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INTERVIEW OF BILL THOMPSON, DEPUTY COMMISSIONER OF FILM MUSIC AND DIGITAL ENTERTAINMENT DIVISION OF GEORGIA DEPARTMENT OF ECONOMIC DEVELOPMENT

(This is a transcript of Rob Hassett’s interview of Bill Thompson, Deputy Commissioner of Film Music and Digital Entertainment Division of the Georgia Department of Economic Development for B to B Magazine)

ROB:              This is Rob Hassett for B to B Magazine.  Today, I’m going to be interviewing Bill Thompson, who is the deputy commissioner of the Film Music and Digital Entertainment Division of the Georgia Department of Economic Development.  Bill, it’s good to have you on today.

BILL:             Well, thank you Rob.  I’m very happy to be here.

ROB:              I know that you have been in the film industry for many, many years, and you were, I know, with Crawford Communications for fourteen years.  And there you ended up as vice president of post production.

BILL:             That’s correct.

ROB:              And you’ve been the deputy commissioner and in charge of the Film Music and Entertainment Division for about two years, right?

BILL:             Right.

ROB:              What’s the mission of your division?

BILL:             Well, it’s much like the overall mission of the Department of Economic Development.  We are trying to grow the entertainment industries in Georgia, and part of that means attracting projects and permanent business locations to the state.  We go about this in a fairly traditional way.  It’s really all about business development which includes promotion, marketing and advertising.  We are doing a lot of sales calls to potential clients all over the United States.  So it’s a fairly traditional business development and sales kind of approach.

ROB:              In addition, Bill, you also worked with the governor’s office and the legislature to enact a special tax credit incentive for video game, film and television production in Georgia, isn’t that right?

BILL:             Yes, that process started in the summer of 2007.  And of course we worked closely with our private sector industry partners.  We met with the governor on three separate occasions.  Each time was probably about six weeks or so kind of apart from each other.  So it was a process that took quite a bit of time; different versions of the proposed legislation were examined and finally we came out with something we felt was pretty good, and the governor agreed.

ROB:              And it went into affect in 2008, right, about in the spring maybe?

BILL:             Yes, the bill was signed on May 12, 2008.  Of course, the legislation itself is retroactive to January 1, 2008.  And so since that time, we’ve had significant success in developing an increase in our number of entertainment projects.

ROB:              As I understand, it offers tax credits of twenty percent to any video or film production, or video game production company that spends five hundred thousand dollars or more in Georgia on production.  And it offers thirty percent if they add a State of Georgia logo somewhere on the film or video, is that correct?

BILL:             Yes, absolutely.  It’s a two-part incentive with the base incentive being twenty percent as you’ve mentioned, and then an additional ten percent for a total of thirty percent if the customer will place a Georgia logo either in the titles or the credits of the project.  Believe it or not, we’ve actually talked to some folks about the possibility of product placement within the actual film.  Some folks have not only included the logo as we require, but they’ve actually offered us other opportunities.  For example, Lion’s Gate Films actually used our movie logo on the movie posters for some of Tyler Perry’s movies.  They actually placed it on the internet site for some of those films.  So there are some unique types of exposure that we’ve been able to get so far with the logo.

ROB:              Bill, where does Georgia rank as a film and television production center as compared to other states in the country?

BILL:             Well, as you know, we’ve been at this a long time.  In the modern era, it really began for us in 1972.  So we’ve been at this for 36 years.  We have during that time, over six hundred projects have been filmed in the state or made in the state in the case of video games.  So those are film projects, television projects, music videos, commercials, video games.  So that’s kind of where we’ve been and where we are.  Also, we have a significant number of supplier companies and vendors within the state that make it very attractive to folks to come and work here.

ROB:              Where do you think we rank for film and television?

BILL:             I think that now with our new incentives, we are certainly in the top five in the United States … maybe even number three.

ROB:              Who would be first?  California, then New York second?

BILL:             Well California doesn’t have any incentives but yet still the most film making in the Unites States certainly continues to happen in California.  But they have no incentives at all.  So if you limit us to strictly to the incentive states, we are definitely probably number three.

ROB:              Who are the others?

BILL:             Well let’s see, New York has a very competitive incentive and they have the infrastructure to go with it.  Michigan as you know is sort of struggling with their new incentive even though it is very competitive.  They have very little infrastructure and they have to import almost everything.  I think you’ll see some changes with that program.  Louisiana is competitive but Georgia’s incentive is actually superior to theirs.  Those are probably some of the highlights.

ROB:              In the amount of TV and film production actually made, California would be first, New York second, and about where would Georgia fall?

BILL:             I would say that probably right now, Louisiana is still probably making more films than we are, but we’re going to fix that really soon.

ROB:              Well, good.  Okay.  Now you do a lot more for the film industry than just encourage them to produce their films here.  What other things do you do for them?

