People have been talking to me lately about what VCs are around and actively investing in Atlanta. Before I get to that topic, I thought I’d talk about a curiosity at one that has imploded (they are not at all that unique in imploding, by the way).
I came to know of Alliance Technology Ventures while I was doing my fund raising in 2001. The funny thing was we had previously pitched to the better known ATV - Advanced Technology Ventures (in Boston and the Valley) prior to pitching that Atlanta ATV (ATV-ATL from here on out). Because people sometimes got confused by the similarity in the names, there was even a note on ATV-ATL’s old site.
Over a year ago I had heard that ATV-ATL was shutting down. They launched in 1994 (according to their old website). They had fully invested their last fund and they weren’t raising any more money. This seems to be a common story with Atlanta VCs since I know of at least two others who are in this death spiral.
So the thing that is most puzzling about this is ATV-ATL’s old domain name. You see, they had a very coveted three letter domain name - atv.com (single letter domains are probably the most coveted). These are coveted because all of the possible three letter and number combinations under the .com TLD are registered. So the only way to get one is to buy it from someone.
The domain name now points to an all terrain vehicle site with a small note on the bottom saying that ATV-ATL’s site is now at www.alliancetechventures.com.
I find it very hard to believe that the other ATV, whose sites are at www.atvcapital.com and www.atv-ventures.com, wouldn’t have jumped at the chance to buy a premium domain name like this. Of course, I don’t know what ATV-ATL got for the atv.com name but since I haven’t seen any stories on this, I can’t believe it was record breaking. Given that the other ATV has over $1.4 billion under management, I’m sure they would have carved out some of their annual management fee to pay for a new domain name.
In the end, just another sad story about another local VC gone bust. Looking at their last set of portfolio companies explains a lot, I think.
] Looking at their last set of portfolio companies
] explains a lot, I think.
Hmm. Well, there are 21 companies on that list. Two of them were home runs (Digital Furnace and RFMD). Eight more of them went public or were sold at a profit, six of them were sold at a loss or shut down, and five are still in business… one of which has potential to be another home run.
I’m not embarrassed by that.
(For those tuning in late… I was the second General Partner at ATV, and I’m the guy who registered that three-letter domain name in 1Q1995, back when they were still available.)
So maybe I don’t remember the story of the portfolio right. So then I guess the question becomes - why the shut down of the firm? It isn’t like we have huge surplus of venture firms in Atlanta and if the portfolio was a success (10-5-6 is a success I’d say) then raising another fund should have been easy.
Perhaps shedding some light on this will help a lot of understand what is wrong with fund raising in Atlanta (for entrepreneurs and VCs alike).
] raising another fund should have been easy
Raising another fund is *never* easy, unless you’re one of the Top Forty firms who have to beat away fund managers with a stick. (NEA’s last fund was 5x oversubscribed.)
And it’s especially hard since Atlanta funds can’t raise their “anchor money” in their own backyard. It’s illegal for state of Georgia pension funds to invest in venture capital. (Blame your friendly teacher’s union.) Then many public and quasi-public funds in the state, just to be on the safe side, mimic the state policy… that means municipalities, and MARTA, and firefighters’ unions, etc.
Then some of the biggest local corporations just choose not to invest in venture capital: Coca-Cola, Delta, Home Depot. (At least they didn’t a few years ago; things may have changed.)
Then some of the ones who *did* invest in venture capital got bought and became branch offices: BellSouth, Scientific-Atlanta, Georgia-Pacific. Branch offices don’t make investment decisions.
At the end of the day, you put up your hand saying “It’s time for our new fund!” and you’re met by an echoing silence. So you hit the road and start pitching to more enlightened pension managers elsewhere… Ohio, Minnesota, Massachusetts. And they ask “So, is your local community investing in your fund? No? I see. What a shame.”
Unvoiced but implicit: “Don’t let the doorknob hit you on the way out.”
The state of Georgia manages about $60 billion in pension assets. Forty-nine U.S. states allow some level of pension investment into alternative assets, including venture capital. The local VC community has encouraged the state legislature to enable a single-digit allocation (1% a year to a max of 5%). It’s been defeated every year. It’s up again this year. Call your state representative.
Can you imagine what $600 million of locally-sourced venture money would do to Georgia? I can.
Bumper sticker: “If you’re moving your startup from Georgia to California… thank a teacher.”