It's a few minutes before seven o'clock on a Thursday evening, and there's a line of people waiting outside a Dunwoody restaurant. Mostly men in their 30s and 40s, dressed in nice pants and blazers - no ties. Once they're allowed inside and the networking begins, the exchanging of business cards, the small crowds around the known-angels and venture capitalists, it's clear that this isn't just any group of business folks. These are entrepreneurs, tech entrepreneurs.

They circle through the several rooms, occasionally pausing at the cash bar to buy a drink or scratch down some notes. Some are visibly nervous, some are trying to figure out who they should be talking to, others laughing like close friends.

Ten years ago, this scene was commonplace. Words like "incubator" and "hatchery" were ordinary lingo, and new companies were launched daily to sell everything from cars to underwear on the Internet. Venture capitalists from Silicon Valley and Boston set up branch offices in Atlanta. Valuations were only discussed in tens of millions, IPOs were routine and everyone had an idea.

Atlanta was on the map.

And then the bubble burst. And suddenly, it wasn't so easy to be an entrepreneur - even with real ideas - in Atlanta.

But slowly and quietly, it's happening again. An entrepreneurial groundswell is growing in Atlanta, complete with strong technology and sound business skills. More importantly, local investors are funding ideas. They're meeting together, making deals and creating software companies and services.

Lance Weatherby, venture catalyst at Georgia Tech's Advanced Technology Development Center (ATDC), is on the front lines of encouraging entrepreneurs and innovation. And he sees positive signs. When the ATDC, a top startup incubator in the country according to BusinessWeek magazine, recently used its blog to announce office space available to several qualified startups, the demand was "overwhelming," says Weatherby. And while the number of startups has dropped off since the Internet boom ten years ago, the quality of the entrepreneurs and their companies is much higher.

"I think that there are lots of exciting things taking place right now that are planting the seeds for opportunity in the city. More people are willing to invest in startups. There are pockets of innovation that are taking place that someone in the normal world wouldn't see on a day-to-day basis," says Weatherby.

Georgia's venture capital spending, which peaked in 2000 with 233 deals totaling $2.3 billion dollars, is slowly gaining ground again, according to a 2008 State of the Industry report by the Technology Association of Georgia (TAG). Last year, according to the report, 80 deals were made worth $426 million, and while that was down slightly from 2007, high-tech venture capital investment was actually up 5 percent. In addition, the average dollars per high-tech venture deal have been increasing at a rapid pace since 2005, and was up to $6.6 million per venture deal in 2008 (still down from $12.7 million per deal in 2000, though).

The study compared Atlanta's technology environment to five benchmark states - California, Massachusetts, Texas, North Carolina and Florida - to look at its ability to create and retain high tech companies, talent and investment dollars. 

"Atlanta is poised for growth," concludes TAG president Tino Mantella. "The number of establishments [to support entrepreneurs], deal size in terms of venture investments and the amount of money spent by university researchers is growing. There are more people out there supporting entrepreneurs than in the past three-to-five years, helping them, raising investment dollars and mentoring. But there's still not a systematic approach to support entrepreneurs. It's still several groups doing little bits," he says.

While California and Massachusetts are inarguably the high tech capitals of the U.S. - Silicon Valley having been born as a tech-hub 50 years ago and Boston's tech community having grown around the No. 1 engineering school in the country (MIT) - Atlanta's road is bumpier and its future less assured.

But the foundation is growing here for an entrepreneurial community that can withstand economic ups and downs, survive and even thrive for generations to come. And Atlanta has enthusiasm, a history of reinventing itself and a clear goal: "We'd like to make Georgia one of the top five technology states in the nation," says Mantella. And it's not out of reach.

What We've Got
For one thing, Atlanta has the No. 4 engineering school in the country. With MIT at No. 1 and Stanford at No. 2, Georgia Tech's placement  isn't too shabby, especially considering the other benchmark cities - the cities Atlanta competes with most directly for venture money and technology talent - placed much further down the list: University of Texas at Austin is 11th, Duke University is 25th, and University of Florida is 28th.

And since we're talking about technology that can be commercialized into feasible products and companies, investment dollars in this area are relevant. It's significant, then, that Georgia Tech is way ahead of benchmark states in its second place national ranking among total expenditures at engineering schools in research and development (R&D) investment, with $443 million spent in 2007 toward computer science, math and engineering to produce commercially viable technology. In comparison, MIT placed fourth with $267 million and Stanford placed 10th with $170 million.

