By Kenna Simmons
February 27, 2023
One of the best decisions Michael Malakhov made as a startup entrepreneur was influenced by something that’s quintessentially Atlanta: traffic.
Malakhov and cofounder Eric Morris decided to house their company, Carpool Logistics, in Atlanta Tech Village (ATV), a “tech hub” that’s part incubator, part accelerator, part coworking space for entrepreneurs. “I live three minutes away,” Malakhov says. “I’ve always driven by the building and [thought], ‘Oh, man, how cool would it be to work in a space like this?’ I looked at several different [spaces] but what stood out to me was that ATV was specifically for tech startups.” The nascent company could take a month-to-month lease, meaning no big money required upfront – which was a key consideration for the partners, who had just quit their day jobs and had no customers (yet).
And, says Malakhov with a laugh, “I already work long hours. The last thing I want to do is spend an hour in traffic.”
That decision, and the subsequent support for Carpool – ranging from advice and resources for what was initially a two-person enterprise to fostering relationships like the one that resulted in two more cofounders with critical knowledge joining the company – was key to the startup’s growth. In fact, it led to another of the most critical events in a startup’s life: an investment of $2 million in 2022 from Atlanta Ventures, the venture capital arm of ATV founder David Cummings, a serial entrepreneur who sold his marketing automation company, Pardot, and created ATV in 2012.
The seed round allowed Carpool, just a year old at the time, to boost its customer base and its staff. Malakhov says Atlanta – and more broadly, Georgia – is a perfect home for the automotive logistics company, which aims to optimize vehicle shipping by enabling multiple customers (consumers, but also dealers, carmakers and auction houses) to ship their cars on one truck. Combining several smaller shipments saves money for customers and helps lower emissions, since they can reduce the number of partially filled trucks on the road. Carpool’s tech platform allows customers to track their shipments, too.
Atlanta has a major stake in the supply-chain economy, and it also has Cox Automotive (which owns Autotrader and Dealer.com, among other brands). But the whole state is a logistics hub – especially for cars. “The majority of imported vehicles [in the U.S.] come into the Port of Brunswick and in Jacksonville,” Malakhov says. “And a lot of the automotive supply chains are moving down to the South,” particularly when it comes to electric vehicles. He adds that the costs to launch a business, and for the owners and employees to live, are much lower than on the West Coast.
Close to Customers
In 2021, startups in Georgia raised more than $4 billion – a new record that beat the previous one of $2 billion set just the year before. While it is true that Atlanta is the state’s epicenter for tech startups, other emerging hubs in Georgia are growing. Larry Williams, president and CEO of the Technology Association of Georgia (TAG), ticks off logistics and supply chain in Savannah as well as Atlanta, fintech and robotics in Columbus, ag tech in Macon and Middle Georgia. The state as a whole has a “balanced portfolio” of companies and industry sectors, and that’s true of the startup scene as well, he says. And just as that helps overall when there’s a slowdown in the economy, it helps startups, too. Despite some layoffs in 2022 at fast-growing startups – including highly touted unicorns valued at $1 billion or more like cybersecurity firm OneTrust and digital experience intelligence company FullStory – Williams says the state is more resilient because it’s not banking on just one sector for tech.
And while founding and growing a company isn’t as easy outside of Atlanta – in large part because that’s where the angel and early-stage investors are – sometimes it makes more sense, Williams says. “A little bit of extra effort in getting connected is part of their challenge,” he says. “But I think for some of these things, you have to go to where the action is. If it’s ag tech, [investors] don’t get that in downtown Atlanta. A lot of companies that are looking to invest in those areas, they know they have to go where the action is.”
ATDC – the renowned tech incubator whose “real” name is the Advanced Technology Development Center – is on a mission to expand opportunities for startups throughout the state. Founded in 1980, the granddaddy of tech incubators (one of the oldest in the country) has graduated more than 190 companies along the way. Although headquartered at Georgia Tech, ATDC is funded by the state and is the state’s official incubator. It has staff in Athens, Augusta and Savannah as well as multiple spots in Metro Atlanta, and recently added coaches in Macon, Columbus and Albany.
