Georgia Ranked 7th in Nation for Venture Capital Raised in 2004; ATDC Companies Accounted for 18% of State Total

Georgia ranked 7th in the nation for amount of venture capital raised during 2004, the state’s best showing ever. ATDC member and graduate companies contributed 18 percent of the total $585 million raised statewide.

In a total of 13 deals, a dozen current ATDC member companies attracted $53 million in venture capital, while four ATDC graduate companies brought in another $51 million. The numbers were reported in the latest MoneyTree™ Survey compiled by PricewaterhouseCoopers, Thompson Venture Economics and the National Venture Capital Association.

Georgia’s 7th place showing topped all other states in the Southeast. For the fourth quarter of 2004, Georgia ranked fifth in the nation, with $158 million invested that quarter.

“Market share may the most important measure of how well a technology community is doing,” said Susan O’Dwyer, technology industry marketing manager at the PricewaterhouseCoopers Atlanta office. “This is the best showing that Georgia has ever had.”

A majority of venture capital raised by Georgia companies flowed in from outside the state. While Georgia might prefer to provide sufficient venture capital from local sources, O’Dwyer pointed out that the ability of local companies to attract outside investors is a strong positive sign.

“This speaks to the attractiveness of the intellectual capital that’s here,” she said. “That out-of-state venture capitalists are willing to come to Georgia to do deals speaks to the attractiveness of what’s going on here.”

In the Southeast, Georgia’s $585 million compared to $335 million raised in North Carolina and $264 million brought in by Florida firms. Georgia was the only state in the Southeast to place in the top ten for 2004.

Georgia’s strength remains in software, though with companies in the life sciences, telecommunication and even semiconductors, its technology community is broader than in other southeastern states, O’Dwyer noted. North Carolina is known for its life sciences companies, which attracted $126 million in 2004. But Georgia life sciences companies were not far behind, bringing in $97 million – reflecting continuing growth fueled by a growing biosciences research initiative.

Two companies co-founded by Georgia Research Alliance Eminent Scholars were among the leaders in attracting outside funding. Lancope, a network security company founded by Georgia Tech professor John Copeland, secured $12.5 million. Telecom infrastructure company EGT, co-founded by fellow professor Nikil Jayant, brought in $4 million.

ATDC member companies shown in the 2004 MoneyTree survey were Broadsource, Cambia, FTrans, GTronix, Invistics, Jacket Micro Devices, Oversight Technologies, Qcept, Quellan, Scentric, Stheno and Vocalocity. ATDC graduate companies represented in the survey included Connecture, EGT, iVivity, Lancope.

Since 1995, Georgia’s venture capital showing has grown from 48 deals totaling $161 million to 81 deals totaling $585 million. While the 2004 total amounted to just 2.8 percent of the nation’s VC funding for the year, O’Dwyer noted that the dominance of California and Massachusetts leaves the remaining states to fight over a relatively small piece of the funding pie.

“California usually accounts for 40 to 45 percent of the total, while Massachusetts takes 10 to 15%,” she said. “That leaves 48 states to divide up the 40 percent that’s left.”

Nationally, Money Tree reported $20.9 billion in a total of 2,876 deals during 2004. The number represented an increase over 2003 that was attributed to stronger IPO and acquisitions markets that led venture capital funds to be more optimistic.

“It is a good time to be a venture capitalist,” said Mark Heesen, president of the National Venture Capital Association. “As we enter 2005, there will be many opportunities across industry sectors, funding stages and geographies. The strengthening IPO and acquisitions markets clearly helped fuel late stage financings in 2004. Now, as venture capitalists are beginning to invest in their new funds, we may well see a shift in focus back to early state companies in the coming year.”

That’s good news for entrepreneurs.

“It is a good time to be an entrepreneur,” said Tracy Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers. “New ideas with realistic business models will be seriously considered. New companies with customer commitments can get cash to progress. And, operating companies can access plenty of capital to accelerate growth. The watchwords for entrepreneurs are potential, prudence and patience.”

Here are the top 10 states in total venture capital raised in 2004, according to the MoneyTree statistics.
  1. California: 1,117 deals and $9,345,925,400
  2. Massachusetts: 337 deals and $2,774,903,600
  3. Texas: 157 deals and $1,096,485,300
  4. Washington: 117 deals and $868,280,400
  5. New York: 142 deals and $721,129,500
  6. New Jersey: 77 deals and $720,399,100
  7. Georgia: 81 deals and $584,832,100
  8. Pennsylvania: 91 deals and $526,065,900
  9. Maryland: 87 deals and $512,349,100
  10. Colorado: 70 deals and $443,599,200
Venture Capital Raised by Georgia Companies

 

Seeding New Companies

The ATDC Seed Capital Fund has helped support the growth of 11 technology-based companies, investing approximately $3.6 million of state funds to attract a total of $140 million in private equity – a nearly 30-to-1 leverage. So far, more than 220 jobs have been created by companies that have received investment as a result of the fund’s work.

The Seed Fund was established in 1999 to expand the amount of early-stage capital available for startup technology companies. State legislation required a match of $3 in private money for every $1 in state money invested, and specified that decisions about investment would be made by private investors. The Fund has exceeded the match requirement nearly 10-fold.

Companies in which the fund has invested include:
  • Ardext
  • EGT
  • GTronix
  • IVivity
  • Jacket Micro Devices
  • Oversight Systems
  • Quellan
  • RF Solutions
  • Scentric
  • Vocalocity

 

Star Software named to ‘Inc. 500’ list

Inc. magazine has named ATDC graduate company Star Software Systems Corp. to its annual “Inc. 500,” a ranking of the fastest-growing private companies in the United States. With a four-year average annual sales growth of 220 percent, Star ranked No. 142 on the list – and as the fourth fastest-growing company in Georgia.

Founded by Tom Eaves, Star Software provides a variety of information-technology and process improvement services. Among its hallmarks is designing software that increases productivity and accuracy of clients’ Web-based databases. Expanding its offerings, the company is about to launch a series of products that will help school districts better manage financial and student information.

Eaves launched Star Software in 1990 in Lafayette, La., but relocated the company to Warner Robins, Ga., in early 2000 after hearing about opportunities there for custom software development. When the company was admitted to ATDC’s Warner Robins location in 2000, it had seven employees and less than $1.5 million in annual revenue. After graduating in 2002, revenue had increased to about $4 million. The company has grown to 89 employees and generated more than $5 million in 2004 revenue, which Eaves expects to triple within the next two years.

Eaves links his company’s fast growth to “outstanding people” and its efforts to provide quality service to clients.

To be eligible for the 2004 Inc. 500, companies had to be privately held through fiscal 2003 and generate at least $200,000 in net sales for the base year of 1999 (for alumni) or 2000 (for new applicants). Companies also had to generate $2 million or more in net sales for 2003 and have evidenced an increase from 2002.