A major media company is committing $250 million to a new business venture that will start technology companies in metro Atlanta, a move experts say could fuel job growth in a burgeoning sector of the region’s economy.
Atlanta-based Cox Enterprises, which owns The Atlanta Journal-Constitution, WSB-TV, Manheim auto auctions and Cox Communications and AutoTrader.com, said the money will be spread out over several years. But the size of the investment is substantial in a state that ranks low in investment vehicles such as venture capital, which are often critical to launch successful technology startups.
In 2011, total venture capital spending in Georgia amounted to $383.5 million, roughly 1 percent of the $30 billion invested nationwide.
“Introducing $250 million in venture capital money to the Atlanta area could be quite material to stimulate company creation and employment,” said Peter Wendell, a Stanford University business professor and founder of Sierra Ventures, a California-based venture capital firm.
Amid slower growth, the state’s economic development gurus have pivoted much of their recruitment effort to cultivating startup companies and jobs that create new technologies.
Metro Atlanta has recently netted a series of big innovation wins, including last week’s announcement of a General Motors technology center in Roswell that will employ 1,000 people.
Tino Mantella, president and CEO of the Technology Association of Georgia, called the Cox venture “great news” for the area’s technology community and one that will help create jobs and form new companies in the state.
“We just need more fuel and companies to focus on this area,” said Mantella, who added that technology companies tend to have a “cluster effect” that spawns new companies.
Heading Cox’s new partnership is Tripp Rackley, a board member of the privately owned media company who is perhaps best known for creating the companies behind online and mobile banking. The partnership will fund startups that Rackley and his team create in metro Atlanta.
Cox and Rackley would share ownership of the companies created.
In the 1990s, Rackley, a Georgia Tech and Roswell High School graduate, founded nFront, a pioneering Internet banking services company that went public in 1999 and through mergers is now part of Intuit. In 2004, he founded Firethorn, a company that provided mobile commerce and banking applications that was acquired in 2007 by Qualcomm.
Such companies typically employ highly paid and skilled workers such as software developers and engineers, a coveted sector of the workforce that tend to in turn help create more start-up companies.
The partnership has already funded investments in two Rackley ventures in metro Atlanta: Experience, a live events ticketing company, and an as yet unnamed technology firm.
Experience allows attendees at sports events or concerts to upgrade their tickets from inside the venue using a smartphone app. Georgia Tech, the Atlanta Hawks, Braves and the Phoenix Suns are among the 20 pro and collegiate teams that have launched Experience in their venues.
Asked in what sectors he would concentrate, Rackley said his background is in financial technology and online security, and metro Atlanta is a hub for those industries, as well as media.
“We’re building these businesses to be big, national businesses,” Rackley said in an interview with The Atlanta Journal-Constitution at the Cox corporate headquarters in Sandy Springs.
Rackley called a partnership of this size a first-of-its-kind investment in new startup companies by a major corporation in Atlanta.
Rackley said his team will dream up companies and new industries that have high-enough barriers to entry to limit competition, but not so high that the technology can’t be developed and perfected in a reasonable frame of time.
“You won’t see us do anything where the technology looks sleepy,” he said. “You are going to see us always look for the next big platform.”
Many large public companies are taking non-traditional approaches to some of their research and development spending by moving money to venture capital-style investments, Stanford’s Wendell said. But less is known about the research investment decisions of private companies, which do not disclose income statements and also can choose to invest with a corporate insider without the layers of disclosure required of a public company.
“It will probably be years before we can evaluate this approach,” Wendell said. “In early stage investing it takes a number of years to know before you are successful or not.”
Cox had approximately $15 billion in revenue in 2011, and employs more than 50,000 people nationwide and more than 8,000 in Georgia.
“While many of our businesses are relatively mature, we continue to spend nearly $2 billion each year in capital expenditures and investments in those businesses,” Cox President & CEO Jimmy Hayes said.
Cox sees this latest initiative as a supplement to its “multifaceted” growth plans, he said. And if the innovation fund is successful, Hayes said more investments could follow.
“We hope we have the opportunity to put a lot more than $250 million behind this,” Hayes said. “It’s a very significant upfront commitment. Cox is a very large company, and we are prepared to continue to invest in this partnership.”
Rackley joined Cox’s board in late 2010 and is a member of a director committee charged with planning growth opportunities for the company. Hayes said Cox Chairman Jim Kennedy asked senior leadership to come up with a way to use Rackley’s skills as an entrepreneur and investor to plot out ways to grow the nearly 115-year-old company.