Atlanta startups realizing too late that profits are more important than promise.
Tech companies seeing their values soar only to watch them crash back to earth.
Layoffs of hundreds of employees.
As investors pull back from risk and valuations plummet, it’s raising images of the dot-com bust of two decades ago, the one that helped lead to the 2001, recession.
Sig Mosley, founder of Mosley Ventures known as Atlanta’s godfather of angel investing, went through the dot-com implosion.
“I don't anticipate we’ll see anything that bad again,” Mosley said. “That impacted not only the tech industry, but the whole economy.”
Mosley began his career in 1990 and founded Mosley Ventures right as the dot-com bust unfolded later that decade.
Now, he is a venture partner at Zane Venture Fund, a $10 million fund that supports minority owned startups. Mosley suggests even if Atlanta’s startup ecosystem faces a downturn, entrepreneurs of color have more resources to help them navigate. That includes Atlanta University Center, the largest consortium of historically Black Colleges and Universities and Russell Center of Innovation and Entrepreneurship, a small business incubator for Black-owned firms.
“We have a number of opportunities where minority entrepreneurs will get help that wasn't available to them in the past,” Mosley said.
Mosley has invested in over 120 startups. He led the SAP Ariba’s $5.7 billion acquisition of Tradex Technologies Inc., the Southeast’s largest-ever VC deal. His comments to Atlanta Business Chronicle come after a record year of investments into its startups.
With the U.S. economy on the cusp of a potential recession, Mosley is confident Atlanta won’t experience a downturn as steep 2007, when the metro area led the nation in bank failures.
“We are more suited to come through this than any location in the U.S,” Mosley said.
This interview has been edited and condensed for clarity.
Last year was a record year for investment but valuations were inflated. Why weren’t VC firms more careful?
West Coast VCs tend to take more liberal views towards valuations, whereas on the East Coast we have them lower. I know one local VC turned down two or three companies just because their valuations did not make sense.
What can companies do if they want to raise capital?
Generate more revenue. Customer revenue is by far the best way to fund a company. In this environment, companies should seek profitability in a reasonable time rather than shoot for the moon. VCs used to look at things like eyeballs. Today, we can't. We have to look at actual revenues.
How does this period compare to other recessionary climates?
The similarity is that it's always generated by some financial event. In the dot-com bust, things got way out of hand. I knew a company that tripled in value in three months for no reason. In 2007 and 2008, you could borrow more than 100% of the value of a home. That's not a good sign. We had a lot of angel investors and VCs, but as soon as the bust happened, they were gone. Now we have been rebuilt again. We have early- stage venture funds. We have seed stage funds. We have funds that are specialized such as Silicon Road Ventures or Engage Ventures. We have a better quality of firms, we have more of them, and I think they will be here for the long term.
How will different industries be affected?
For industries, cybersecurity is always an area of concern. Medtech and healthtech will continue to do well. Edtech might suffer because some don't view it as critical. Supply chain industries should be helped significantly because we are continuing to have so many supply chain problems.