BILL:             Well, you know, first and foremost, we’re a resource for customers.  And all of our services are provided absolutely free.  So customers come to us for help about identifying certain locations that they may want to shoot in.  We have a 90,000 image database, where we can easily identify those sorts of locations and we can put together what we call a package and send it out electronically to folks.  If customers want to come and physically be here, I have two location scouts on my staff that can help show them around the state.  And then of course, we’re sort of an information clearing house for different types of resources that customers may need, including the hiring of crew people, the identifying of local suppliers and things like that; that can help them do their work here.

ROB:              Bill, what activities have you been involved in in the last, let’s say, three months to bring films to Georgia?

BILL:             Well, since the legislation was passed, we’ve been making trips out to Los Angeles to educate some of our customers there about our new incentives.  And we’ve had some pretty good success, certainly since the bill was signed.  We’ve had many, many television series projects and feature films shot here.  For example, we had a project that came in called “Van Wilder III.”  That project started shooting in August.  Even before that, we’ve had a docu drama that was shot here called “The People vs. Leo Frank.”  And that was a very good example of a docu drama here in the state.  We’ve had a project by Warner Brothers called “The Preacher’s Kid” which just finished shooting on November 17.  There’s a movie in town now that is going to wrap here in a few days called “The Joneses.”  And that stars Demi Moore and David Duchovny.  We had a Paramount project this fall called “Road Trip II.”  And there was an independent feature film made called “Our Child is Missing.”  That was produced out in the Carrollton area and was produced by a Los Angeles company that’s since relocated to Georgia.

ROB:              What company is that?

BILL:             It’s called Red Five Entertainment.  And they’ve made two movies now out in the Carrollton area.  They seem to really like working in that part of the state which is great.

ROB:              Other than the incentive, what are other draws does Georgia have for the movie industry?

BILL:             Well you know, as I’ve mentioned, we’ve been in this for a long time, so we have a high degree of experience level.  We have a very well established and professional crew base.  We have a good infrastructure in terms of suppliers and equipment rental companies and other source of vendors that are needed to support production.  And you know, we also have numerous diverse locations all over the state.  Georgia’s the largest state east of the Mississippi River.  Consequently, we have more diversity than some other states would.  We have mountains in the northern part of the state.  We have over a hundred miles of coastline on the Atlantic Ocean.  We have lots of diverse looks in the central and southern part of the state; with historic towns like Savannah, Augusta, Macon, and Columbus.  And lots of rural areas with small towns.  So a customer can come to Georgia and literally get just about every look that they could possibly need from huge metropolitan areas like Atlanta to very small rural types of areas.  So that’s one of our greatest strengths.

ROB:              And we have a mild climate.

BILL:             We do.  We’re very fortunate in that we don’t generally experience any major hurricanes.  We don’t have a lot of winter type climate.  Its fairly moderate and which means there’s a longer shooting season.  So people can come here and they don’t have to worry about … boy, like I’ve got to get done before its hurricane season or I’ve got to get done before it starts to snow.  People can come here and pretty much shoot literally year round.

ROB:              And I guess with the drought, we have generally good weather.

BILL:             Well, we do.  Certainly we have rain and we have thunderstorms and things like that occasionally but in general, compared to most other states, our climate is very, very moderate.

ROB:              Now your division also promotes the music industry in Georgia.

BILL:             Yes, we do.  The music industry in Georgia is a two billion dollar a year industry now.  It’s growing exponentially at the rate of a hundred million dollars a year.  And just like our state itself, the music industry is extremely diverse in Georgia which is actually a very positive thing.  We have a huge hip hop and rap kind of industry here.  We have a tremendous alternative rock industry up in Athens and other parts of the state.  We have lots of southern rock, bluegrass, country music and jazz, classical music.  So the music industry is an incredible economic boost to our efforts.

ROB:              And it’s been growing at a hundred million a year.  That’s incredible!

BILL:             It is!  And, of course, you know with some of the economic down turn, that could slow down a little bit, but that’s exactly what we’ve experienced in the last three years.

ROB:              How big is the film industry in Georgia?

BILL:             The film industry is not as big as the music industry at this time.  But my goal is in short order, maybe by the end of 2009 or maybe 2010, my goal is for the film and television industry in the state to be a one billion dollar industry.  We’re well on  our way.  In 2007, the economic impact of all of our entertainment segments,  was six hundred seventeen million dollars.  You can see, with the film and television segments certainly being the most of that, that we’re on our way to having a one billion dollar or more film industry here.

ROB:              So film and television was six hundred and what?

BILL:             Six hundred seventeen million in 2007, in terms of what we call economic impact.

ROB:              And finally, you’re also encouraging video game companies to operate in Georgia.  Where would you say Georgia ranks in the United States in video games, in that industry?

BILL:             Well, certainly California would be number one.  Massachusetts has a strong industry because of MIT and some other things.  Certainly, New York is strong.  You know, Austin, Texas is very strong.  And then maybe secondarily a little bit, Seattle, Washington with the whole Redmond area; that’s pretty strong.  But you know I would say that Georgia today may be somewhere, number six or something like that, you know when you look at those other states that have a more mature industry.  But as I said before, we are growing exponentially here in Georgia, so that’s a good sign.

