We continue our interview series with Endeavor Entrepreneur, Stephen Pair. Stephen is the co-founder and CEO of BitPay, the world's leading blockchain payment processor. BitPay has raised over $72M from leading venture capital firms and operates in one of the most exciting industries in the world. We dive into cryptocurrency, the importance of blockchain and why Stephen decided to join Endeavor.
We sat down with serial entrepreneur and Endeavor Atlanta board member David Cummings. He founded the Atlanta Tech Village, Atlanta Ventures, and bootstrapped Pardot which he eventually sold for $95 Million. David shares insights about his entrepreneurial journey, the Atlanta ecosystem, and why he joined Endeavor Atlanta.
On March 30th Endeavor Atlanta held its first Scale-Up Breakfast, an intimate gathering for high-growth entrepreneurs focused on learning from successful founders. Serial entrepreneur and Endeavor Atlanta Co-Chairman Jeff Arnold took the stage to talk about scaling culture and talent in high growth companies.
Dave Keil, CEO of QASymphony and Endeavor Entrepreneur, kicks off our interview series. Dave has a diverse background leading early stage companies as well as large enterprises (e.g., ChoicePoint). Under his leadership, QASymphony has grown from a few employees in 2014 to a team of 100 generating significant revenue. In 2017 alone they opened a European office, grew revenue by 113% and raised a $40M Series C from Insight Venture Partners.
Endeavor Atlanta will turn one in March. With this milestone approaching, Adam and I thought it would be a good time to share what we have learned about Atlanta’s entrepreneurial ecosystem and highlight the areas of opportunity the region can address to create an even better environment to scale a business.
Before we dive into our findings, we want to reaffirm the many assets Atlanta has today – things even “the coasts” would covet. This includes our amazing cost of living, diverse population, highly-skilled talent pool, and access to the world through our airport. And perhaps most importantly we have an increasing level of startup activity and support mechanisms in place for founders. Indeed, a great foundation we shouldn’t take for granted.
In speaking with hundreds of entrepreneurs, mentors, and investors (including outside Atlanta), several opportunity areas emerged that would move our ecosystem forward: better access to capital and mentors.
On the capital side, we surveyed some of the top entrepreneurs in Atlanta that are running high-growth, revenue generating businesses and found the following:
- 82%* found it challenging to raise money locally
- 43% noted misaligned traction expectations based on the round being raised (e.g., expecting $1M in revenue for a seed round)
- Capital raising challenges occur at all stages of equity financing, from pre-revenue and seed rounds through growth equity, although it's most pronounced in angel through Series B
- 30% specifically mentioned onerous terms as a barrier to taking local investment
Interestingly, many investors we spoke with, including local, SF and NYC based firms, mentioned the lack of quality opportunities in Atlanta. This is causing local investors to invest more and more outside our region. So, is it the lack of great ideas and entrepreneurs, or a lack of capital? Or both? We don’t necessarily have the answers, but we have a few theories to offer:
- Theory #1: the chicken or egg problem. Money tends to follow success, which begets more success through increased investment. Increased investment allows founders to tackle bigger problems, and so on. With few local home-run** stories to point toward, Atlanta’s ecosystem is conditioned to settle for singles and doubles. This drives investment down, creates lower valuations and less friendly terms, and home runs become harder to find. As one founder in our survey stated, "Entrepreneurs in Atlanta need to think bigger. We have a reputation for exiting with a single or double rather than hanging on to scale to a home run.”
- Theory #2: Conservative and siloed capital. Local investors (non-institutional) prefer traditional investment opportunities (e.g., real estate) over venture deals. Breakfast capital is hard to find and often hidden in very closed networks of wealth individuals. This makes it very hard for early stage startups, especially in very new or cutting edge markets.
- Theory #3: Talent to scale. Several investors we spoke with mentioned the valuation haircut Atlanta companies often face raising capital in part due to fear the company will struggle to scale talent locally. Part of this is likely cultural given the large percentage of Atlanta’s talent that works in lower risk corporate environments, but part is lack of brand recognition for our diverse, educated talent pool. Unfortunately, perception is reality. But having firms like Amazon and Apple and many others look to Atlanta as an HQ market shows that perception is changing.
We believe all three areas are being addressed somewhat organically today. Local success stories like Greensky, Mailchimp, Sharecare, Rubicon Global, Kabbage, and AirWatch are creating the north stars new Atlanta founders can use for inspiration and investors can see as examples of Atlanta’s potential. A few more “IPO ready” firms that scale and stay in Atlanta can help address many of the areas above too.
The second area of opportunity entrepreneurs mentioned was increasing access to high-quality mentors. At a local level this means pulling in more successful founders and executives to pay it forward as well as increasing access to mentors outside our region. The entrepreneurs we’ve had the pleasure of working with desire a mix of “generalist” founders that understand broad areas related to scaling a company and “subject matter expert” advisors that know their specific challenge areas or industries very well. Finding a great mentor for each entrepreneur situation is a non-trivial exercise that requires a broad network to pull from and a high level of trust.
The last area of opportunity we’ll mention is really an output of the first two: speed to execute. Assuming it’s harder for an Atlanta based entrepreneur to raise capital and find great mentors to support scaling, these companies likely lose precious time in the process. Time is the enemy of every founder and time spent looking for help provides an opportunity for competitors. Solving for the first two opportunities increases the speed with which entrepreneurs can execute, increasing their chances of outsized success.
As we’ve interacted with Endeavor’s global mentors and entrepreneurs, we realized many of these opportunities are not unique to Atlanta. In fact, Endeavor’s model, now in its 21st year, focuses on addressing the areas outlined above. In other words, Atlanta’s challenges are often the same ones faced by entrepreneurs in Spain, Japan, Ecuador, Louisville and many other locations outside the proverbial coasts.
As one local founder put it, "Atlanta's ecosystem has good bones, but we still have a ways to go." We agree, and we’re excited to be a part of building the future.
* – Endeavor Atlanta survey of over 50 top local entrepreneurs leading revenue generating companies
** – Defined loosely as $500M+ exits