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Welcome to SL #33! We sat down and had a blast with Glenn McGonnigle, one of the founding partners of Atlanta’s newest venture capital fund – Tech Operators (founded by Glenn, Tom Noonan, David Gould, and Said Mohammadioun). We discussed a variety of things, including the details of the new fund, the landscape in the Southeast, and what types of plants Mike grows in his backyard for “medicinal purposes”.

The bus is back and ready to rumble with Mike at the wheel – this time, he plows headfirst into entrepreneurs who seem to think that circumventing AngelLounge and trying to get us to champion their deal is a good idea.  FAIL!  Mike also segues into a nice monologue on the angel perspective of the current economic downtrend.  Some great listener emails, a musical tribute to the $700B government bailout, and a sprinkling of StartupLounge humor round out another great show. Enjoy!

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Shownotes and Interview Questions:

As usual, we had lots of related follow-up questions and side discussions, but here is a good sampling of the questions we asked on the show:

• Give us your elevator pitch for Tech Operators
• Tell us about your recent closing of a new fund
• Was it hard to raise this fund, given the economic climate?
• You’ve raised a virgin fund, which is very hard to do.  Why do you think you were so successful where many others have failed?
• What is the story you tell potential limited partners that excites them about investing in Georgia and the Southeastern US?
• Do you anticipate a great deal of competition for deal flow?
• When will the fund begin investing operations?
• You have four people on your founding team.  Have you identified particular strengths and roles?
• A lot of people have a view that Atlanta VCs, don’t have much of an interest in seeing true early-stage companies.  Their perception is that most regional VCs have moved upstream to more emerging growth type deals.  Are you observing something similar?
• When you receive an opportunity and you’re inclined to pursue it, what is your process for examining that opportunity?
• There seems to be a lot of venture fund raising activity here in Atlanta – some existing venture players that have been dormant for a while are raising new funds (e.g. Kinetic, Noro-Moseley), and several new funds are in the works.  From your perspective, is this a positive thing for Atlanta or a negative thing for TechOperators?
• Recently, there was some commotion around the notion that some regional/local VCs are “spreadsheet jockeys”, meaning they tend to invest based on analytics and business models rather than a simple opportunity to create value in the marketplace without necessarily having an easily illustrated business model firmly in place. What is your take on this?
• On average, how long does it take to get you from that starting point to an agreement on an investment?
• What is the best way to get an opportunity in front of you?
• How many opportunities do you expect to look at each year and how many investments do you expect to make in a given year?
• When dealing with you guys, what’s one thing that’s an absolute no-no?
• How involved do you plan to be day to day with your portfolio companies?
• If you were to “sell” yourself to an entrepreneur to take you on as an investor, what do you think is your biggest selling point?
• What is a piece of advice you would give to new early-stage investors?
• If you could change something in the environment or ecosystem to make your job easier, what would that be?
• What’s your overall assessment of the Atlanta early stage market? Is it improving, and if so, how do you see that?
• If you were to give one piece of advice to entrepreneurs that might want to approach you for capital, what would that be?

Listener Emails Read and Answered on the Show:

jswanson: Hey guys, love the show.  I have a quick question for you this morning.  I am contemplating raising a small round of angel financing for a new software startup.  I am concerned about the current market conditions and I’m wondering what you’re seeing out in the angel sector.  What can I expect to see in terms of angel interest, activity, and ultimately valuation?

Patesh: I have a strange cap table problem that I’m hoping Mike can help me with.  I am losing a co-founder due to his personal medical situation.  Currently, he owns 30% of the company.  I need to find a replacement for him, and will need to give the new guy an equity stake.  The guy I’m losing knows that I’m going to want to reduce his equity stake to some extent, as its only fair. Any suggestions on how best to tackle this?  Do I just suggest a number and work it out with him, or is there a better way?

Sam: Greetings guys.  I am very interested in starting up a new video game studio here in Atlanta, primarily because I’m from here, but secondarily because I’d like to take advantage of the generous tax credit incentive from the state.  Even though we have a nice incentive here to build this type of company in Georgia, we don’t seem to have a lot of investors in that sector.  Any tips?  Can I convince an outside investor to invest in this deal, and allow me to stay in Georgia?

Carmine: Scott and Mike, I love the show, it has been a huge help to me.  I visit the StartupLounge site daily to see if there are new episodes posted.  Please keep it up!  I am curious about one thing, though. How do you guys find the time to do these podcasts, blog posts, speak at various events, and hold really cool events like PitchCamp and CapitalLounge?  From what I gather from your bios, you both have day jobs.  How can this be?  Have you secretly invented a cloning machine?  If so, tell me where I can get one!

Guest Bio:

Glenn McGonnigle

Glenn McGonnigle is a founding partner of Tech Operators, a new venture capital firm in Atlanta focused on early-stage technology ventures. McGonnigle was most recently Chairman and CEO of Atlanta-based VistaScape Security Systems, a leading provider of enterprise intelligent video surveillance software. McGonnigle was recruited by the company’s board to raise capital and grow the business. He subsequently oversaw the successful sale of the company to Siemens Building Technologies. An authority on IT and physical security convergence and a frequent contributor and expert speaker for numerous industry publications and events, McGonnigle helped shape President Bush’s 2005 National Strategy for Maritime Security.

Previously, McGonnigle was a co-founder and top executive of Atlanta-based Internet Security Systems (ISS) where he helped raise initial venture capital and launch the business. For 7 years, he led the business development team in developing sales channels and entering the managed security services market. During his tenure, the company grew from startup to revenues of over $225 million and was recently acquired by IBM for $1.5 billion.

Prior to ISS, he was President and co-founder of Data Integrity Services Corporation, an early-stage provider of WAN-based data management services. Throughout his 24 year career, McGonnigle has remained focused on emerging technologies and has held a variety of sales and marketing executive positions during the high growth stages of EMC, Epoch Systems, Borland, and Wang Laboratories.

He is an active member of the Technology Association of Georgia (TAG) and sits on the advisory board of Georgia Tech’s Tennenbaum Institute. In addition, he has served as Entrepreneur in Residence and CapVenture coach supporting Georgia’s Advanced Technology Development Center (ATDC). McGonnigle holds a BS in mechanical engineering from the University of Virginia.

Miscellany:

Enjoy! To play it, use the tools at the top of this post – you can play it via the embedded Flash player by pressing the big play button at the top, or download it to play on your computer or MP3 player.  You can also take advantage of our iTunes feed.

Podsafe music used within this episode:

• Neolith by Kevin MacLeod
• 700 Billion Dollars by Steve Goodie
• All the Money in the World by Hutch

Our format is a little out of the norm as far as podcasts go. We treat our efforts as a true “show” rather than a super-concise (limited) vehicle for delivery of information. Therefore, the podcasts can run a bit long (actually, it is largely driven by the guests and their responses.) While we try to have very substantive discussions, we also try to have a lot of fun along the way (and that tends to elongate the programming a wee bit.) Our theory is that if we are having fun during the show, hopefully, you will be having a little fun listening as well.

Here is the breakdown for the show, in case you want to hop around.

A special thanks to Glenn for coming in and hanging out with us!

We welcome your continued feedback as well! If you have an interest in appearing on the show, becoming a show sponsor (hint, hint), have some suggestions for topics, have feedback, or would just like to email us and tell us to “shove off”, we invite you to contact us.

Enjoy!