Atlanta’s sundry startups join in global VC funding boom


Image Credits: Nigel Sussman (opens in a new window)

Mailchimp is selling itself to Intuit in a transaction valued at $12 billion. The deal is a coup not only for companies that eschew venture capital backing — Mailchimp is famous for its bootstrapping history — but also for the city of its founding, Atlanta.

Mailchimp’s mega-exit comes in the same year that fellow Atlanta-based startup Calendly raised a massive $350 million round that valued the technology company north of $3 billion, per Crunchbase data.

The two companies underscore how possible it is to build large startups in markets outside of the traditional collection of cities most associated with technology entrepreneurship in the United States, like Boston, New York City and San Francisco, to name a few.

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Investors are taking note. CB Insights data through Q2 2021 indicates that startups in Atlanta are on a fundraising tear, already surpassing total capital raised in 2020 in just the first half of this year. The city’s venture acceleration is similar to fundraising gains we’ve seen in markets like Chicago.

The Exchange wanted to better understand the Atlanta market, especially regarding how bullish its local inventors are that its current pace of fundraising can continue, and what sort of external interest its startups are enjoying. So, we ran questions by Sean McCormick, the CEO of Atlanta-based SingleOps, a software startup that raised capital earlier this year; Atlanta Ventures’ A.T. Gimbel; and BLH Venture Partners’ Ashish Mistry. We also heard from Paul Noble, CEO of Verusen, a supply chain intelligence startup that raised an $8 million Series A round in January.

The picture that forms is one of a city enjoying a rising tide of venture activity, boosted by some local dynamics that may have helped some of its earlier-stage companies scale more cheaply than they might have in other markets. And there’s plenty of optimism to be found concerning the near future. Let’s explore.

A funding boom

It’s cliche at this point to note that a particular geography is experiencing record venture capital results; many cities, regions and countries are seeing startup capital inflows accelerate. But there are markets where the gains still stand out despite the generally warm climate for private capital investments into private companies.

Atlanta is one such market. Per CB Insights data, the U.S. city saw $2.17 billion in total investment during 2020. In the first quarter of 2021, Atlanta nearly matched its 2020 tally, with its startups collecting some $2.07 billion in total capital. Another $953 million was invested in the second quarter of the year; keep in mind that venture capital data is laggy, and thus what may appear to be a sharp decline may be ameliorated by later disclosures.

But with around $3 billion invested in the first half of 2021, already around a 50% gain on 2020’s full-year figures, it’s clear the city is seeing an unprecedented wave of venture investment.

Dollar volume is half the venture capital activity matrix, of course. The other key data line for the investment type is deal volume. There Atlanta’s activity is less superlative; Q1 2021 saw Atlanta startups attract 57 total deals, the second-best results that we have data for, narrowly losing to Q3 2017’s 59 deals.

But Q2 2021 saw Atlanta’s known venture deal volume fall to 42, a figure that is a slight miss from 2020’s average deal volume, measured on a quarterly basis. The same caveat regarding delayed data applies here, but perhaps not enough to completely close the gap between what we might have expected from Atlanta startups in terms of Q2 deal volume in the wake of the city’s super-active Q1.

Despite the somewhat slack Q2 2021 deal count in Atlanta, per current data, it’s clear that the city is enjoying record venture capital attention. What’s driving the uptick? Let’s find out.

The founder’s perspective

In April 2020, SingleOps announced a $6 million round. The Atlanta-based company builds software for what it calls the “green industry.” Notably, that’s not a reference to cannabis. Instead, SingleOps serves the larger landscaping and outdoor care market.

A market segment you think about often? Perhaps not, but the company was growing its ARR by more than 100% when we last checked in, helping explain how it secured its funding round.

The Exchange was curious about the intervening time, asking SingleOps CEO Sean McCormick about investor outreach since his company’s Series B. Per the executive, investor outreach has increased “steadily” since his company last raised. “Each new ARR milestone” that SingleOps reaches, he wrote in an email, “seems to open up a whole new segment of [investor] interest.”

McCormick partially credited private equity and his company’s business model genre — a mixture of software revenues and payments support — as reasons for the interest that SingleOps has received. (In response to another question, the CEO called Atlanta a great place for a SaaS business, adding that there is “no better place in the world to be for payments” than his local market. More on sectors shortly.)

Private equity interest in Atlanta is only one part of the puzzle. External investors are also helping drive the market’s venture activity. We asked McCormick if he was seeing more interest from local investors, or those from other markets. SingleOps is hearing “much more from VCs in other markets,” a change from when the company was founded in 2014, he added.

Paul Noble, founder and CEO of Verusen, an Atlanta-based startup focused on supply chains that has raised around $14 million, offered another hypothesis as to why the city is seeing more venture demand. In his view, it’s “an abundance of diversity in human talent, experience and thought” combined with “a technology backdrop of world-class academic institutions … that are actively training and fueling people to innovate and support the extensive customer base of companies” in the city.

