Metro Atlanta startups get investor spotlight

Most of the pieces have been in place: top state research universities, startup incubators, the infrastructure needed to help get businesses started. Where Georgia's come up short in nurturing young tech firms, however, is in attracting investor cash.

That may be changing.

Venture Atlanta, a gathering aimed at connecting promising technology startups with major investors, drew more out-of-state investment firms to its annual confab last week than ever before, organizers say. The two-day conference lured 65 venture capital funds, including 51 from outside Georgia, an 89 percent increase over last year, said Allyson Eman, the conference’s executive director.

That investor turnoutand the funds business leaders hope they could pump into young companiescould be key in creating the next generation of Atlanta companies and lifting the metro area's job market.

“We realize we need to recruit at home and also grow what’s here,” David Hartnett, who heads the bioscience and health IT arms of the Metro Atlanta Chamber.

Business groups like the Metro Atlanta Chamber, Technology Association of Georgia and Invest Atlanta, the city’s economic development arm, have put renewed focus on cultivating new and emerging companies for their potential to help propel the region through the sluggish recovery. They’re also stepping up the marketing of Atlanta as a tech center.

Metro Atlanta is riding a wave of high-profile tech company deals, such as Vonage buying locally-based Vocalocity for $125 million, and a $200 million investment mobile security firm AirWatch received earlier this year.

The metro area also has enjoyed national buzz around hot new startup hubs like Atlanta Tech Village in Buckhead, where startups rent workspace alongside their entrepreneur peers. The village is already home to more than 100 small companies in its first year of operation.

Industry watchers say such deals help to show high-tech investors that there are solid prospects in the metro area and big money to be made here.

Dick Kramlich, an early investor in Apple and co-founder of top venture firm New Enterprise Associates, called Atlanta a “Top 5” market for startups.

“I think at NEA, we don’t do enough (in Atlanta),” Kramlich told the crowd of 700 in a ballroom at the Georgia Aquarium. “There’s a lot more we could be doing in Atlanta.”

That was music to the ears of the entrepreneurs in the room, said Tino Mantella, president of Technology Association of Georgia.

“That might be the sound bite of the conference,” Mantella said.

Thirty-one startups made presentations to partners from some of the biggest venture capital firms in the country. The conference also attracted about two dozen “angel” investment groups. These firms typically start at the earliest stages, providing initial seed money.

Most of the presenters came from key Atlanta sectors, including health care information technology, mobility and financial technology. Some companies were pre-revenue firms hoping to land their first customers. Others have been in business for a few years, and need critical funding and advice to reach the next level.

In a large banquet hall surrounded by screens, entrepreneurs got six minutes each on stage to explain what they do, who their customers are, how their business models work and how the business might grow with additional financial backing. After their pitches, the startups that piqued investors' attention met with venture groups outside the ballroom or at gatherings outside the event.

Venture capital firms invest in startup companies seen as having high risk but also high growth potential. Venture investors, in addition to taking equity in the company, also often provide key managerial or operational expertise to fledgling firms. These new companies usually can’t issue debt to finance their operations because of a lack of operational history.

Cherie Fuzzell, CEO of Parkmobile USA, makers of a mobile payment app for parking, said her company is looking to raise $5 million to $8 million to continue its growth. Parkmobile has teamed with governments, universities and parking companies in 35 states and Washington, D.C. The company processed 2,000 transactions in 2009. It’s now handling more than 1 million per month.

“I think people are beginning to recognize Atlanta as a hotbed for entrepreneurship,” said Fuzzell, a veteran of Atlanta financial technology industry. Fuzzell said she made contacts with about 12 venture funds following her presentation and had meetings with eight.

The venture capital industry, critical investors in developing companies, shrunk following the tech implosion of the early 2000s, with Georgia firms getting a fraction of what they once received.

Venture capital investing peaked in Georgia in 2000 at more than $2 billion during the tech bubble. It was about $262 million last year.

Georgia’s off to a better start at $374 million in the first three quarters of 2013, according to data from the National Venture Capital Association. But Georgia still accounted for only about 1.8 percent of the U.S. total so far this year, which was not up much over the last two years.

Given the shrinking industry, the greater number of outside venture firms at the conference is testament to the quality opportunities and Georgia’s growing tech reputation, said Mantella, the TAG president

Beyond marketing, buzz and the roster of startups at Venture Atlanta, there’s another factor that might have contributed to the strong investor turnout. Earlier this year, state lawmakers passed a law creating a state-backed venture vehicle called Invest Georgia.

Invest Georgia could pump $100 million into Georgia-based startups over several years, though money has yet to be allocated. Invest Georgia would invest in venture funds that invest in Georgia companies. Those venture firms also must have an office in Georgia to qualify for state investment.

If outside firms open local venture capital offices, Mantella said, it will lead to more exposure for Georgia companies and greater funding.