Sig Mosley and John Yates Discuss Atlanta’s Vibrant Tech Scene in 2021

Over the course of the last few years, we’ve seen a number of Atlanta startups reach unicorn status. Meaning these companies are valued at an excess of $1 billion. Global funding has increased 150% year-over-year with a record of $300 billion in 2020. Over $288 billion has been invested in just the first half of 2021. A five-year high for Atlanta hitting over $2 billion.

Startups cannot grow without the help of seed investors. We are here to talk about those unsung heroes that are seeding the growth: angels and early-stage investors. We want to explore the history of the Atlanta angel investing scene, what it has become today, and where we are headed.

We are joined today by two Atlanta investment insiders, Sig Mosley, Managing Partner at Mosley Ventures, and John Yates, Attorney and Partner with Morris, Manning, and Martin who can share their insights on angel investing.

Transcription:

Jim Fitzpatrick:
Gentlemen, thank you so much for joining us on the show.

John Yates:
Thanks Jim.

Jim Fitzpatrick:
Sure. It’s great to have you in person, right? I mean, it’s good to be back face to face. So, John, I want to start with you, what was considered a large investment in the early days when the Atlanta scene was young?

John Yates:
Well, it’s hard to believe that Sig and I were there in the early days. Sig, we’re still young men, but… The early days would probably be the early 1980s or maybe in the late seventies. A big check for an early stage company was probably $100,000. If you could wrap together angels and enough folks to bring a $100,000 to the table, you had real money at that point in time.

Jim Fitzpatrick:
100,000.

John Yates:
Obviously things have changed since then.

Jim Fitzpatrick:
That’s right. That’s right. When you look back at the early days of tech investing in the Southeast, how did you differ from the things that are going on today? How does it differ?

John Yates:
Well, I think… And Sig, this is a role that you keep played within this industry. I think what we saw were a few very discreet individuals who were making investments and those people that were making those investments were principally folks from the technology community and the other community that was investing was a real estate community. And we remember this, we would have real estate folks putting money into tech company, and Sig that didn’t work too well. Did it?

Sig Mosley:
No, that did not work well at all because they didn’t understand what was primary software. Because they wanted to be able to touch something. They wanted to be able to hold it.

John Yates:
It’s got to be tangible.

Sig Mosley:
Tangible, well, software ain’t anything but tangible therefore, a lot of them got in and got out very quickly.

Jim Fitzpatrick:
Sure, sure. And it’s something also real estate you can finance, you make a run to the bank and go, “Hey, let me grab a million on this piece of property or this building or what have you.” Not so much on the software.

Sig Mosley:
No, no. The software very, very— and they didn’t like the terms of the deal because The deals could go a lot longer than they wanted to be committed to.

Jim Fitzpatrick:
Right. Right, right. For sure. Who are some of the people who most impacted the growth of Atlanta’s tech scene, John?

John Yates:
It’s really interesting, in the early days it was very telecom-focused and communications focused and Sig and I saw that here in this community. So you had Hayes microcomputer products. It was literally just a mile or so from where we’re seated right now in Norcross. And it was very interesting because Hayes created effectively the modem, which I guess, think about today as like the carburetor for a car. And it was a world leader. I mean, he was the international leader in that area. And then just a few other miles up the street, you had Digital Communications Associates, DCA, and Sig and I were just talking about that company, leading provider and a communications technology hardware and software. But those were larger companies and then they were supplemented by folks like BellSouth. And you had the telecoms together and the communications together, we were really a communications juggernaut for a period of time and then things really changed.

Jim Fitzpatrick:
Yeah. Yeah. They sure did. And you must have remembered those days, right?

Sig Mosley:
Oh, yes. But you also had— up in West Point that did a lot in the telecommunication area well. So we were very heavy in telecommunication initially.

John Yates:
Yeah. That was all the rage.

Jim Fitzpatrick:
And with Sig is too modest. Actually, Jim I’ll tell you about the most important players here. And the most important players were John Imlay and SIG Mosley. And if you look at the community and you see where the tech leaders are today and where they were 10 years ago, 15, 20 years ago, they really emanated from the companies that Sig and his co-worker John Imlay really helped create. So when you think about where that tech community really grew in Atlanta, it was largely as a result of the efforts that Sig undertook and that he undertook with his former colleague John Imlay.