ROB:              What’s our gross revenue in Georgia on video games?

BILL:             I think in the last three years, it’s been about a hundred eighty million dollars of revenue which translates to about three hundred million dollars of economic impact.  And as I’ve said before, it’s growing every single year so we’re very happy to be a part of that growth, and certainly we’re doing everything we can to foster that growth.

ROB:              I know you seeded and promoted the SIEGE Conference which is in the computer game industry, that started last year, and doubled in size for this year.

BILL:             Yes, and we quickly kind of identified that the SIEGE Conference was something that was very much needed in the state.  And by the way, SIEGE stands for Southern Interactive Entertainment Game Expo.  So we’ve been very happy to be a significant sponsor of that event for the last two years.  This year we saw that event double in size in terms of attendance.  We think it’s an important component of what we’re trying to do within the state along with trying to attract one or more video game publishers to Georgia, and also one or more video game testing centers which we’ve learned will be key components of growing our industry here.

ROB:              If anyone wants to reach you guys about film, music or video games, how should they contact your office?

BILL:             Well, the best way to reach us is really the main line because most of my staff is very mobile.  So it’s always best to not dial anyone person direct.  It’s better to call the main line in our division, and that number is (404) 962-4052.

ROB:              I meant to ask you this earlier, how many video game companies are in Georgia?

BILL:             There are approximately fifty video game companies in Georgia, and of course, we’re hoping that number will continue to grow.  And there are about approximately two thousand employees working in that industry in the state.  So keep in mind, some companies have very large staffs and some companies are very small.  So anyway, we’re anticipating that that will continue to grow.

ROB:              How many people work in the film industry in Georgia?

BILL:             Georgia right now has a resident crew base of about fifty-two hundred, and that number continues to grow.

ROB:              How about music?

BILL:             Music actually has the largest of all.  There are ninety-five hundred people working in the music industry in Georgia.

ROB:              Bill, if somebody is calling your office about film, who should they ask for first?

BILL:             Well, generally if they are calling us about film, they want (a) to talk about the tax credits; and (b) they may have some interest in doing a location scout or something like that, so I would say that all film calls should probably be directed to Lee Thomas.  Her number is (404) 962-4048.

ROB:              What about music?

BILL:             Any calls for music related things should be directed to Brenda Brayton and her number is (404) 962-4047.

ROB:              And what about video games?

BILL:             Video games would be under a guy named Asante Bradford and I don’t have his number in front of me but I think it’s (404) 962-4056 but I just don’t have it in front of me.  Sorry.

ROB:              Bill, thanks a lot and I really appreciate your working with me today.

BILL:             Well, thank you, Rob.  I appreciate your interest and I hope we can do this again.

(This is a transcript of Rob Hassett’s interview of Bill Thompson, Deputy Commissioner of Film Music and Digital Entertainment Division of the Georgia Department of Economic Development)

ROB:              This is Rob Hassett for B to B Magazine.  Today, I’m going to be interviewing Bill Thompson, who is the deputy commissioner of the Film Music and Digital Entertainment Division of the Georgia Department of Economic Development.  Bill, it’s good to have you on today.

BILL:             Well, thank you Rob.  I’m very happy to be here.

ROB:              I know that you have been in the film industry for many, many years, and you were, I know, with Crawford Communications for fourteen years.  And there you ended up as vice president of post production.

BILL:             That’s correct.

ROB:              And you’ve been the deputy commissioner and in charge of the Film Music and Entertainment Division for about two years, right?

BILL:             Right.

ROB:              What’s the mission of your division?

BILL:             Well, it’s much like the overall mission of the Department of Economic Development.  We are trying to grow the entertainment industries in Georgia, and part of that means attracting projects and permanent business locations to the state.  We go about this in a fairly traditional way.  It’s really all about business development which includes promotion, marketing and advertising.  We are doing a lot of sales calls to potential clients all over the United States.  So it’s a fairly traditional business development and sales kind of approach.

ROB:              In addition, Bill, you also worked with the governor’s office and the legislature to enact a special tax credit incentive for video game, film and television production in Georgia, isn’t that right?

BILL:             Yes, that process started in the summer of 2007.  And of course we worked closely with our private sector industry partners.  We met with the governor on three separate occasions.  Each time was probably about six weeks or so kind of apart from each other.  So it was a process that took quite a bit of time; different versions of the proposed legislation were examined and finally we came out with something we felt was pretty good, and the governor agreed.

ROB:              And it went into affect in 2008, right, about in the spring maybe?

BILL:             Yes, the bill was signed on May 12, 2008.  Of course, the legislation itself is retroactive to January 1, 2008.  And so since that time, we’ve had significant success in developing an increase in our number of entertainment projects.

