David Cummings on Startups

Atlanta Needs More $1MM in Annual Revenue Profitable Companies

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David Cummings

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Earlier this summer, Chris Dixon wrote a blog post titled Shoehorning Startups Into the VC Model where he argues most startups aren’t appropriate for venture capital (similar to the 4 Reasons to Raise Venture Capital). Joshua Baer, founder of Capital Factory (startup accelerator program) and several successful startups, wrote a comment on the post outlining his strategy to grow the Austin-area startup community:

The first thing I usually do when I talk to a startup about raising funding is to try and talk them out of it and provide alternative options (customers paying in advance is the best!). At Capital Factory, we are focusing on tech startups that can reach $1mm in profitable annual revenue on less than $1mm of funding. They can get all of that from Angels and many won’t ever need to raise more funding from VCs (and many will go raise more money).

This is a great strategy and applicable to Atlanta as well. With so few startup exits in Atlanta each year, we need more focus on building companies that are profitable on $1MM in annual revenue with less than $1MM in funding. Once a tech company achieves profitability on $1MM in annual revenue, there are many more options available like growing organically without raising more money, raising more money (money is easy to raise when you’ve derisked the model by hitting the $1MM in revenue mark), or paying dividends to owners (something that should happen more frequently in markets that don’t have many exits).

Atlanta needs more $1MM in annual revenue profitable tech companies with less than $1MM of funding to help grow the startup community.

What else? What are your thoughts on the value of $1MM in annual revenue profitable companies?

Comments

3 responses to “Atlanta Needs More $1MM in Annual Revenue Profitable Companies”

  1. Geoffrey Graham Avatar
    Geoffrey Graham

    Thanks for this post. I expect that Atlanta will get more $1M profitable tech companies after it starts celebrating the ones that it has.

    On the bright side, our tech entrepreneurs are building businesses with revenue far more often than with investment. I think that’s a healthy dynamic and wrote about it some here:

    http://www.guildquality.com/blog/2011/12/28/southern-style-software-healthy-software/

    Reply
  2. Matthew Avatar
    Matthew

    As the co-founder of a startup that is pitching at Baer’s upcoming Demo Day, and as someone that has always had at least a toe in the ATL startup community, I say: YES, absolutely.

    Atlanta reminds me of Austin insofar as it understands B2B, which is a great space to achieve these numbers. You don’t have to go huge in order to hit a million in revenue. With the number of F500’s in and around ATL, there *ought* to be ample opportunity for niche SaaS products to take root.

    Reply
  3. Dave Avatar
    Dave

    If Atlanta is going to thrive, we need to grow bigger companies with bigger exits to help grown local talent, startup founder wealth, and create a strong angel community that has some big wins as these big wins help find future investments/risks. I think if you are seeing that much success that early that by not moving fast to obtain market dominance and ride the momentum. And, if you don’t get experienced investors and advisors early involved a big outcome is highly unlikely. In my mind, Atlanta investors don’t know enough about emerging tech opportunities to offer any real value to have big outcomes that are needed to grow a thriving startup community. And, the community needs mentors and to share equity across employees generously to really make a startup career rewarding not only professionally but financially as well for all employees that have contributed. A small exit or no exit does nothing for the rapid growth if Atlanta and interest from investors as they want fast and big exits!

    Reply

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