Jim Fitzpatrick:
Do you would sit back and just say, “Wow, that, that seems like ages ago, but we’ve come so far.”

Sig Mosley:
Oh, we have come so far. But at the same time, you have company like Scientific Atlanta with Glen Robinson. You had NDC. You had a number of other companies that helped bring the community together.

Jim Fitzpatrick:
Great segue to my next question, which is what are some of the supporting organizations that have been key to the establishment of Atlanta’s tech scene, incubators and accelerators and such, John?

John Yates:
We’re very fortunate the Advanced Technology Development Center, ATDC that Sig and so many others have been involved in through Georgia Tech has really been key. It’s been one of the oldest incubators in the community. I know it started out in a very old sort of dilapidated building in Georgia Tech and today it’s become really, probably the prototype for the incubator that would be the best example of a successful organization that’s brought together technology companies, entrepreneurs, and tied it into the academic community. And we’re very fortunate that it’s now known internationally as really the best example of a successful organization.

John Yates:
And then there about a lot of other organizations as well. The Technology Association of Georgia is one of the largest associations for tech companies in the country, over 30,000 members. Larry Williams has done a great job in that organization.

Jim Fitzpatrick:
Yeah. Unbelievable. He really has.

John Yates:
And it’s well known too. So we’ve really planted a flag through ATDC, through Technology Association of Georgia, then a lot of other ancillary groups too, that have come together to really worth the tech community.

Jim Fitzpatrick:
Sig, These types of organizations are so vital to the growth of this.

Sig Mosley:
Oh, they are. Because without them, you don’t educate your entrepreneurs. And by educating the entrepreneurs, you are building better companies. Because in addition to the one that John had mentioned with how Atlanta Tech Village or ATV. And then we also, how today the Russell Innovation Center for Entrepreneurs down on the south side of town. So we have had a number of them and they continue to help companies become what they can become.

Jim Fitzpatrick:
So let me ask you while I got you sitting here, what is the story behind Sig said no t-shirts?

Sig Mosley:
Oh. Well-

Jim Fitzpatrick:
A number of people asked me to ask you this, by the way. They said, “oh, you’re going to be talking to Sig Mosley. You got to ask him that.

Sig Mosley:
Well, I had the reputation of saying no more than I said yes on the investments. And so people and company couldn’t figure out when they should come to me to ask me, because they didn’t know where I would say no early on or they should wait and talk to everybody else. But everybody else kept saying, “Well, what does Sig say?” And so two of my friends here came up with the t-shirt that says Sig said no. And they gave it to me at a networking event. And they didn’t think I would wear it, I put it on that night and have probably kept it in my-

Jim Fitzpatrick:
The last time that we had you on the show, I asked you the question, how many deals that you look at? You said, “I look at about a hundred deals to make one.” And people wrote in to me and they said, “Did he say a hundred deals to look at one? Oh my gosh, what are my chances?” Is that typical among seed investors and early investors and in companies?

Sig Mosley:
I think it depends on where they’re coming from. But for us, even today, I still look at one hundred to do one and so-

Jim Fitzpatrick:
Sure. Sure. Are there those deals that you looked at, that you passed on, and shot up and said, “Damn, I missed it.”

Sig Mosley:
They’ve been very few. I have any regrets.

Jim Fitzpatrick:
So you feel good about the hundred to one ratio?

Sig Mosley:
Oh yeah, now I do. And generally the one I have missed are not necessary true tech deals, so.

Jim Fitzpatrick:
Okay. Okay. All right. And that’s your deal? The tech deal.

John Yates:
And not amplify one thing too, when SIG said no, it was always a professional no. And I’ll tell you, one of the things that Sig has done is given back. So it’s really important, when you say no, you can explain to them why. And I think that’s one thing that this community has done a great job of saying is, “Look, I may not be able to help you. It may not be my dollars that are going into your company. Let me see if I can help you somewhere else.” And Sig’s done a remarkable job of that.

Jim Fitzpatrick:
Yeah. There’s no question. I did hear that from a number of people that said just that. So a number of people, actually that sent me an email that said, “Sig said no to me.” So they said, “maybe we should come up with another t-shirt that said, Sig said no to me on my company.” But nevertheless, they did say you were very professional. Did give them good advice over it. And that’s what a lot of entrepreneurs need. You’ve got to go through so many nos to find that yes. I mean, the chances of coming out, making a presentation and then five people say, “Yeah, we’re in” it’s just slim to none.

