Tech merits better startup climate

The American economy has been the largest and strongest in the world for decades.

Indeed, in 2005 the Toronto Globe and Mail mapped the gross state products (GSPs) of the American states to the gross domestic products (GDPs) of various nations, and determined that even lowly Georgia (actually the state with the ninth-highest GSP) was comparable in the size of its economy to financial powerhouse Switzerland.

The economic success of the U.S. is a powerful argument for capitalism, and while there are many reasons for America's stellar economic performance, one pillar of capitalist society has played a particularly large role: entrepreneurship.

The U.S. is the nation where many of the most famous (or infamous) entrepreneurs got their start: Andrew Carnegie, Henry Ford, Steve Jobs. Americans have a history of striking out for themselves.

The gold rushes and similar phenomena are simply historical precursors to today's startup markets.

The advent of the internet led to a new boom in American entrepreneurship, making overnight millionaires of lesser known people like Evan Williams (founder of Pyra Labs, the company that created Blogger and was sold to Google in 2003, and now Twitter) and Kevin Rose (founder of Digg).

The success of these "Web 2.0" companies, along with a few contributing factors like the boom in availability of venture capitalist funding and the substantially lower amount of money needed to start an internet company, has resulted in increasing numbers of young people-undergraduates in college, in many cases-starting their own web firms.

The unfortunate thing about this boom is that we at Tech, and in Atlanta in general, are currently in the middle of missing the startup boat. There are only a few areas around the country that are true hubs of innovation, where 20-year old kids with great ideas and better work ethic are taken seriously.

These are places that live and breathe creativity, hope and promise; places where trends are born and future leaders congregate. These are the places that will be home to the bulwarks of the American economy in years to come-and Atlanta, at least so far, isn't one of them.

The communities I describe, and that people with infinitely more entrepreneurial experience than I have noted for their hospitality to startups, have a number of traits in common.

According to Paul Graham (founder of Viaweb, the company that built the software that now powers Yahoo Shops), the necessary prerequisites for duplicating the success of Silicon Valley can be boiled down to the presence of two categories of people: the nerds and the wealthy.

The nerds are there to start the companies, and the rich people to bankroll them.

The question, then, is: What brings these groups together in one place, as they exist in the Bay Area or fellow startup hub Boston?

One trait these areas have in common is the presence of great universities. Boston (or to be more precise, Cambridge) has MIT and Harvard; the Bay Area has Stanford and Berkeley. While these universities are undoubtedly bastions of learning and draw students from all over the world, Atlanta is no slouch itself in the quality university department with Tech and Emory.

Anyone who has spent a day on our illustrious campus would agree that we have the nerds requirement squared away. (Sidenote: One other way to attract nerds is to have a massive corporation that employs lots of them. Seattle is a startup hub in large part thanks to Microsoft.)

Similarly, it would surprise me to learn that Atlanta has a shortage of rich people.

The city may not be populated by Los Angeles-level nouveau riche, but we are certainly better off than cities like Pittsburgh or St. Louis, each home to excellent universities and little investment.

Although Atlanta has in recent years ceded its title of financial capital of the Southeast to Charlotte, it is still the business and cultural center of the region.

While most venture capital firms are based in one of the current hubs, Atlanta startups are in position to benefit from greater participation from so-called "angel" investors, independently wealthy individuals (or groups thereof) who invest smaller amounts into developing companies.

Why, then, was Atlanta in lowly 13th place in the nation by number of startup jobs in the first 5 months of 2006, according to O'Reilly Research?

I believe the problem is two-fold. First, we lack the investors willing to take risks on unproven people. Tech's own Advanced Technology Development Center (ATDC) is a notable startup incubator, but they themselves say "ATDC prefers entrepreneurs with experience."

Contrast this with the approach of Graham's new venture, Y Combinator, which gives small amounts of funding ($5,000 per founder, up to $20,000), legal help, and vast amounts of advice from a collection of experienced industry mentors to entrepreneurs who may not even have an undergraduate degree yet.

According to Graham, the average age of a Y Combinator founder is 23, and the program has been running successfully since 2005.

Indeed, the program has been so successful that it has now spawned a knockoff called TechStars in up-and-coming Boulder, Colorado (also ranked above Atlanta in terms of number of startup jobs).

There is another, more significant problem, and that is the lack of examples and mentorship. A student is much more likely to strike out on his or her own when they go to Stanford and have Google's success to aspire to than someone at Tech, where these great successes are few and far between.

When you are surrounded by hundreds of entrepreneurs who have at times failed, but often succeeded, you can find well-connected mentors with relative ease and advice from many corners regardless. But in Atlanta, we lack this startup culture.

We already have most of the traits needed to be a haven for startups, and we should address these issues now to assure the city's continued prosperity.

I believe that there are people in Atlanta who are amply qualified to mentor young entrepreneurs-they simply need to put in the effort and to make themselves more accessible. At the same time, I can only hope that it will not be long before someone will make a bold investment in the quality of Tech's graduates and our ability to start companies.

Once that happens, perhaps we can give some support to Atlanta's oft-promoted slogan: "Every day is an opening day."