ROB:              As I understand, it offers tax credits of twenty percent to any video or film production, or video game production company that spends five hundred thousand dollars or more in Georgia on production.  And it offers thirty percent if they add a State of Georgia logo somewhere on the film or video, is that correct?

BILL:             Yes, absolutely.  It’s a two-part incentive with the base incentive being twenty percent as you’ve mentioned, and then an additional ten percent for a total of thirty percent if the customer will place a Georgia logo either in the titles or the credits of the project.  Believe it or not, we’ve actually talked to some folks about the possibility of product placement within the actual film.  Some folks have not only included the logo as we require, but they’ve actually offered us other opportunities.  For example, Lion’s Gate Films actually used our movie logo on the movie posters for some of Tyler Perry’s movies.  They actually placed it on the internet site for some of those films.  So there are some unique types of exposure that we’ve been able to get so far with the logo.

ROB:              Bill, where does Georgia rank as a film and television production center as compared to other states in the country?

BILL:             Well, as you know, we’ve been at this a long time.  In the modern era, it really began for us in 1972.  So we’ve been at this for 36 years.  We have during that time, over six hundred projects have been filmed in the state or made in the state in the case of video games.  So those are film projects, television projects, music videos, commercials, video games.  So that’s kind of where we’ve been and where we are.  Also, we have a significant number of supplier companies and vendors within the state that make it very attractive to folks to come and work here. 

ROB:              Where do you think we rank for film and television?

BILL:             I think that now with our new incentives, we are certainly in the top five in the United States … maybe even number three.

ROB:              Who would be first?  California, then New York second?

BILL:             Well California doesn’t have any incentives but yet still the most film making in the Unites States certainly continues to happen in California.  But they have no incentives at all.  So if you limit us to strictly to the incentive states, we are definitely probably number three.

ROB:              Who are the others?

BILL:             Well let’s see, New York has a very competitive incentive and they have the infrastructure to go with it.  Michigan as you know is sort of struggling with their new incentive even though it is very competitive.  They have very little infrastructure and they have to import almost everything.  I think you’ll see some changes with that program.  Louisiana is competitive but Georgia’s incentive is actually superior to theirs.  Those are probably some of the highlights. 

ROB:              In the amount of TV and film production actually made, California would be first, New York second, and about where would Georgia fall?

BILL:             I would say that probably right now, Louisiana is still probably making more films than we are, but we’re going to fix that really soon.

ROB:              Well, good.  Okay.  Now you do a lot more for the film industry than just encourage them to produce their films here.  What other things do you do for them?

BILL:             Well, you know, first and foremost, we’re a resource for customers.  And all of our services are provided absolutely free.  So customers come to us for help about identifying certain locations that they may want to shoot in.  We have a 90,000 image database, where we can easily identify those sorts of locations and we can put together what we call a package and send it out electronically to folks.  If customers want to come and physically be here, I have two location scouts on my staff that can help show them around the state.  And then of course, we’re sort of an information clearing house for different types of resources that customers may need, including the hiring of crew people, the identifying of local suppliers and things like that; that can help them do their work here.

ROB:              Bill, what activities have you been involved in in the last, let’s say, three months to bring films to Georgia?

BILL:             Well, since the legislation was passed, we’ve been making trips out to Los Angeles to educate some of our customers there about our new incentives.  And we’ve had some pretty good success, certainly since the bill was signed.  We’ve had many, many television series projects and feature films shot here.  For example, we had a project that came in called “Van Wilder III.”  That project started shooting in August.  Even before that, we’ve had a docu drama that was shot here called “The People vs. Leo Frank.”  And that was a very good example of a docu drama here in the state.  We’ve had a project by Warner Brothers called “The Preacher’s Kid” which just finished shooting on November 17.  There’s a movie in town now that is going to wrap here in a few days called “The Joneses.”  And that stars Demi Moore and David Duchovny.  We had a Paramount project this fall called “Road Trip II.”  And there was an independent feature film made called “Our Child is Missing.”  That was produced out in the Carrollton area and was produced by a Los Angeles company that’s since relocated to Georgia.

ROB:              What company is that?

BILL:             It’s called Red Five Entertainment.  And they’ve made two movies now out in the Carrollton area.  They seem to really like working in that part of the state which is great.

ROB:              Other than the incentive, what are other draws does Georgia have for the movie industry?

BILL:             Well you know, as I’ve mentioned, we’ve been in this for a long time, so we have a high degree of experience level.  We have a very well established and professional crew base.  We have a good infrastructure in terms of suppliers and equipment rental companies and other source of vendors that are needed to support production.  And you know, we also have numerous diverse locations all over the state.  Georgia’s the largest state east of the Mississippi River.  Consequently, we have more diversity than some other states would.  We have mountains in the northern part of the state.  We have over a hundred miles of coastline on the Atlantic Ocean.  We have lots of diverse looks in the central and southern part of the state; with historic towns like Savannah, Augusta, Macon, and Columbus.  And lots of rural areas with small towns.  So a customer can come to Georgia and literally get just about every look that they could possibly need from huge metropolitan areas like Atlanta to very small rural types of areas.  So that’s one of our greatest strengths.

