As I mentioned in my last post, our next Capital Lounge event is this Wednesday, 8/27. This is going to be far and away the best event we’ve done, on so many levels. More quality deals, more investors (4 to 1 company to investor ratio), and a couple of pretty big announcements, including one in particular that, to quote Mike Blake, that will “change the face of of the Atlanta early stage capital ecosystem.”

If you’ve ever planned a big event before, you obviously know all of the logistics and planning that go into it. CapitalLounge is no different. It’s a ton of work, for sure. But one thing that we do that many other groups don’t do is vet the attendees. This adds an order of magnitude to the effort required to pull off this event.

A key reason for the success of the CapitalLounge event is our vigilant effort to restrict attendance to direct capital providers and entrepreneurs with fast-growth potential. Investors and entrepreneurs are able to get maximum value from the event when they can spend their time establishing relationships with one another, rather than be distracted by other entities (hordes of service providers, job seekers, low quality deals, investor-wannabe types, etc.)

For the upcoming event, roughly one (1) out of every 4.5 applications was rejected for one reason or another. That’s a lot of filtering - and that equates to a lot of work. We have to do it this way - otherwise, we end up becoming the thing that we are trying change. There can be no sacrifice of the vision.

We get a lot of questions (especially from those whose applications are rejected) about the criteria we use, how we review applications, etc. Even though a lot of this information is automatically emailed to the applicant if their application is denied, I thought it might be instructional to provide a little more insight into how we select entrepreneurs, investors, and observers for this event.

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Our next Capital Lounge event is next Wednesday, 8/27, and man is it shaping up to be a good one.

As it stands right now, this will be the best investor turn out to date (due I think in large part to the success we’ve had with our Angel Lounge initiative). Right now we have over 40 investors signed up, and that number will probably drive closer to 50 in the next few days. There is a slight edge in the number of angel investors, but it is pretty evenly split between angels and traditional venture capital firms.

Over 150 entrepreneurs have signed up as well, and about half of them are new deals. Very cool to see that trend continue.

Of course, we try very diligently to weed out service providers, job seekers, etc. in order to create an environment conducive to having substantive discussions between innovators and capital providers.

if you want to meet the movers and shakers in the startup community (ATDC, VentureLab, regional VCs, local angels, and a veritable army of fellow entrepreneurs), you need to be there. And why not? It’s free.

We’re going to be making some cool announcements there as well.

As a reminder, we are capping attendance (for entrepreneurs, at least). So if you haven’t applied, and you want to attend, you should probably apply sooner rather than later.

Cheers.

The crossroads — a place where two roads cross at or about at right angles, otherwise known as “the forks of the road” — is a metaphor used in religious and folkloric belief all around the world. From the legend of the delta blues guitarist Tommy Johnson (no, not Robert Johnson, as some believe), who sold his soul to the devil at the crossroads, in exchange for other-worldly guitar playing skills, to the ancient Mayans to Robert Frost’s “The Road Not Taken”, the concept of the crossroads has been used to depict a “deciding moment” or “turning point” in life.

I think we’ve arrived at the crossroads in Atlanta, as it pertains to the early-stage venture scene. This is probably going to be a long post, so be forewarned.

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Well, now that it has hit the wire, I guess we can all talk a little bit about it …

Atlanta – Appcelerator, an Atlanta-based, open source software company has raised $4.1 million in its first round of venture capital, according to a report by PEHub, which cited a regulatory filing. The company develops products and services for rapid rich Internet application development on a service-oriented architecture (SOA). Appcelerator officially launched its open-source developer community and first product offering in October 2007, after developing its product over the course of several large-scale deployments across the country. Storm Ventures led the company’s first round of venture capital, according to the report.

Congrats, Jeff, Nolan and the gang at Appcelerator!

Cheers.

Matt McCall (Draper Portage Ventures) wrote a very interesting post yesterday. In it, he describes the current venture capital landscape as having “flatlined”. Matt is an ultra bright, fairly conservative venture capitalist (at least he was way back when Portage was a key investor in one of my past lives - MetalMaker). A good read if you are currently launching a startup, and/or you are seeking funding for one.

I’m certainly not an economist, but I will say this: things could certainly be better. The job market sucks, the housing market is nonexistent in many places, and we’re staring $5 gasoline in the face. But how does it really affect the capital-seeking early-stage entrepreneur? It doesn’t sound like this is a particularly compelling time to start a new venture. Possibly, but not necessarily.

I founded my last company in 2000 - unless you were living on a deserted island then, you will remember how nasty the market was. Nevertheless, through persistence and self-funding, I managed to keep the thing going until I could exit (2005 - when the market was more in my favor). Timing is everything, as they say. Granted, the exit wasn’t overly lucrative, but we made money, and no one got hurt in the process.

I do want to point out one thing, though (and Mike and I are going to discuss this a bit in our podcast recording session later today). If you are an entrepreneur that is banking on someone else’s funding to help you to build, launch, and realize your dream - your expectations were probably out of line to begin with, so now it gets doubly hard for you. I see deals like this all the time (as do most investors):

Acme Software provides a world-changing solution to the way consumers shop online! Our cutting-edge, paradoxical approach to e-commerce will drive us to $1B in revenues in just 24 months. Seeking $5M to hire a team, build out the product, and start selling it.