Sig Mosley:
Yeah. It really is.

Jim Fitzpatrick:
So how did you start as an investor? I know a lot of the people viewing right now are probably scratching their head saying, “Wait a minute.”

Sig Mosley:
Well, I worked at MSA for 21 year management science America. And we sold the company in early 1990 to Dun & Bradstreet. Shortly thereafter, the chairman and I negotiated a deal where I would go and run his family—, his family foundation. And part of what he wanted to do to give back to the entrepreneurial community. So we began doing angel investing really before it even had title and so over the next 20 years, we did 122 tech deals. I don’t count the Atlanta Falcons in my result because that was solely called. John wanted to be in football.

Jim Fitzpatrick:
That’s great. In the past it seemed that successful founders took their exit capital and rode off into the sunset. These days it seems that there are more successful founders reinvesting that cap capital into companies right here. We talked a little bit about it, but talk to us about that.

Sig Mosley:
Yeah. We definitely see a lot more of it now than we did in the early day. You look at Ben Chestnut at MailChimp. You look at the two founders of Kabbage. They both have given back. Yeah. And so Tom Noonan had been a great… He has set a great example when he and Chris Klaus came out of ISS. They both have given back tremendously. So we see a lot more of it now.

Jim Fitzpatrick:
Okay. Okay.

John Yates:
The other element there too is we see people, those individuals too. Maybe you don’t always see that they’re putting money back into the community, but they may be writing a check into a fund, to an existing venture fund or private equity fund. So they’re writing even bigger checks and then those funds are invested into the community. So it’s maybe an indirect way, but it does definitely help to support the community.

Jim Fitzpatrick:
Yeah, for sure. For sure. Now do you call them right after that acquisition saying “okay, how much can we count on?” Like a telethon.

John Yates:
No, we’re going to do 300 deals this year. And I’ll tell you, when I look for testimonials, I call them right after we hand them the check or wire transfer the money and say, “Would you give us a testimonial?” And they usually say, “That’s great. You go ahead and write it.”

Jim Fitzpatrick:
That’s right. You write it. Yeah. Everybody wants you to write the testimonial. I’ll sign it, right. In the early days, most investment capital was coming from outside Atlanta. How and why is this changing John?

John Yates:
Well, again, this phenomenon that’s taken place with the pandemic that’s changed things radically, but pre pandemic, I think it’s important to look at it as we indicated in the early days, in the eighties and nineties. I think early nineties, we saw a lot of these funds from the west coast that wanted to come in, swoop in and take the best deals and then move them to California. Well, that changed radically when we ended up having the situation where people would much rather stay in Atlanta. And so now what we see is very interesting phenomena that’s, I think, changed remarkably funds all over the country that will be contacting us. And I know they’re contacting you too Sig and they say, “look, we’re investing now, we’re out of San Francisco or Boston or New York, but we’re not investing in any companies in San Francisco, Boston or New York. We’re looking elsewhere. We’re looking at the secondary and tertiary markets and we’re looking at Atlanta.”

Jim Fitzpatrick:
That’s a good trend, right?

John Yates:
It’s a great trend.

Sig Mosley:
Great trend.

Jim Fitzpatrick:
I want to bring this next question up because I think it’s so vitally important. We’re seeing more funds dedicated to companies led by diverse founders. And that’s so exciting to see, especially being in Atlanta. We should lead this in the nation. So how does this also benefit the Atlanta tech scene overall and what is, what impact does this have? I mean, it’s just great to see minorities that are landing these deals to be able to start their companies and to the next level. And I think it speaks volumes for Atlanta, right?

Sig Mosley:
Well, it does. We look at the number of new— that have been created, a number of them here in Atlanta that are around the whole diversity area. You have the—, you have Zane Venture Fund, you have Valor ventures here in town. And also then you had to look at the people who were involved. Paul Judge had done a wonderful job of being an entrepreneur.

Jim Fitzpatrick:
Yeah. That’s for sure. Boy that’s-

Sig Mosley:
An investor and diversifying all throughout the Atlanta area. We now have the A3C conference that he put on here, that thanks to Paul. We are moving towards it. We are not the leader. We are definitely moving toward being the leader in that area.