ROB:              And we have a mild climate.

BILL:             We do.  We’re very fortunate in that we don’t generally experience any major hurricanes.  We don’t have a lot of winter type climate.  Its fairly moderate and which means there’s a longer shooting season.  So people can come here and they don’t have to worry about … boy, like I’ve got to get done before its hurricane season or I’ve got to get done before it starts to snow.  People can come here and pretty much shoot literally year round.

ROB:              And I guess with the drought, we have generally good weather.

BILL:             Well, we do.  Certainly we have rain and we have thunderstorms and things like that occasionally but in general, compared to most other states, our climate is very, very moderate.

ROB:              Now your division also promotes the music industry in Georgia.

BILL:             Yes, we do.  The music industry in Georgia is a two billion dollar a year industry now.  It’s growing exponentially at the rate of a hundred million dollars a year.  And just like our state itself, the music industry is extremely diverse in Georgia which is actually a very positive thing.  We have a huge hip hop and rap kind of industry here.  We have a tremendous alternative rock industry up in Athens and other parts of the state.  We have lots of southern rock, bluegrass, country music and jazz, classical music.  So the music industry is an incredible economic boost to our efforts.

ROB:              And it’s been growing at a hundred million a year.  That’s incredible!

BILL:             It is!  And, of course, you know with some of the economic down turn, that could slow down a little bit, but that’s exactly what we’ve experienced in the last three years.

ROB:              How big is the film industry in Georgia?

BILL:             The film industry is not as big as the music industry at this time.  But my goal is in short order, maybe by the end of 2009 or maybe 2010, my goal is for the film and television industry in the state to be a one billion dollar industry.  We’re well on  our way.  In 2007, the economic impact of all of our entertainment segments,  was six hundred seventeen million dollars.  You can see, with the film and television segments certainly being the most of that, that we’re on our way to having a one billion dollar or more film industry here.

ROB:              So film and television was six hundred and what?

BILL:             Six hundred seventeen million in 2007, in terms of what we call economic impact.

ROB:              And finally, you’re also encouraging video game companies to operate in Georgia.  Where would you say Georgia ranks in the United States in video games, in that industry?

BILL:             Well, certainly California would be number one.  Massachusetts has a strong industry because of MIT and some other things.  Certainly, New York is strong.  You know, Austin, Texas is very strong.  And then maybe secondarily a little bit, Seattle, Washington with the whole Redmond area; that’s pretty strong.  But you know I would say that Georgia today may be somewhere, number six or something like that, you know when you look at those other states that have a more mature industry.  But as I said before, we are growing exponentially here in Georgia, so that’s a good sign.

ROB:              What’s our gross revenue in Georgia on video games?

BILL:             I think in the last three years, it’s been about a hundred eighty million dollars of revenue which translates to about three hundred million dollars of economic impact.  And as I’ve said before, it’s growing every single year so we’re very happy to be a part of that growth, and certainly we’re doing everything we can to foster that growth.

ROB:              I know you seeded and promoted the SIEGE Conference which is in the computer game industry, that started last year, and doubled in size for this year.

BILL:             Yes, and we quickly kind of identified that the SIEGE Conference was something that was very much needed in the state.  And by the way, SIEGE stands for Southern Interactive Entertainment Game Expo.  So we’ve been very happy to be a significant sponsor of that event for the last two years.  This year we saw that event double in size in terms of attendance.  We think it’s an important component of what we’re trying to do within the state along with trying to attract one or more video game publishers to Georgia, and also one or more video game testing centers which we’ve learned will be key components of growing our industry here.

ROB:              If anyone wants to reach you guys about film, music or video games, how should they contact your office?

BILL:             Well, the best way to reach us is really the main line because most of my staff is very mobile.  So it’s always best to not dial anyone person direct.  It’s better to call the main line in our division, and that number is (404) 962-4052.

ROB:              I meant to ask you this earlier, how many video game companies are in Georgia?

BILL:             There are approximately fifty video game companies in Georgia, and of course, we’re hoping that number will continue to grow.  And there are about approximately two thousand employees working in that industry in the state.  So keep in mind, some companies have very large staffs and some companies are very small.  So anyway, we’re anticipating that that will continue to grow.

ROB:              How many people work in the film industry in Georgia?

BILL:             Georgia right now has a resident crew base of about fifty-two hundred, and that number continues to grow.

ROB:              How about music?

BILL:             Music actually has the largest of all.  There are ninety-five hundred people working in the music industry in Georgia.

ROB:              Bill, if somebody is calling your office about film, who should they ask for first?

BILL:             Well, generally if they are calling us about film, they want (a) to talk about the tax credits; and (b) they may have some interest in doing a location scout or something like that, so I would say that all film calls should probably be directed to Lee Thomas.  Her number is (404) 962-4048.

