Editor’s Note: This post is written by Christian Devlin, vice president of CBRE Atlanta
In partnership with Venture Atlanta this week, I had the pleasure of co-hosting the fourth annual tech panel with King and Spalding, during which I co-moderated a panel discussion entitled, “Attracting Investors in Today’s Economy” with Judy O’Brien, acclaimed Silicon Valley tech attorney. The all-star panel included venture capitalists from San Francisco and Washington DC, an Atlanta-based private equity investor, the co-founder of an Atlanta FinTech unicorn and the founder of an Atlanta based FinTech startup.
As I did with my post, “How to Attract and Work with Strategic Investors,” for Venture Atlanta last year, I’m going to share with you some of my key takeaways from this fantastic discussion.
Dayna Grayson, partner at New Enterprise Associates:
- On investing in companies outside of the Bay Area: put Atlanta into the same bucket as markets like Boston. For those markets, look for companies that have the potential to be stand-alone, public companies, ones that aren’t banking on an M&A event for their exit.
- On sourcing deals and on what types of startups interest them: the best source of new investments is referrals from other entrepreneurs. Want to see big ideas and great teams, more so even than traction.
Gil Cogan, managing partner at Opus Capital:
- On identifying companies that they like to invest in: like to get involved very early, usually 12 to 18 months before commercialization of the product. Typically involved in a company for 8 to 10 years.
- On emerging areas of technology that interest him: predictive analytics has a lot of potential, particularly technologies that present data in visual ways.
Don Butler, managing director at Thomvest Ventures:
- On the number of startups they see: receive about 30 slide decks / executive summaries per month, and ultimately invest in about 1 to 2 percent of the companies we look at.
- On co-investing with strategic/corporate investors: has found that there is significant value in the data and trends that strategic investors track (i.e. regarding customer behavior).
Rob Palumbo, managing director at Accel-KKR:
- On why Atlanta is a good place to invest: Georgia Tech and Emory are phenomenal resources. Atlanta has a highly educated workforce, diverse economy, and a good airport (the last is not to be underestimated).
- On the characteristics of companies that have achieved the best exits: outstanding management teams. Outstanding management teams and a decent business is always better than decent management teams and a great business.
Kathryn Petralia, co-founder and COO, Kabbage:
- On the changing environment for raising capital in Atlanta: Atlanta is becoming much better known as a tech hub, people (investors) are much less afraid of investing here than 5 to 7 years ago.
- On raising capital from strategic investors: “they had money and we needed it.” The idea is that there would be some opportunity for a commercial relationship, part of our strategy was to partner with large banks globally. Strategic investors typically don’t want to invest unless they can see a path to a commercial relationship.
- On getting in front of investors: identify which firms are best suited for you (i.e. by stage and/or sector focus), getting an introduction from a mutual connection is always best.
Brian Dally, founder and CEO of GROUNDFLOOR:
- On Atlanta’s environment for raising capital: we started out raising capital in Raleigh before relocating to Atlanta…Atlanta is like five Raleighs, so raising capital here is even more possible. At every stage but especially early, we looked for the best investor, not the best valuation, and that has served us well.
- On using Crowdfunding to raise early stage capital: we met some very savvy investors who we wouldn’t have met otherwise, and while it was a great way to allow customers to participate in the company’s success, it left out everyone else and didn’t end up yielding much capital relative to the effort required.
I’d like to leave you with a few insights from Judy O’Brien. The right investor will bring enormous value to your company but finding that investor can be challenging. Entrepreneurs should research and understand the focus of both the fund and its partner, and approach those who invest at your stage of development, whose investment model fits your business and who understands your technology and the company you want to build. Keep in mind that investors are looking for great management teams who are insiders in their industry. Because investors see so many opportunities, it helps to have a warm introduction from someone the investor trusts who can help you understand both how to approach the investor and how to respond to their concerns.