Jim Fitzpatrick:
Right. Not only is it the right thing to do, but it also means a tremendous amount of money. I mean, these minority founders are going on to build such great companies and do so well for the stakeholders and the shareholders down the road. So I think it’s a great thing. And long time coming, but… Right?

John Yates:
One company probably mentioned, it’s also Calendly. Who’s just done a remarkable job.

Jim Fitzpatrick:
There you go.

John Yates:
And what Tope’s been doing there. You have these successes now. I think we’ve all agreed too. Not every company, whether you’re run by diverse leadership or non-diverse leadership is going to be successful, but the fact that we’re nurturing those businesses and we can show examples of very successful businesses really sets us apart from other cities.

Jim Fitzpatrick:
Yeah. There’s no question about it. There’s no question. It means good dollars. So if you were to tell new angels, which areas and industries and invest to scout in, what would they be?

Sig Mosley:
Well, you look at what Atlanta had been known for years. You have cyber security, you have digital health, you got logistics, you got ed-tech, you got property tech. Those are areas that we are very, very good at here. To a certain degree, robotics as well.

Jim Fitzpatrick:
Yeah, for sure.

John Yates:
And I think the other one to add to that too, Sig, that we’ve seen is FinTech. I mean, I think what we’re seeing here with FinTech and payments has really put us in a unique position, but I think it’s highlighted, we don’t have a heavy, or I would say an overly concentrated community in one technology, which is a good thing. I think we have a great span. And then with Georgia Tech and our other institutions in this state generating new engineers and new entrepreneurs. I would say the one thing that’s probably pretty common to the growth of our companies. A lot of business-to-business, B2B companies. Now several B2C that have been very successful, but most of those early stock software companies and the software companies today and tech-enabled companies have a pretty strong B2B component. And that does separate us.

Jim Fitzpatrick:
Yeah. Yeah. For sure. And beyond tech, because everyone that’s listening right now says, “Well, I don’t have a tech program. I don’t have a… I’m not building an app, so to speak. I want to do something else outside of technology, beyond tech.” What are the there areas that you see emerging from consumer goods, social enterprises and such?

Sig Mosley:
Well, I’m not in that market, so I am not a good person-

John Yates:
But let me tell you what you do, Sig. Sig would convince them to develop an app.

Jim Fitzpatrick:
Right. To develop an app. Right. If you can deliver that hamburger, forget it through the window, like a hologram or something.

John Yates:
You just don’t know you’re a tech company, but you really are a tech company.

Jim Fitzpatrick:
That’s right.

John Yates:
And I think that’s part of our advantage. I mean, we have we’re number three in the country for Fortune 100 headquarters. Now those aren’t considered necessarily tech, Delta Airlines and Home Depot-

Sig Mosley:
Coke.

John Yates:
Coke. You don’t think them as tech companies, but they are very active in looking at technology and using it in growing their business. So I think other small companies just say, “Look, I’m not a tech company,” might be well advised to think about how can I become a tech enabled business.

Jim Fitzpatrick:
That’s right. That’s right. Talk to us about the importance of the educational role and those institutions that do play in a role in the ecosystem. Because we’ve got such great institutions here, right?

Sig Mosley:
Oh, we do. Georgia Tech is so well known, particularly in the engineering area, Emory in the healthcare area. And you got Georgia State that cover multiple areas. And you look at basically all of the tech communities, they all have universities tied into them. And we by— have one of the best with Georgia Tech. So.

Jim Fitzpatrick:
Yeah, for sure.

John Yates:
It’s true. And I think the other thing, if you look and compare ourselves with some of the other cities that are worthy competitors. We mentioned Austin earlier, it’s a great city. It’s got University of Texas. But we are so blessed with the airport, with the foundation we have here, with the diversity. We’ve had our other elements that differentiate us and this ability of Georgia Tech to continue to generate entrepreneurs as an engineering school, into this community, it really can’t be underestimated. It’s been a key driver and is one of those drivers that’s not going to go away. It’s just going to get better. And then what Emory’s doing right now with their expansion, particularly now in the digital health and healthcare area-

Jim Fitzpatrick:
It’s incredible.

John Yates:
It really is.

