Last month Atlanta-based software company OneTrust closed a $200 million Series A round. The company’s product is a privacy management platform and, given the rise of privacy laws like GDPR and CCPA, it’s not surprising that investors are bullish.
However, the massive size of this particular funding round is surprising. Usually startups here in the Southeast see investment on a smaller scale, not at this unicorn level. We wondered if this funding round was confirmation of a startup boom in Atlanta. After all, we’re rumored to be one of the top five tech hubs in the country.
That’s a question that can be answered with data, so we compiled the last ten years of Atlanta-based software startups, and our analytics tell a slightly different story. In fact, it looks like the number of new software startups peaked in 2015, and the trend has been downward since then.
Is this really the case? And if so, why?
First, how did we get these numbers? Most (but not all) of this data is a compilation of new companies listed on Crunchbase. As much as we hate the word, this dataset has been “curated” – we’ve removed media, PR and web design firms, ecommerce sites, manufacturing, medical devices and wireless providers. That may seem somewhat arbitrary, but we tried to focus on companies that have developed an actual software product. You can read more details on our methodology at the bottom of this post.
Here’s the Crucial Thing
A second visualization adds some important perspective. Here the blue columns represent a running total of number of new software companies, while the yellow stacked portion is new businesses for that year. So, although 2018 shows a shortfall in the number of new startups, the overall trend is clearly one of strong growth. These may not yet be Silicon Valley numbers, but they reflect a strong upward trend of startups in the short span of a decade.
Why Is Atlanta a Tech Hub?
What makes Atlanta burgeoning tech hub? It’s likely the convergence of a number of factors. First, Georgia is a business-friendly state with low corporate tax rates and right to work laws that favor employers. Our cost of living, especially housing, is another strong factor in our favor, especially when compared with cities like San Francisco and Seattle.
Atlanta is also an international travel hub. And this may have some bearing on another important factor – Atlanta’s diversity. Immigrants to the US are responsible for more than half of this country’s largest startups (and it’s likely this is true for smaller organizations as well.) A recent study by WalletHub found that Atlanta bedroom communities like Johns Creek and Sandy Springs ranked among the top 100 American cities for diversity.
A startup is more than a founder with an idea, however. It needs an ecosystem to support it. Atlanta is home to a large entrepreneur community even beyond tech companies, such as those new PR firms, marketing companies and web design firms we removed from our dataset.
Universities like Georgia Tech, Georgia State, the University of Georgia and Emory not only graduate thousands of tech-savvy workers each year, but also have their own entrepreneurship programs like the Advanced Technology Development Center (ATDC). Other organizations, like Atlanta Tech Village (an incubator founded by entrepreneur David Cummings) Techstars Atlanta and Switchyards help connect founders to community and capital. As more and more startups achieve success, it makes it easier for others to follow them.
Atlanta is not without a few drawbacks, however. The most obvious, of course, is transportation. Atlanta is auto-centric, and traffic is getting worse every year. This is actually significant – here’s an article that explains the correlation between entrepreneurship and public transit. And while the cost of living is lower, until recently Atlanta lacked the rich mix of arts and entertainment venues to attract under 30’s that cities like New York or San Francisco have.
The good news is that another trend over the past decade has been the growth of new cultural venues like the BeltLine, Ponce City Market, and Mercedes-Benz Stadium, home to the Falcons and Atlanta United FC. So perhaps the startup trend is an indication that Atlanta has reached critical mass as a major city. We certainly hope so.
Will this trend continue? And is it confined to metro Atlanta, or is there similar growth across other regions in Georgia and the Southeast? We’re going to keep digging into the data to see what it can show us.
How We Cleaned the Data
We dropped from this dataset companies that did not have a website or a LinkedIn listing. We included, however, companies that had these assets, but which were no longer in business.
For all our efforts, there may still be some discrepancies in the data. Founding dates on LinkedIn, for example, did not always match those on Crunchbase. We’ve opted to use the LinkedIn date, with the idea that businesses own that listing and so most likely have the correct year. We also tended to evaluate organizations based on their descriptions on LinkedIn. It was very evident that early stage companies were somewhat …aspirational in their Crunchbase descriptions. Marketing agencies claimed to be using AI, and pretty much everyone was into something cloud-related. And we can’t claim that our listings are completely correct – simply because on the journey from start up to established ISV sometimes the product changes. That’s to be expected.
And of course, this data is only for city of Atlanta companies. The greater Atlanta area has many startups, and those numbers may make for a different story entirely, one we hope to share in another post soon.