honest.
I think most of the local decline in this field, is due to brain-drain, but thats for another post. So Paul is correct, but don’t despair, he’s also wrong. There are things you can do as an Atlanta startup to circumvent the local freak show, and there are very good things about Atlanta that you can use to your advantage:
1. Cheap/Talented labor: Atlanta has great University graduates – from sales, marketing, to engineering. Meanwhile, your competitor in CA, is diluting his equity just to deal with the high capital costs. Good luck getting that second round of funding with less revenue and an inflated valuation. In the end, its all up to how you execute using this competitive advantage.
2. Job #1: Build your business: Throw the Silicon Valley business model out the door. You’re not there, so it doesn’t apply. That model always begins with you getting seed funding, sometimes in the millions. No Atlanta VC (unless he’s your good-ole-boy) is going to take the risk to fund you if you have no executive team, no product, and no revenue. Remote VCs won’t bother with the jet-lag anyway. Build your business, show revenue growth Q-over-Q, and build your team. You need to concentrate on eliminating risk for your potential funding partners. Once you can show a viable business, VCs will offer money from every corner of the globe! Digium was funded in Alabama, of all places, based on this principle.
3. Time to get funded: Lets assume you have your little company with your 5 minions, and decide to get funding. Get introduced to VCs in the hub cities. Those guys will get on a plane for you, and will help you build your business, as long as you took care of #2 above. Advice: Go to the locals, only if California gets hit with an earthquake and slides in to the ocean.
So thats a short and honest response to Paul Graham’s essay and the subsequent Atlantan rebuttals. Is it harder building a tech startup in Atlanta? Absolutely. Is it impossible? Nothing is impossible. Concentrate on building your business, first. Worry about the money falling from the sky later.
Competitors: Don’t try to deduce whats going on at LoopFuse from this post. We’re far exceeding our revenue targets and nicely funded. You’re better off keeping an eye on your customer list. 
