There’s a reason the Silicon Valley VCs like to invest in Silicon Valley, and the New York VCs invest in New York. It’s because entrepreneurial innovation is everywhere, but each specific region has a unique terroir. I heard that loud and clear when Valor’s new summer associates from Chicago, two gentleman from Kellogg’s venture program, attended a pitchathon we hosted last week at Emory. Their take was generally, what we’re calling early stage in Atlanta is a fully developed firm pitching in Chicago.
How could Atlanta and Chicago, cities quite alike in many ways, have really different stages? It just is that way–and has something to do with the availability locally of:
- Qualified customers in the area
- Critical mass (or lack) of mentors and entrepreneurs in the industry active locally
- Exit opportunities
- Typical valuations for different stages, historically
- Access to capital
Is local venture capital territorial?
Talent is global. Entrepreneurship is global. You can fly people in from anywhere. Remote work and remote customers are no problem. Exits often ride in on dark horses. There’s Slack. We can all think of an example of a remote CEO, a remote CFO, a Trans Atlantic key customer that simply works. So wouldn’t venture be globally distributable, too?
Hypothetically, sure. In practice, as a standard operating stance, it’s more friction for a startup to find product/market fit outside of its ecosystem. Imagine yourself designing a solution for Mongolia. You could, but it’s much harder to be super successful. So one way or another, for a startup to reach that magical repeatable sales model it needs to scale, you get back to what kind of earth its sinking its roots in.
Smart money or expensive check?
And if your capital is smart money, not just a check, it’s more effective closer to you, the entrepreneur, too.
That’s why top investors like Jenny Lee at GVV flew to China with a suitcase of cash to live there—she knows the entrepreneur on the ground. That’s why Charlie O’Donnell at Brooklyn Bridge Ventures says he’s covered up in opportunity in yes, Brooklyn. That’s why TechStars doesn’t import every startup to Denver, but instead creates TechStars in local cities, with local stars and local startups.
Atlanta: a top 10 local venture capital opportunity
It’s one of the reasons Valor is so excited about Atlanta’s startup ecosystem. Atlanta is a one of the 10 largest startup ecosystems in the country. It’s practically untapped and presents a huge opportunity for the right companies:
- Atlanta ranks 6th in the U.S. for the number of Fortune 500 headquarters (18) and have 3 of the Top 100 privately held companies, like Cox, Racetrack, and Yellow Pages.
- Georgia ranks 5th in university research, with over $1B invested annually.
- Atlanta’s investor angels rank 4th in the country for performance.
- Georgia Tech ranks among the Top 10 best buys nationally in public education.
- ATL is the largest incubator hub in 900 miles, with 500,000+ square feet of office space dedicated to innovation.
- World class programs support Atlanta startups specifically, like TechStars thanks to Cox, Flashpoint, ATDC, the MicroSoft Innovation Center, and AT&T Foundry.
- 97% of the funding for startups in Georgia comes from outside the region.
- Only 1% of venture capital firms in the U.S. are here. We get about 1% of the venture capital in the U.S. Yep, that’s an opportunity.