ROB:              What about music?

BILL:             Any calls for music related things should be directed to Brenda Brayton and her number is (404) 962-4047.

ROB:              And what about video games?

BILL:             Video games would be under a guy named Asante Bradford and I don’t have his number in front of me but I think it’s (404) 962-4056 but I just don’t have it in front of me.  Sorry.

ROB:              Bill, thanks a lot and I really appreciate your working with me today.

BILL:             Well, thank you, Rob.  I appreciate your interest and I hope we can do this again.

Uncategorized

INTERVIEW OF TERI DENISON OF THE SMALL BUSINESS ADMINISTRATION

 (Transcript of Rob Hassett’s interview of Terri Denison, District Director of The Small Business Administration for Atlanta area for btobmagazine.com)

ROB:     This is Rob Hassett for btobmagzine.com. Today I’m going to be interviewing Terri Denison who is the District Director of the SBA (Small Business Administration) for Atlanta. Terri is a graduate of Cornell and also has a graduate degree from a small school in Texas, and has been the District Director for the SBA in Atlanta for about seven years, right?

TERI:     Exactly.

ROB:     Terri, I really appreciate you’re being on the program today.

TERI:     Glad to be here.

ROB:     I also want to mention and thank, Gregory Henley, who is the Director of the International Center for Entrepreneurship at Georgia State, for helping me prepare for the interview today. Terri, what is the mission of the Small Business Administration?

TERI:     Basically, we’re a federal government agency whose purpose is to help the national economy through helping small businesses to start and expand.

ROB:     And you have different programs within the SBA don’t you?

TERI:     Yes, we do. I would categorize them in five different ways in terms of the types of assistance that we provide. First, we provide financial assistance mainly in the form of guarantees on loans made by commercial lenders.

ROB:     And that’s where most of the activity the SBA deals with comes in isn’t it?

TERI:     That’s the one … I think … We do a lot in that area, and I think that’s the one that most people associate with the SBA. We also work with several organizations to provide management and technical assistance to not only startup businesses but for existing businesses as well. We partner with the Small Business Development Centers, which are hosted here by the University of Georgia.

ROB:     How does that work? What is the Small Business Development Center?

TERI:     Actually, it’s an entity which the SBA partly funds along with the University of Georgia to provide counseling and training to people who are thinking about starting a business, in the process of starting a business, or who are currently operating an existing business. Counseling is always free. Training is usually at minimal costs, basically to cover the cost of the training, and it covers a variety of subjects that would be of interest and of benefit to the small business community. In addition to the Small Business Development Center, SCORE is our volunteer partner organization made up of not only retired business people, but actually current business people as well that also provides a wealth of knowledge through training and through one-on-one counseling. We also have in Metro Atlanta two Women Business Centers, one at Kennesaw State and one near the West End in Atlanta proper. They provide counseling and training as well focusing on one of the fastest growing segments of the small business community, and that’s women entrepreneurs. But they will assist men as well.

ROB:     Now if somebody wanted to benefit from that training, what would they do? How would they get in touch and find out when the classes, or the programs, or the counseling was available?

TERI:     Probably the easiest way for them would be to go to the SBA website for the Georgia District Office, which is available here   www.sba.gov/localresources/district/ga/index.html. We have an events calendar on that page that would have information on things that are going on here at the District Office as well as some of our resource partners. There are also links to some of the organizations that I’ve just mentioned so that you can go directly to their website and see what kind of training is coming up.

ROB:     For the counseling, is that done over the phone or in person generally, or both?

TERI:     Actually both. A lot of it, I would say the lion’s share, is probably done in person. But a lot of our organizations that we work with do e-mail counseling. For example, SCORE has been doing that for several years. They’ll also do remote counseling facilitated by a PC camera. So if you have a camera, they have one, then you could still have interface counseling but only done through the internet, done online, versus in person.

ROB:     Terri, in order to obtain the counseling you get, is there a wait or is it pretty much available when people need it?

TERI:     It depends. For example, the SCORE Atlanta Chapter, which is actually located here at the Georgia District Office, will take walk-ins for counseling. Generally the first appointment, they’ll start counseling at 10:00 in the morning, and then they usually take the last client around 1:00 or 1:15 to finish up by 2:00. But the Small Business Development Centers tend to provide counseling on an appointment basis, and the waits on that may vary.

ROB:     Where are they located? Is there one or are they all over the state?

TERI:     The Small Business Development Centers, there’s actually 17 around the state. There are several in metro Atlanta, and then in several other cities outside the metro-Atlanta area. SCORE, the Atlanta Chapter, has several satellites away from the main site here in downtown Atlanta. There are also chapters in Augusta and Columbus and Dalton. So there’s a lot of coverage … and in Savannah.

ROB:     Terri, what are the requirements for a loan under the SBA’s loan program, the main one which is the 7A Program, right?

TERI:     Yes.

ROB:     What are the requirements? What do you have to have to qualify for that loan?