Not only is Georgia Tech investing heavily in sciences, Georgia's other research universities are contributing as well. Emory, University of Georgia, Medical College of Georgia, Morehouse and Georgia State, along with Georgia Tech, collectively invested an impressive $1.2 billion in 2007 in science and engineering R&D.

Atlanta also has 26 Fortune 1,000 companies, which ironically is good for the entrepreneurial movement in that those large companies attract educated and talented people to Atlanta in good economic times. In the past eight years, the percent of the state population with a bachelor's degree or higher has grown 17 percent. And Georgia's population growth continues to outpace the national average - it is the ninth most populous state and the fourth fastest-growing. Georgia also has a greater share of the coveted 25 to 44 age group, the cohort that makes up the bulk of the workforce, according to the TAG report. In addition, metro Atlanta, has the tenth largest high tech employment base in the U.S., with 183,000 jobs.

In bad economic times, it's fortunate for Atlanta that some of those talented folks are let go, and some take the bold move - and a considerable shot of courage - to test out their own ideas and become entrepreneurs.

"We have a pretty vibrant startup community. And I don't think we want to be Silicon Valley. It's a fool's errand to replicate that here," says Weatherby. "We have fantastic research universities and a quarter of a million people going to college in the Atlanta area. We need to take advantage of those young, smart, energetic people; keep them here and keep them engaged."

What We Need
In a word, money. According to Mantella, right now Atlanta gets less than one percent of total venture dollars given out in the country. The big dogs of venture capital are in Silicon Valley and Boston and often offer venture capital only to companies willing to live and work in their areas. Entrepreneurs and investors committed to Atlanta want to see more capital - especially early stage money - in Atlanta.

"We need more money at the seed stages, when companies first start," says Rick Cope, founder and CEO of local startup NanoLumens, and also a serial Atlanta entrepreneur. "If you put money in a bunch of startups, some are bound to succeed" and create wealth, as well as a community of experienced entrepreneurs with money and knowledge to bring to the next generation of startups, he says. When searching for seed money for NanoLumens, he had offers from investors in Austin, with the condition that he relocate there. Cope eventually found angel investors here, though he and his wife, Karen Robinson, another Atlanta serial entrepreneur, put a significant amount of their own money into NanoLumens to get it started and stay in Atlanta.

"We have a lot of wealth in Atlanta, but it's generated through real estate and companies like Chick-fil-A, not by technology companies," says Cope. "Those executives don't necessarily understand technology, so they're not becoming angel investors for startups. We need successful Atlanta technology CEOs and leaders. Then, once they sell their company, there's more money available, which leads to more deal flow, to hire more people, and then you have a second generation of entrepreneurs starting their companies," he says.

The idea of entrepreneurs "graduating" to become investors is the inspiration behind TechOperators, a cadre of four Atlanta businessmen, including local success story Tom Noonan, co-founder of Internet Security Systems and serial entrepreneur, and local investor Said Mohammadioun. TechOperators, says Cope, is a great example of doing it right. "We need to consistently see more of that. More fresh technology CEOs and leaders coming back with their own money and others' money for new funds in Atlanta," he says.

So while Georgia's venture capital has been increasing, our $6.2 million per deal average was still dead last compared to the five other benchmark states, according to the TAG study.

Venture capital not only helps companies get underway, it helps them grow. Atlanta entrepreneurs want to see more early stage money, but the city also needs institutional investors willing to fund established high tech companies.

Public Helps Private?
Entrepreneurs tend to look toward universities as their institutional help, rather than government. But Georgia is extending a hand as well to do its part in encouraging high tech startups.

Last year a $40 million fund was created to allow Georgia to provide early-stage funding to startup companies based on ideas developed in Georgia's research universities. The Georgia Research Alliance Venture Capital Fund is a combination of $10 million of state money and $30 million of private sector money, and targets companies focused on technology and life sciences. Last May, Georgia established a 25 percent tax credit for investing in the fund, according to the Metro Atlanta Chamber of Commerce.

And in March, the Georgia House of Representatives passed legislation to invest public funds to understand exactly what it would take for Georgia to become "the No. 1 destination for entrepreneurs in the United States of America by developing, and expanding, education for the support of science, innovation, technology, energy, and new Georgia entrepreneurs," according to House Resolution 165.

