2 Year Growth of 2 Pre-IPO Atlanta Startups

Continuing with yesterday’s post on Atlanta Companies on the 2016 Inc. 500, there are two tech startups that really standout: Kabbage and Cardlytics. Both are financial tech (FinTech) companies that are growing super fast. Here’s a bit about each and their revenues for the last two years:

Kabbage – Small business lending based on alternative data sources to evaluate credit worthiness (e.g. checks your eBay ratings, Amazon ratings, UPS shipment volume, and QuickBooks statements to determine a loan amount). Here’s Kabbage’s revenue for the last two years as published in the Inc. 500:

  • 2016 – $97.4 million
  • 2015 – $40.1 million

Cardlytics – Aggregates data from 1,500 financial institutions to run online and mobile banking rewards programs (think anonymized purchase data from consumers that’s used to serve up relevant offers). Here’s Cardlytics revenue for the last two years as published in the Inc. 500:

  • 2016 – $77.6 million
  • 2015 – $53.4 million

Based on the scale of the business and growth of revenue, both of these companies would be in pre-IPO territory. Often, $100 million in revenue is the magic mark to go public and both should pass that this year. Congrats to both companies on the great growth and here’s to their continued success.

What else? What are some more thoughts on Kabbage and Cardlytics?

Atlanta Companies on the 2016 Inc. 500

The 2016 Inc. 500 just came out and it’s great to see 30 companies from Atlanta on the list (up from 28 last year). Here are the Atlanta companies on the 2016 Inc. 500:

  • #5 Company.com, $33.3m
  • #19 Thrive Farmers, $23.1m
  • #42 Castle Medical, $49m
  • #44 MacStadium, $5.8m
  • #88 Futurewave Systems, $14.7m
  • #98 CATMEDIA, $17.4m
  • #99 ArrowCore Group, $4.7m
  • #107 CallRail, $6.2m
  • #183 Kabbage, $97.4m
  • #195 Global Lending Services, $70.6m
  • #240 AKESOgen, $8.9m
  • #260 Orion, $5.9m
  • #269 Synartis Health, $2.1m
  • #276 PSG Construction, $24.3m
  • #307 Aspirent Consulting, $6m
  • #328 GENERAL MATERIALS, $3.2m
  • #333 Karna, $14.9m
  • #339 OTR Capital, $11m
  • #354 Real Estate Expert Advisors, $1.6m
  • #356 Access Point Financial, $30.5m
  • #365 Assurity Staffing Group, $2.6m
  • #366 Cardlytics, $77.6m
  • #377 Social123, $2.7m
  • #389 Anteris Management Consulting, $4.2m
  • #390 ImagineAir, $2.8m
  • #407 Digital Enterprise, $5.1m
  • #415 Regulated Capital Consultants, $9.9m
  • #461 Nolan Transportation Group, $196.3m
  • #470 Totally Joined For Achieving Collaborative Techniques, $4.1m
  • #497 S2 IT Group, $3.7m

Congratulations to all the winners of the 2016 Inc. 500!

TechStars Mentor Manifesto

Last night TechStars Atlanta announced their 2016 class. As part of the event, they invited all the mentors and passed out The Mentor Manifesto:

  1. Be socratic
  2. Expect nothing in return (you’ll be delighted with what you get).
  3. Be authentic and practice what you preach.
  4. Be direct. Tell the truth, however hard.
  5. Listen, too.
  6. The best mentor relationships eventually become two-way.
  7. Be responsive.
  8. Adopt at least one company every single year.
  9. Clearly separate opinion from fact.
  10. Hold information in confidence.
  11. Clearly commit to mentor or do not. Either is fine.
  12. “I don’t know” is preferable to bravado.
  13. Guide, don’t control. Teams must make their own decisions.
  14. Accept and communicate with other mentors.
  15. Be optimistic.
  16. Provide specific actionable advice, don’t be vague.
  17. Be challenging and robust but never destructive.
  18. Have empathy. Remember that startups are hard.