TERI:     Well first of all, I think we should clarify that it’s a guaranteed loan, so the first interface is going to be with the commercial lender who actually provides the funding of the loan. The lender, having looked at the application, any business plans, or financial information, decides that it needs additional security for that loan, because maybe it doesn’t quite meet all of its conventional underwriting criteria, then the lender would request a guarantee from the Small Business Administration. Or if they are a preferred lender, they’ve actually been delegated authority to provide the guarantee themselves without prior approval from the SBA.

ROB:     A preferred lender is a bank that has proven that they know what the rules are, right?

TERI:     Yes. They have a track record with us and they have shown, not only in terms of the level of SBA-related activities that they have expertise, but also how they handle the servicing and liquidation of those loans.

ROB:     What is the interest rate on those loans?

TERI:     Well it varies. Generally, there are variable rates, and they are generally pegged to the prime. The SBA does have a cap on the maximum spread above that peg rate, which is 2.75%.

ROB:     Is there a cap on how much you can borrow under that program?

TERI:     The maximum loan that can receive an SBA guarantee is Two Million Dollars.

ROB:     And does the borrower have to pay any points?

TERI:     I’ve not heard of that being associated with commercial lending.

ROB:     Closing costs?

TERI:     Generally, yes.

ROB:     And the borrower has to guarantee the loan, but that’s typical of any bank loan isn’t it?

TERI:     It’s pretty standard practices in commercial lending that the principals of the company that’s to borrow put up personal guarantees. We require that if someone has more than 20% ownership interest that they have to provide guarantees.

ROB:     Now there’s another program that you have called the 504 Program, right?

TERI:     That’s correct. And that program is geared towards fixed asset financing. So land, buildings, long-life machinery and equipment for production purposes. It cannot be used for working capital or purchase of inventory, whereas with the 7A Program which we just talked about, those would be eligible uses of proceeds for loans with that 7A guarantee.

ROB:     Are the qualifications otherwise the same as the 7A Program except for the fixed asset?

TERI:   Pretty much. The other component is that it has to meet an economic development objective. That can be achieved in a couple of ways. A certain number of jobs will be created or retained. Usually that would be one per every $65,000 of the SBA 504 loan. If a project does not meet those job creation requirements, then the loan has to meet other public policy goals or development objectives. For example, if the project is in an area that is slated for revitalization, there’s a revitalization plan for that area, that would make it an eligible project. If it is in an area that has been impacted by federal cutbacks, like probably here in the next few years, you’re going to have the closure of Fort McPherson and Fort Gillem, army installations. So the areas around those installations, projects in those areas would probably be eligible.

ROB:     What is the interest rate on the 504 Program generally?

TERI:     The 504 loan is pegged to the U.S. Treasury rate versus the prime. It depends on what the U.S. Treasury rate is. The five-year loan rate applies to a ten-year loan; and a ten-year loan rate applies to a twenty-year loan.

ROB:     Now with what’s going on in Washington, have there been any changes in these two programs to try to help get us out of this recession?

TERI:     Yes. Of course back in February, the America Recovery and Reinvestment Act, or as a lot of people know it as the Stimulus Bill, was signed into law. There were several provisions in there related to SBA programs. First of all, on the 7A Loan Program, the maximum guarantee is normally 75% of the loan for loans over $150,000. Under the Recovery Act, there is a temporary increase in the guarantee up to 90% for these loans. And that’s very significant because that means higher guarantee equals less exposure for the lender and reducing their risk. So the idea would be with the higher guarantee, lenders would be more inclined to approve loans that maybe they would not do in this current environment under their regular underwriting criteria.

ROB:     Oh, definitely.

TERI:    But both the 7A and 504 Loan Programs, there are fees attached to the guarantee of the loan, and the fees are a way for us to try to offset some of the costs for the program for the taxpayer by having the actual user or the beneficiary of those guarantees assume some of the costs. Under the Recovery Act, there is a temporary elimination of the fees for the borrower. Of course, that would make the transaction less costly, and then that’s money that the borrower can then put into the business to help them to continue to operate and to prepare for recovery as we move forward through this economic downturn.

ROB:     How much was that fee that’s been eliminated for the time being?

TERI:     In terms of?

ROB:      Is it a percentage?

TERI:    On the 7a Program, it is a percentage depending on the amount of the guaranteed portion of the loan. It can be anywhere from 2 – 3.75%, depending on the amount of the guaranteed portion. Generally on the 504 Loan Program, the fees are approximately 3% of the transaction.

ROB:     Got you. What is the America’s Recovery Capital Program?

TERI:     The America’s Recovery Capital Program, or ARC Program, is a measure to try and assist small businesses that have existing business debt, to help them be able to cover that debt during this time of economic difficulty. Basically, the loan is a 100% guaranteed loan. It’s still made by a commercial lender. However, the borrowers would not have to start repayment until 12 months after final disbursement of proceeds from that loan. There would not be interest for the borrower on that loan because the SBA would cover the cost of interest over the life of the loan. The loan could be up to $35,000, and cover up to 6 months’ worth of principal and interest payments on non-SBA related debts that the small business may have.