“Not everyone wants to live in the big city,” says Ben Andrews, ATDC’s statewide program manager (and a member of Georgia Trend’s 2022 40 Under 40). “We wanted to make it possible to create startups where people are living.” Echoing Williams, he says it makes sense to be in Savannah if you’re a logistics company or Augusta if you are a cybersecurity startup. “Even companies in Atlanta will end up having a satellite office in one of those other cities in Georgia,” Andrews says.
Being close to customers can be as important as being close to investors. “There are a lot of startups where it makes sense for them to be close to rural areas because that’s where their customers are,” says Andrews.
Incubators can help bridge all kinds of gaps for startups, just as ATDC has done for those in Atlanta and now in places like South Georgia. “We’re working with a company right now and they’ve met their first big investor. They’ve gotten multiple clients and customers but there are these resources out there they just didn’t know about,” says Andrews. “When we expanded, they met us and we’re really just making connections for them – it’s connections that they knew were out there but they didn’t know where to go.” Making those connections is a big part of how ATDC helps startups; it can leverage its well-known brand (and relationships) with investors on behalf of new companies no one knows about yet.
ATDC offers several “tiers” of resources, starting with a program called ATDC Educate for would-be entrepreneurs that focuses on the very basics, like classes on customer discovery and financial literacy, then providing tiers of support for startups based on where they are in their lifecycle. The ATDC Accelerate tier helps early-stage companies hone their business model and go-to-market strategy. Accelerate companies must have at least one full-time and one part-time person dedicated to the business and have a minimally viable product – something to show to customers and investors. They may be pre-revenue and seeking an initial round of funding.
ATDC Signature companies are ones that have their business models and leadership team in place, a scalable product or service and technology or intellectual property (IP) that is industry changing. Carpool, for example, is an ATDC Signature company (although it lives at ATV and not ATDC). It made sense to join ATDC because the incubator has several different industry verticals, including a new supply-chain one. “Most of the startups at ATV are probably SaaS-platform related,” says Malakhov, referring to software-as-a-service companies that deliver applications over the web. “When ATDC was building out its supply-chain vertical, they reached out to us and we thought it would be very valuable for us to be part of that organization.”
Andrews says there are usually between 30 and 40 Signature companies in the incubator at a time. Once a startup hits $1 million in annual recurring revenue from the product side of its business for two years in a row, it graduates. A one-time big sale or a single big customer doesn’t count. “We have a really high benchmark to graduate,” says Andrews. “We track our graduates for five years and a little over 90% are either still in business or have had a successful exit event” like a sale or merger of the company.
One startup growing in South Georgia is Do Process, an HR tech company in Albany. Andrews says the company appeared on ATDC’s radar right after the incubator started offering coaching in the city. “They have a lot of revenue from the services they provide and they’re looking to scale up their product,” Andrews says, adding that HR tech is a hot area right now.
Cofounder Blake Cook describes Do Process, whose niche is using video to optimize employee onboarding and training, as “like a learning-management system and TikTok had a baby.” It maps out each process within a company and makes them video-based, which Cook says helps employees train faster and allows employees to access the information as needed. Trying to use written employee manuals just isn’t efficient for either the employer or the employee, Cook says, especially for small businesses.
“We’ve built a great relationship with the people at ATDC and they have been a tremendous help in scaling our business.” Blake Cook, cofounder, Do Process
Although he’s “not a big program guy,” Cook says being part of ATDC is great, starting with the accessibility the program offers to resources that aren’t so common in rural areas, like having conversations about technology and investment. “We’ve built a great relationship with the people at ATDC and they have been a tremendous help in scaling our business,” he says.
Do Process has opened an Atlanta office at ATDC but remains Albany-based. Cook, an Albany native as is cofounder Tracy Goode, says, “I never started this business to have a tech company. We wanted to solve a problem, which was accessibility and employee training. Having a tech company in Albany is a little bit different now that we’ve seen other places and companies…but it’s an advantage in some ways because we see where the biggest needs are. We see people struggling to hire, struggling to train. I don’t see it as a disadvantage, being located somewhere like Albany.”