The resolution - nicknamed SITE for science, innovation, technology and energy - also recognizes "there is a tremendous need to promote and cultivate science, innovation, technology, energy and entrepreneurs so as to increase the number of new and successful technology based businesses in this state and, in turn, dramatically increase job opportunities and economic success for all Georgia citizens."

But still, "The state could do more," says Mantella. "I'd like to see them make a significant investment in innovation." For example, he asks, "How will Georgia use the stimulus package money? Right now it's around $19 billion. We should make sure people across the state have access to technology. Part of the stimulus could be used for broadband. About 92 percent of the population has access to broadband, but not 92 percent of the geographic region. The state has pockets where you can't use a computer or cell phone. What company would move there? It's difficult to make progress for those regions.

"This is a challenge for the state," continues Mantella. "Eighty percent of jobs in the next 10 years will be technology related. Our state priorities should match. The state should see technology, innovation and entrepreneurship as key words to the state agenda."

The Future
Mantella says Georgia has five objectives to work toward the ultimate goal of making Georgia one of the top five states for entrepreneurs: education, an entrepreneurial base, funding, resources and state support.

"The Atlanta metropolitan area is in a good position to grow because of the cost of living, the influx of a young, educated population, and our entrepreneurial spirit. There's no reason we can't be in the top five, but we have to work as one community," says Mantella.

"The state of startups in Georgia is really driven by the entrepreneurs," says Weatherby. "They have to be the ones to go out and make things happen. There are lots of grassroots efforts from the entrepreneurial community. It gives me great hope that it's really going to happen."

Weatherby hopes five years from now people will be as aware of the number of startup companies in Atlanta and their innovations as they are of happenings in Atlanta's other industries: Fortune 500 companies and commercial real estate. "I would hope that in 10 years high tech companies are a major segment of what's happening in the city of Atlanta."

"I'm optimistic for the future," he says. "I really am. More optimistic that I've ever been."

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The Truth Squad

Sanjay Parekh, a veteran Atlanta entrepreneur-turned investor, is happy to see the number of support organizations increasing in Atlanta. And also, not so happy. His own firm, ShotPut Ventures, is designed to fund early, early stage companies (like, napkin stage) as well as give them advice and the benefit of the experience of each of the investors. ShotPut invests $5,000 per founder and an additional $5,000 for the rest of the team of entrepreneurs for one summer. The entrepreneurs get enough money to live on for the summer - in other words, enough to take the jump, quit the day job and see where their idea can go. But the entrepreneurs are not going it alone. ShotPut is run by a team of Atlantans who have successfully been there; David Cummings, Allen Graber, Mitch Free, Jeff Hilimire, Parekh and others have founded tech-related companies.

ShotPut is part of Atlanta's growing tech movement, offering real support to companies. The city has seen an increase in new investment funds - including TechOperators, CEO Ventures, and Buckhead Investment Partners. Other groups like Startup Lounge (with entrepreneur mainstays Michael Blake and Scott Burkett) and Atlanta Web Entrepreneurs offer free networking to qualified entrepreneurs seeking opportunities to shake hands with angel investors and venture capitalists. Sometimes, but not always, there are sponsors, like technology lawyers or financial advisors, who also seek to meet and help the entrepreneurs. These sponsors are approved by the entrepreneurs and investor hosts, and are respectful of an entrepreneur's limited budget and fragile (or sometimes bloated, but nevertheless vulnerable to deception) ego.
But there are others.
"Among networking groups, we still have people on the fringes," Parekh says. "We still have people who think it's their right to take advantage of entrepreneurs. There are some sets of service providers who know they have to stay away at this point, but there's another set of service providers who are trying to get their buck regardless of the long-term impact on the community. I think that happens in every community, but it's more harmful at the stage Atlanta is in now. "Some of them try to crash events. Some people think the rules don't apply to them. They try to take money away from entrepreneurs by providing services they don't need at this point," he says. "These are people trying to take advantage of entrepreneurs. Some of these people are taking people who have hopes and dreams and getting them to pay $1,000, when they can talk to investors for free." Which is exactly why ShotPut was founded: to be the 24/7 advisors for these young companies. But part of success is weeding the good from the bad, which is especially difficult as a city establishes itself as a technology destination.

Entrepreneurs beware.