Thanks to @lance for tweeting this out.

Atlanta Startup Village #39

Tomorrow night at the Atlanta Tech Village is Atlanta Startup Village (ASV) #39. ASV is free to the public and the largest monthly gathering of entrepreneurs in the Southeast. Here are the presenting startups:

  • HandiCRM – full featured CRM for general contractors
  • The Memory Kit – Where memories live
  • Flippy – Become the star of famous clips
  • Sifted – Pop-up lunches as a perk
  • SidePrize – Weekly cash prizes for your fantasy league

Please join us at the event and connect with fellow entrepreneurs.

4 Reasons for a Lack of Local Institutional Capital

Continuing with yesterday’s post on Rating the Atlanta Startup Scene, several people have asked how we get more local institutional capital. Institutional capital, like it sounds, is capital provided by institutions like university endowments, pension funds, etc. Generally, institutional capital is a much larger source of capital, as compared to angel capital, and thus an important part of a thriving startup scene, especially for startups that hit the growth stage (see Scaling a Startup is Expensive).

Here are four reasons there’s a lack of institutional capital in Atlanta (and all areas outside the Bay Area, Boston, and NYC):

  • Track Record – New funds are forming all the time but most of them only have high net worth individuals and family offices as limited partners since institutional investors always require an investment track record of one or two funds (e.g. get started with a small fund from personal investors, show great results, and then raise money from institutions).
  • Pedigree/Background – There’s a certain resume and pedigree that institutional investors look for, often including a name-brand college, work on Wall St., etc. that’s not as common outside the money centers.
  • Big Exits – The goal of any fund is to make great returns, and that requires big exits, yet there are so few exits, let alone big ones, that the story of low cost of living and low valuations doesn’t resonate. Meaningful returns and exits resonates.
  • Dot Com Bust – Many regional funds that had institutional capital went out of business after the dot com bust as they didn’t have strong enough returns to raise another fund. A whole generation of funds were wiped out and it’s 7+ years to build a new fund that gets to the point that fits the institutional capital model.

As expected, the answer to having more local institutional capital is to have more successful startups with solid exits that generate returns for first-time funds so that they can then raise another fund with institutional capital. It’s a multi-stage process that requires a decade or more to see results. The best thing we can do as a community is to help produce more successful startups.

What else? What are some other reasons for a lack of local institutional capital?

Rating the Atlanta Startup Scene

Two years ago I put together a few thoughts on the Atlanta startup scene and gave ratings for each of the major components. Well, it’s time for an update. We’ve made good progress in a few areas and moved backwards in others.

Here’s my rating of the Atlanta startup scene:

  • Office Space (A)
    Unlike several years ago, there are a number of great options for startups to find their first office and even grow to 20 or 30 employees. Post 30 employees, there aren’t any turnkey office options and thus the growth stage startups are sprinkled all over the different submarkets.
  • Community (A-)
    Combined with the office space function, there are a number of great startup communities in Atlanta with different focuses like B2B SaaS, consumer apps, etc. One area that needs more attention is scale ups, and that’ll develop with time as more startups reach the growth stage.
  • Exits (C-)
    Things have been really quiet on the exit front for a while. With Cisco’s acquisition of Lancope for $452M and SecureWorks going public earlier this year there’s some minimal activity, but generally things have been much too quiet to be a healthy ecosystem.
  • Angel Capital (C)
    A steady number of angel investors write checks with most of the money coming from the usual sources (local non-tech professionals) and a small handful of successful tech entrepreneurs continue to write invest in 2-3 deals per year.
  • Institutional Capital (C-)
    Deals continue to get done (usually two Series A rounds per quarter and one Series B or later per quarter) and 95% of the institutional capital is from out of state. In the grand scheme, it’s a tiny number of deals but there’s a continual flow of activity.

Overall, I’d give the community a B with a quality foundation and significant room to grow and improve. As a community, the most important thing is to increase the number of startup success stories. Results matter.

What else? How would you rating the different components of the Atlanta startup scene?