Collaborating and Connecting
Zach Hodges is another cofounder of a tech company who’s found a sweet spot in his hometown, although he got there by a circuitous route. The Augusta native and Air Force veteran, along with two other cofounders who had all served together, started Cyber Security Solutions in Tampa in 2015. Hodges was catching a flight out of the Augusta airport when he heard the “welcome to Augusta” speech over the loudspeaker. In addition to mentioning the Masters and James Brown, the announcement name-checked the city as the soon-to-be cyber capital of the world. After a little research and a tour of the Georgia Cyber Innovation & Training Center, the startup’s founders decided to open a satellite office in the center’s Cyber Valley, a space designed to foster collaboration and innovation among companies with different-sized footprints.
“In this space, there’s not a lot of working together with potential competitors,” says Hodges, who serves as Cyber Security Solutions’ vice president and COO. “But the Cyber Center put together an ecosystem where it was OK to share information and find ways to work together.” Through the center, Cyber Security Solutions has been able to grow by adding employees using a grant program that provides salary reimbursements for three to six months, collaborating with other companies on external work and even partnering with the center on the Georgia AI Manufacturing (GA-AIM) grant project, which is designed to speed integration of AI technologies in industries across the state.
The GA-AIM grant and project is led by the Georgia Tech Research Corporation and has a number of initiatives. The Cyber Center’s role is to perform cybersecurity assessments for small, underserved rural manufacturing companies, says Rob Dennis, executive director of corporate relations for Augusta University. “We weren’t prepared to go it alone — we needed a company that knew how to do the assessments and [could] blueprint a way forward.” Dennis reached out to Cyber Security Solutions, and now Hodges and team are leveraging their primary work and knowledge, gained doing cybersecurity assessments for companies contracting with the U.S. Department of Defense, in order to now partner with the Cyber Center. They’ll work with Augusta University and Augusta Technical College to train students to do streamlined assessments. Basically, says Hodges, an assessment usually involves lots of questions about technical configurations that are hard for non-experts to answer. Cyber Security Solutions’ technology can be used to scan a company’s configurations and allow the human-posed questions to focus on physical and personnel security – like asking about locks on doors rather than how a firewall is configured.
The Cyber Center doesn’t house an incubator, although the Clubhou.se, a coworking space that aims to encourage interaction among entrepreneurs working on different projects, does have space in the center. And the center overall fosters the kind of innovation and collaboration, and connections, that help companies like Cyber Security Solutions grow. (The company is currently building out bigger space within the center.) Michael Shaffer, executive vice president, strategic partnerships and economic development for the Cyber Center, says that as the tech ecosystem there grows, there are conversations about an entrepreneurship center – maybe broader than just tech, but a way to take advantage of everything from the IP at the university to the talent pool that comes from Fort Gordon.
It could work in conjunction with a planned downtown microenterprise center, which the downtown development authority is establishing in partnership with Augusta Tech, says Shaffer. “The Georgia Cyber Innovation and Training Center showed what an ecosystem can do, how important it is to build something,” he says. “We’ve got the partners here, we’ve got the people power…what we have to create is the hub for it to come together. So when we’re talking about what’s the next thing, it is to create an entrepreneurship center in downtown Augusta.”
“The Georgia Cyber Innovation and Training Center showed what an ecosystem can do, how important it is to build something.” Michael Shaffer, executive vice president, Strategic Partnerships and Economic Development, Georgia Cyber Center
For Georgia as a whole, what’s next is increasing venture capital investments in startups. Coming off that record 2021 year, the state saw a decrease in VC investment of about 50% in 2022, with companies raising $2.25 billion. Williams says, “right now we’re in implementation mode” (read: investors are more interested in profitability than growth). But he adds that VCs are always looking for good quality deal flow. “They need great companies to look at and to invest in,” he says. “Making sure that we’re continuing to provide great companies … is really going continue to help our venture capital [funds] grow locally and attract more venture capital from around the country.” And that will keep Georgia’s tech growing.