$400 snack closets

$400/mo snack closet
My new co-working neighbor’s $400 per month snack closet

If I launch another software company in which remote work isn’t a big part of our culture (I don’t think I’d do this, but if I did), I’d be looking to the South’s secondary and tertiary markets: Greenville, Rome, Chattanooga, Birmingham.

Why would I look elsewhere? Because I have always had an odd interest in the expense side of a startup’s income statement.

Here’s my observation about what’s happening right now in Atlanta:

A Bay Area startup raises a $5M seed round and immediately opens an Atlanta office because our city is awesome and there is no more talent on the West Coast. They maintain their Palo Alto HQ because they want to be close to investors. Their CEO’s key metrics are 1) dollars invested and 2) headcount. They are going to make the world a better place, and their first step on the path to world-changing is to rent a snack closet for $400/mo in an ATL co-working space.* Their investors have to put the money to work, so paying attention to the expense side is not only quaint, but it’s counterproductive.

More and more Bay Area companies follow suit. Soon, even Atlantans begin adopting the growth-without-regard-to-cost mindset. Institutional investors have the money, and Atlanta seems like a good place to put it. Over time, rents and wages rise to levels not supportable by profit-generating businesses, so the entrepreneurs leading them react by embracing remote work and/or moving HQs to Birmingham, Chattanooga, Greenville, etc.

Eventually, the dialog in the Atlanta startup community stops referencing things like profit, churn, fully-loaded CAC, or really any metric that might be indicative of true value creation for customers and owners. All the talk turns to investment rounds, new office square footage, and hiring plans.

The Atlanta scene drifts away from being entrepreneur-oriented and increasingly exists to serve the interests of bankers, institutional investors, lawyers, and real estate developers. Atlanta stops being a good place for the ambitious young entrepreneurs who want to retain a big stake in their new ventures. “Founders” have less and less skin-in-the-game and they begin to look a lot more like early employees than entrepreneurs.

Flash forward twenty years: Elsewhere in the South’s wonderfully livable secondary and tertiary markets, yeoman entrepreneurs have been creating real and enduring value. The Bay Area is now home to luxurious and thinly staffed HQs for investors and their portfolio companies’ C-suites. Actual business operations happen here in Atlanta, but Atlanta’s leaders are struggling to find talent. Fortunately, great people and a strong startup culture has emerged in places like Birmingham, Chattanooga, and Greenville, so the Atlanta satellites start opening satellite-satellites.

* A friend once relayed something he heard from the owner of several storage facilities: “Give me any address in the entire country. My team can tell me with uncanny precision exactly how many 5x10s to build, how many 10x10s, how many 10x20s, and how many of each should be conditioned. I will know how much it will cost to build the facility, exactly how much to charge for each unit, and how quickly the place will reach 90% occupancy. I can tell you all of that, but what I can’t tell you is why someone will pay me $125 per month to store $25 worth of crap.”

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