Noble’s comments regarding education echo what we heard from Boston-area investors and founders a few weeks back; an indicator that a particular market may survive or thrive as a startup hub appears to be its university density. The more per capita, the better it appears.

Bullish investors

Atlanta Ventures partner A.T. Gimbel said timing is one reason Atlanta is breaking records in 2021.

“The venture investment occurring today is a result of several companies starting five to 10 years ago.” And then, there’s awareness. “The word is getting out — software businesses that generate substantial impact are homegrown here in Atlanta,” he said, referring to the fact that several unicorns have now sprouted from the Georgia city.

As we have seen in other locations, this, combined with the rise of Zoom investing, has resulted in an influx of out-of-town money — with firms like Base10 and Tiger involved in noteworthy deals. Good news for local entrepreneurs, but not necessarily bad news for a local VC fund like BLH Venture Partners, Ashish Mistry told TechCrunch: “Out-of-town firms are also smart enough to include local firms in their deals, because they know it’s prudent to have someone local involved.” As a positive sign, he mentioned “the number of newer and growing local firms like Knoll and Tech Square Ventures.”

Perhaps more interestingly, outside money isn’t just chasing underpriced deals or companies operating at lower costs — because our sources agree that neither will last. “Building a company here is still relatively more cost effective compared to other mature markets, but it feels like we are catching up quickly.” As for valuations, “we’re quickly getting to a place where we won’t be the most value-oriented market that we were once,” Mistry summed up.

With these advantages gone, Atlanta will have perhaps more important arguments to tout: its talent pool and startup ecosystem. “We have a top engineering university, Georgia Tech, as well as management programs at Emory and other universities; but beyond that, there’s also other companies that have previously succeeded. So, you have an ecosystem that’s not nascent: entrepreneurs who are not just starting their first or second startup, but their third or fourth, with talent that’s recycling as well.”

Marketing, fintech and much more

Famously being home to what Gimbel jokingly referred to as a “successful company that is packaged in a little red can” (Coca-Cola), Atlanta has strong startups in related fields: “Companies like MailChimp, Calendly, Salesloft and Terminus have put Atlanta on the map when it comes to sales and marketing,” he said, noting that Coke is renowned for its branding work. And Mistry highlighted martech as one of the city’s hottest sectors.

There’s also a strong fintech side to the city’s startup scene, for reasons McCormick made obvious: “Almost all of the large payments companies have headquarters in Atlanta and nearly 70% of the world’s digital payments are processed by systems in Atlanta.” This was corroborated by a 2016 story from local radio WABE, an NPR affiliate: “Every time you swipe, tap or insert your card and even pay with your phone, there’s a good chance the transaction will be processed here in Georgia.”

This makes it a good fit for SingleOps, which has a digital payments offering, but McCormick also mentioned other sector-related factors that explain why the team is “very content with being in Atlanta,” including the fact that “there are a whole host of successful vertical SaaS businesses and many opportunities to network and learn from them,” and Atlanta being “a leading metro for the green industry,” which, again, is SingleOps’ target.

Mistry described HR and recruiting, cyber/data security and compliance, and supply chain and logistics as strong sectors in addition to martech and fintech.

Verusen confirms why Atlanta is a good place for supply chain and logistics startups: “There is no place we would rather call home,” Noble said of Atlanta, arguing that “it has all the right elements to be the world’s epicenter for supply chain technology and digital transformation.”

Gimbel also had a word for digital health, which was recently represented in Y Combinator’s latest batch by Reframe, an Atlanta-based startup helping people cut back on drinking alcohol, and one of our Demo Day favorites. But maybe what we’ll remember is another point Gimbel made: “Greenlight, FullStory, OneTrust and Flock Safety have proven time and time again that billion-dollar businesses can be built here regardless of the industry.”

What’s to come

Looking forward, you will not be surprised to learn that there are few clouds on the horizon for the Atlanta startup scene.

“For the rest of the year, I am not seeing any headwinds unless we have a macro externality,” Mistry said. Translating that a little, Mistry is saying that short of a dramatic impact to the larger macroeconomic environment that Atlanta operates in, venture capital investment will continue apace.

The investor went on to write that he expects “money to continue to flow as long as startups keep on performing and money continues to cycle.”

Gimbel agrees, writing that it is possible for Atlanta’s startups to fundraise in the back half of the year at the same pace they managed at the start of the year, adding that startups in the city are “spawning monthly and the amount of at-bats are more plentiful than ever.” Gimbel also cited rising angel activity.

We are now into the third quarter of 2021, making our H1 data increasingly aged. Soon it will be time to start a fresh look at venture capital results. But Atlanta’s data and on-the-ground optimism mirror what we’ve seen in other markets. It’s full-octane time in Startup Land, a region that is increasingly geographically broad.

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