Nov 26, 2012
- Atlanta, a relatively unknown player in the start-up universe has a lot to offer budding entrepreneurs. Self-starters should give Atlanta a chance to be their next home.
Most entrepreneurs rightly consider San Francisco to be the #1 city for starting a company. It has abundant talent (great universities), excellent physical (air and sea ports) and technical infrastructure (internet and communication lines), a lot of capital (VC and PE money), and a tightly-knit & supportive entrepreneurial culture. Similarly, Boston and New York City boast many of these attributes. While cities like Austin, TX and Washington, DC have seen their stars rising on the entrepreneurship scene, a less known city boasts many of the same attributes with a few to boot. That city is Atlanta, GA.
While Atlanta may not be known as an “entrepreneurship hub”, the city has seen some significant start-up activity in recent years. According to the Kauffman Index of Entrepreneurial Activity, the state of Georgia experienced the second largest increase in entrepreneurial activity over the past decade. As another data point of activity, Crunchbase provides the following list of companies founded since January 2008 within 10 miles of these cities.
New York – 126
San Francisco – 119
Boston – 35
Austin, TX – 28
Washington, DC – 21
Atlanta – 21
Clearly Atlanta is far from the top spot, but the city is well within reach of other rising entrepreneurial hubs like Austin and DC. The reason for Atlanta’s placement is that it has excellent economic advantages that deserve attention:
- It is home to the fastest growing airport and near the fastest growing seaport, Savannah, GA. (Entrepreneurs interested in travel, e-commerce, manufacturing, and distribution should pay attention.)
- The metro area houses many universities that graduate thousands of students each year. This constant influx of talent provides a vast labor pool accessible to businesses of all types.
- And the city is emerging as a player in technical infrastructure. It is 5th in the country with 31 colocation centers behind Chicago (54), Dallas (52), LA (49), and NYC (48).
These are obvious, yet fundamental, points for entrepreneurs, though some readers might push back and point out that in all fairness, these attributes are not specific to helping startups as they provide valuable resources for every business. So what are the real reasons for founding your company in Atlanta? To answer, let’s take a look at two of an entrepreneur’s most pressing concerns:
a) Paying customers
b) Low expenses
Let’s take a look at how the city of Atlanta scores on each of these.
Paying Customers. Georgia is home to 30 Fortune 1000 companies and Atlanta has approximately half of those. Delta, The Home Depot, Waffle House, and the Center for Disease Control are some of the iconic names in Atlanta with several more household names rounding out the list. Big companies are always on the look-out for innovative ways to cut their costs and gain exposure to new markets. B2B start-ups will find plenty of customers with deep pockets in Atlanta.
Additionally, there is a growing customer base for B2C start-ups. In the decade following 2000, the metropolitan Atlanta population grew by 20% (from 3.4 M to 4.1 M) and the Georgia population grew by 18.3% (from 8.2 M to 9.7 M). Predominantly, this growth occurred in the 18-64 year old bracket. Furthermore, the estimated median household income rose from $34k to $50k over the same time period. Not only are these currently big numbers, but the population explosion is estimated to continue by 20% over the next decade or so. If you need customers, they’re in Atlanta.
Low Expenses. As an entrepreneur, it is important to keep your expenses low during the start-up stage, both personal and company.
On a disposable income basis, you will have $37k more in your pocket in Atlanta than San Francisco, $60k more than New York, and $28k more than Boston. Also, a one bedroom (approximately 650 sq. ft.) in Atlanta will cost you $846 per month versus $1845 in San Francisco, $2700 in New York City, and $1949 in Boston. That is a lot more money in your pocket.
Company-wide, the average salary in Atlanta is $77k, New York is $88k, $89k in San Francisco, and $79k in Boston, MA. While there is not much variance on average salaries, operating expenses like electricity are still significantly cheaper in Atlanta ($0.14 in Atlanta, $0.21 in NY, $0.22 in SF, and $0.15 in Boston). On a whole, it is simply cheaper to do business in Atlanta.
Now, all that being said, other important considerations include access to capital, access to top talent, and an active entrepreneurial culture to preserve an entrepreneur’s sanity. On these three considerations, however, Atlanta scores poorly.
a) Capital. While there is a great amount of wealth in the South – and Atlanta is the financial gateway to the South – very little of it is focused on Venture Capital and even less on seed capital.
b) Talent. Colleges and universities in the area have not traditionally approached entrepreneurship in the same way as universities like MIT and Stanford. Therefore, there are not as many start-ups coming from the local schools.
c) Community. Also due to the underemphasized nature of start-ups in the South, there is very little community or culture in the area. Small pockets of optimism are arising, however.
In response to these points:
First, capital is mobile. One could raise money in Menlo Park or Boston and return to operate in Atlanta. For the cost savings, it’s worth the travel.
Second, the talent scene is improving quickly. Georgia Tech has developed a strong docket of entrepreneurial programs that will produce interested graduates with the technical and business skills to create start-ups. GA Tech even has its own start-up incubator program called Accelerated Technology Development Center (ATDC). It is likely that other schools in the area will follow suit.
Third, as the interest in entrepreneurship rises, organizations dedicated to entrepreneurship will increase to support them. While there are few such organizations now, “start-ups for start-ups” are growing quickly in the area. The Technology Association of Georgia and Venture Atlanta are two such organizations lighting the way. Ultimately, an entrepreneurial culture will arise when there is critical mass.
The data presented above presents a good market opportunity for entrepreneurs to enter the Atlanta market at an early stage of the start-up scene and really have an influence on developing the culture and interest in Atlanta. Of course there are downsides to Atlanta but the detractions are less impactful than the attractions. If you are considering starting your company and want excellent infrastructure, access to customers, cheap start-up costs, and the chance to be a big fish in a small pond, Atlanta might just be the place for you.