Sorry, not gonna cut it. This is laughable. Telling an investor that “with my time and your money, all things are possible” is not a value proposition. If anything, it a nice fat red flag to any serious investor that you aren’t a bankable jockey (rightly or wrongly - this is the reality).
A tough capital market makes the second mile on your journey possibly more arduous - however, the first mile should not be affected. Innovate, sell, and meet the investors halfway.

In an underserved market like Atlanta, you are not likely to waltz in and secure a first round of capital with an idea alone (save for the occasional angel that truly gets what you are doing). Even if you have a prototype product, your chances may only marginally better. So guess what? Nothing has really changed for you. However, once people are buying what you’re selling, the opportunity will stand out like a diamond in the rough. This is your challenge.

If Acme came in with this pitch, however, things get interesting:

Acme Software’s beta product currently provides over 50,000 consumers with a very unique way to shop online. For the first 12 months after launch, the company generated revenues of $1M, and we’re now at cash-flow break-even. Seeking $2M to expand our product and to expand our sales efforts.

When markets get tough, investors withdraw. Their margin for error is already small, and it gets even smaller in tight markets (true for most entrepreneurs as well). However, entrepreneurs are in a slightly different position. They have the “x factor” - the gene. The thing that makes them drive for success even through the toughest of times. The thing that separates mid-level Fortune 1,000 managers from someone who will try the unthinkable. When the landscape sucks, it actually drives innovation and resourcefulness even further. A blessing in disguise to a serious entrepreneur. Not the same for investors - they are often content to ride out the storm - as well they should, since they are most likely investing someone else’s money. But if your deal represents a chance to return even a mild multiple in a tough market, you may find takers.

Good deals get funding … still. They likely always will. But proving yourself to be a “good deal” could be getting a lot harder if you are on the uber-early end of the spectrum. So adjust your expectations if you need to, then get out there, execute, and don’t worry about things you can’t control. Turn a bad market into an opportunity to move forward, while many others sit on the sidelines. If you can’t (or aren’t willing to) do this, you are most likely going to find the next 12 months to be a colossal waste of your time, energy, and precious capital.

Of course, if your venture is already off and running, Matt serves up some pretty good advice to try and insulate yourself. Good reading, for sure.

Cheers.

I had a fun lunch with Drew Ermenc from Catalyst Magazine last week. Our office is actually upstairs from theirs, so it was pretty convenient. Among the many things we talked about was the status of “rockstar entrepreneurs” here in Atlanta. Specifically, they are working on some events for later in the year, and were trying to put together a list of entrepreneurs that would make great panelists and/or speakers.

I was asked if I could suggest some “rockstar” caliber entrepreneurs that they could engage here in Atlanta (or Georgia). Ideally, this would be someone who was currently enjoying a great deal of success, and who also had “name recognition”. Obviously, the combination lends itself to “street cred”, and the ability to draw enough people to fill a venue.

I thought about it for a few minutes, and I must admit, I was a little stuck. I mentally sifted through a few dozen names, but they generally fell into one of the following buckets:

• They satisfied one criteria (are currently enjoying success in a venture), but not the other (they bring name recognition), or vice-versa.
• They are too “new” - they haven’t had a big hit yet, although I’m bullish on them. But they don’t have the street cred yet as a result.
• They had a great deal of success at some time in the past, but are not currently doing much of anything.
• They are ultra successful (cash-wise), and do not currently face the challenges that early-stage entrepreneurs face.
• They are “tired” - everyone has trotted them out over the past 5 or 10 years as a speaker, and thus wouldn’t bring a fresh perspective.
• They are “real estate” moguls, or in some other industry which is driven more by how much cash you can deploy rather than swinging for the fences as a bootstrapping upstart.

If I were to plot this as a distribution curve, there are lots of people on either side of the bell (the long tail!), but not many people inside of the sweet spot (currency/relevant now, street cred, success, etc.)

The only name that really jumped out at me was Mitch Free from MFG.com. MFG went from being bootstrapped from an Excel spreadsheet/sneaker-ware marketplace to an international B2B player backed by Jeff Bezos. And they are still going strong.

Who am I missing?

While I think there may be some gaps now, this won’t always be the case. I think in the next few years we’ll have a new wave of rockstars that will emerge from what is happening here now. But boy, if we were to hold a Woodstock and try to populate it with current Rockstars in Georgia, it wouldn’t be a terribly long show.

Cheers.

10 years ago, Catalyst Magazine was a great resource for Atlanta entrepreneurs. Sadly, they fell dormant for a while and ceased publication. Not too long ago, they were sold to Billian Publishing and are now making strides towards resurrecting the magazine. This is cool … I’ve had a number of discussions with them over the past few months and they are really excited about the emerging wave of entrepreneurship that is occuring in the Southeast.

You may also remember Catalyst for their “Top 25 Entrepreneur” (and the “ones-to-watch”) awards. They’ve been quietly soliciting applications for the past month or so for the 2008 awards - and have extended it for a month. Click here for more info.

Cheers.