Atlanta Becomes Hot-Bed for Tech Start-Ups

3:19 PM, Feb 15, 2013   |    comments
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By Jefferson Graham, USA TODAY

ATLANTA - You can buy a small home in the suburbs here for as little as $100,000. Food and transportation can be more affordable than in its Northern big-city counterparts.

Yet Atlanta is the USA's ninth largest city, with a metro population of nearly 6 million. It is home to the nation's busiest airport and huge companies such as Coca-Cola, UPS, Home Depot and Turner Broadcasting.

What it hasn't been is a top 10 city for tech start-ups. But that's changing.

Access to Hartsfield-Jackson airport and the metro area's low-cost living and working expenses have encouraged many young start-ups to try Atlanta.

"Our goal in the next 10 years is to make Atlanta one of the top 10 cities for tech start-ups," says Johnson Cook, the managing director of the new Atlanta Tech Village, a "co-working" space that opened in January.

The Village sold out its 85 available desks - via Twitter - within two weeks. It now has a waiting list of 100 people who want to pay $300 monthly per desk.

Local university Georgia Tech has 40 companies working at its Advanced Technology Development Center, which it calls the largest and oldest campus-based tech incubator in the nation. It, too, has a waiting list of 21 companies wanting to participate.

Firms get to stay at the ATDC for up to three years. Georgia Tech has no investment in the companies. Its intent, instead, is to help create jobs by helping small businesses get off the ground, says Stephen Fleming, a Georgia Tech vice-president.

Many tech start-ups working within Atlanta focus on B2B - companies looking to work directly with big firms.

"One of the beauties of Atlanta is you have access to so many Fortune 400 companies," says Adam Wexler, a co-founder of InsightPool, which helps businesses with customer acquisition. "If you can create a solution that satisfies their needs, you'll be in a good spot."

Because Atlanta has such a high concentration of medical providers, many tech start-ups also look to the burgeoning health field.

Patientco, for instance, helps doctors make bills understandable to the public, and Digital Assent eliminates the need to fill out forms in doctor offices.

Patientco CEO Bird Blitch says being based at Georgia Tech and having access to students is "great for recruiting." Being on campus "helps us shine a little more in terms of the perceived tech benefits."

According to the AngelList website, which tracks start-ups, there are 363 tech start-ups operating in the Atlanta area. The National Venture Capital Association puts Atlanta as the No. 12 city in the nation for tech start-ups, with 54 start-ups funded in 2012. That's above Denver's 50, but way below 1,146 in the San Francisco/San Jose area.

A handful of past start-ups are well known, most notably MindSpring, an early Internet provider that was started at the ATDC and later snapped up by EarthLink; and Khush, maker of the popular Songify app for Apple and Android devices. It was acquired by Palo Alto, Calif.-based Smule in 2011.

Three Atlanta-based start-ups had big exits for their founders in 2012. Social media marketer Vitrue was acquired by Oracle. Pardot, which specializes in online leads, went to Indianapolis-based ExactTarget. Gannett, the parent company of USA TODAY, picked up Blinq Media, which helps design social-media ad campaigns.

Nationally, the San Francisco area is by far the No. 1 spot for tech start-ups, followed by Boston, New York, Los Angeles, Washington, D.C., and Seattle, according to the National Venture Capital Association.

In those cities, tech giants help fuel the start-up scene. Just as Silicon Valley has Google and Apple, and Seattle has Amazon and Microsoft, local investor David Cummings says Atlanta can break into the top 10 with a huge, breakout consumer tech company.

"We don't have it yet, but it will happen," says Cummings, the founder of Pardot, and Atlanta Tech Village. "We need a billion-dollar software company."

Cummings thinks local start-up AirWatch could be it. The firm, which helps enterprises manage employee cellphones, is looking to raise $150 million in a 2013 IPO, and has said it plans to double its workforce to 2,000 this year.

The IPO's impact "will be huge," says Cummings. "It will really put Atlanta's tech scene on the map."

But while folks at start-ups can live cheaply and find an audience for their products and services, Atlanta's drawback is money. Venture capital, Cummings says, doesn't flow as easily as it does in Silicon Valley.

"This isn't a field of dreams," adds Cummings. "You can't walk in with an idea written on the back of a napkin. Here you have to prove the value on day one."

Top Cities for Tech Start-ups

1. San Francisco/San Jose: 1,146 companies funded in 2012

2. Boston: 415

3. New York, 302

4. Los Angeles: 181

5. Washington, D.C: 116

6. Seattle: 111

7. San Diego: 101

8. Philadelphia: 98

9. Austin: 87

10. Pittsburgh: 76

Source: National Association of Venture Capital

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