Jim Fitzpatrick:
Yeah. There’s no question. What do you see the role of angels being now that investments are moving towards later stages and bigger check sizes?

Sig Mosley:
Well but that is for companies that have gotten to a point of being ready for them. You still need the angels and the early-stage VCs to invest in them because they had to get to a certain size to be able to attract that VC-type money. And so up to the angels to work with the old company need to invest in them to help grow them.

Jim Fitzpatrick:
Sure. For sure.

John Yates:
I think we’ve seen also a growth of angels overtime. And I mean, Sig was unique because he came from the industry. He knew the industry. We’ve been in enough board meetings together that I know he knows how to run a software company and to give advice, but what’s happened, I think, in our situation now is we’ve got a lot of sophisticated angels. And then we have angel organizations and I guess the one cautionary note would be, the angel organizations are great, but these entrepreneurs need to be careful when they bring too many people, friends and family into their company. And you get a list of stockholders that is just so broad that it makes it difficult to get that next round of financing. So it’s always wise to get the advice from people that have been there, done that, to make sure that you’re not bringing in a group of angels that might actually make it more difficult to get the Series A and Series B capital and later.

Jim Fitzpatrick:
Which is actually very common, right? I mean, you probably see a lot of that.

Sig Mosley:
Yeah. Well, I was lucky back when I began doing the… I came across an idea of using an LLC or a limited liability company to do what I call herd cats into, in that I would herd the angels into an LLC and then use that LLC to invest in the company. So you had one item on the cap table. It worked well.

Jim Fitzpatrick:
It worked well. But we do see that. Do companies for those entrepreneurs, those young entrepreneurs, out there right now that are listening to us have this conversation, is it okay to just have an idea to get with an angel investor and say, “Here’s my idea.” Is that too early on? Or are you looking for a proof of concept?

Sig Mosley:
No. Well, it depends upon the angel. I will meet with somebody that has an idea. And I’ll tell them what I think or the idea.

Jim Fitzpatrick:
Okay. But they’re one of the 99 that’s made by me.

John Yates:
That would be a professional no—

Jim Fitzpatrick:
Exactly. Yeah. He would get his shirt. Here’s your shirt.

Sig Mosley:
And so. But it also it good to work to your investors before you need money. Because the more they know about you, the more they have worked with you, that will make the due diligent process easier when you need to raise money. You also need to only talk to angels and RVCs who invest in your area. Somebody come to me with a biotech deal, they are wasting their time and my time because I am anything but a bio person. And so you need to do your research, even at the early stage.

Jim Fitzpatrick:
That’s right. That’s right. John, let me end with you. And that is, what do you think Atlanta could do to go from a mid-tier ecosystem to a top-tier ecosystem?

John Yates:
So that’s a question, I don’t think we have… I’m not going to give you this positive answer to say one thing would make that happen. But I think there are a couple things that Sig and I would, agree on. I think to the degree that we can continue to communicate the message about what we have going on here and be clear in that communication, not just in the U.S., but internationally, it would help to bring more funds to town. People still think about Atlanta and say… They think it’s an underserved market. They don’t see all the activity happening. Obviously, the recent MailChimp transaction, huge situation, caught the attention of everybody internationally.

John Yates:
But we’ve really got to get out to these various cities throughout the country. Every year prior to the pandemic, we would go to Boston and New York and San Francisco and Los Angeles and Chicago, and we started bringing along government officials, the governor or the mayor, lieutenant governor, so we could tell that story. We need to do more of that and let people know what’s happening here, because I think people know of the airport, they know about Georgia Tech, but they’re not as familiar with our great successes. And so we need to toot our horn a little louder for folks.

Jim Fitzpatrick:
Oh, there’s no question about it. You want to add anything to that, Sig?

Sig Mosley:
No, I think John covered it. He’s right on top of it.

Jim Fitzpatrick:
That’s right. That’s right. Well, Sig Mosley, Managing Partner of Mosley Ventures, and John Yates, Attorney and Partner at Morris, Manning & Martin. Thank you gentlemen so much. This has been quite a pleasure. I know that our viewers and subscribers will get so much out of our talk today. So thank you so much.

John Yates:
Thank you.

Sig Mosley:
Thank you.

Jim Fitzpatrick:
Thanks.

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