ROB:     Is there a cap on that program on how much you can borrow?

TERI:     $35,000 is the max.

ROB:     Are there any special criteria that you have to meet?

TERI:     Well, we’ll be getting more details actually next week.

ROB:     Oh, it’s new!

TERI:     Yeah. It was part of the Recovery Act. Actually our administrator will be making an announcement early next week to rollout more of the details on how the program works. But based on the statute, the business has to be viable. So in other words, it could not have been in trouble prior to the economic downturn, and that there’s a likelihood that it will be able to survive with the assistance of the loan. But at the same time, the business has to be in a position where it is having difficulties making its existing loan payments. It cannot be a matter of they can pay it but they choose not to pay it. There has to be a difficulty there for them.

ROB:     Terri, who decides whether they qualify? Is that something the bank does or does what?

TERI:     Well, the bank would … It would work like our guaranteed loans. They would do an evaluation, and we will be providing them criteria and guidelines on what that would be. Then they would make a recommendation to approve the loan, and then meet the requirements for a guarantee from us. And then we would, based on their analysis and our analysis, go ahead and approve the guarantee if it qualifies.

ROB:     What is the Surety Bond Guarantee Program?

TERI:     It works very similar to the loan guarantees, except it’s on surety bonds which, of course, businesses that are in construction or construction related industries are often required to put up a bond. Surety bonds are often required to submit bids or for payment, and also for performance. In case there’s a problem with performance, the surety would be responsible for getting that work completed. The bond covers against that. A lot of times, small businesses have difficulties acquiring surety bonding through regular conventional channels, just like small businesses have trouble a lot of times getting loans through conventional commercial channels. So the Surety Bond Guarantee Program once again tries to encourage surety companies to issue bonds to these small businesses by reducing their exposure on the bonds. The SBA would guarantee anywhere from 70-90% of the bond value.

ROB:     Is there any cap on that?

TERI:     Well normally the maximum contract that would be eligible for a surety bond guarantee from the SBA would be Two Million Dollars. However, as part of the Recovery Act, there is a temporary increase in the maximum contract value from Two to Five Million Dollars. Then there also are provisions that are in the works where that could go up to Ten Million Dollars in terms of a maximum contract amount, if the contract is a federal government contract and the contracting officer that’s responsible for that contract certifies that up to a Ten Million Dollar bond is necessary in order for that company to be able to receive the contract.

ROB:     Is that increase in effect now, so potentially a bond guarantee could be that much?

TERI:     No, the Five Million Dollar threshold is in effect. There’s a little more guidance that was needed for determining when a bond between five and ten million could be guaranteed. We’re looking forward to that being finalized here in the near future.

ROB:     Terri, what is the Small Business Investment Company Program?

TERI:    The Small Business Investment Company Program, or SBIC Program, is a program that focuses on equity investment as opposed to debt as a means of providing financing in a company. That could be straight equity or it could be convertible debt, an instrument where’s initially a debt, but, depending on the performance of the company with the infusion of cash, the SBIC could have the option of converting that to an ownership interest at some point. The SBIC Program is pretty much run through our headquarters office, the Office of Investments. So we don’t really work with it a whole lot here at the local level. But I know we have several licensed SBICs in Georgia who serve the state and the southeast part of the country.

ROB:     Do they get their funding from the SBA, or do you know how they’re tied to the SBA?

TERI:    Yes, the SBA licensed them to operate as small business investment companies. There is an application, an evaluation process, involved there, both a paper application and then an actual presentation by the management team of that perspective SBIC to our Office of Investments. They are required to raise a certain amount of capital to bring to the table if you will, and then the SBA matches that capital. There’s a formula for doing that. So the SBA’s role would be to help the SBICs leverage more capital that would be available for investments in small businesses.

ROB:     Is there any program that the SBA has that we haven’t talked about that you can think of?

TERI:     Well, in addition, you know, we’ve talked about our financial assistance and our management and technical assistance. We do have programs related to government contracting. Some of those, we work with in our office. Others are handled through a separate office within the SBA, the Office of Government Contracting. For instance, here in the District Office, we administer the Section 8A Program which has been around for probably about 25-30 years. It focuses on helping small businesses that are majority owned and controlled by disadvantaged individuals. That could be minorities or others who meet the criteria for social and economic disadvantage as is defined in our regulations. This helps them enter the federal procurement market as well as to receive other business development assistance from us. We also have through our Office of Government Contracting a Certificate of Competency Program that a lot of people don’t know about. If a small business is the apparent successful offerer or low bidder on a government contract, but maybe the contracting officer still doesn’t feel that the company has either the financial or technical capability to perform on that contract, the contracting officer can request the SBA to do a Certificate of Competency analysis on that company. Sometimes our office helps out with that if there’s a question as to the company’s financial capacity. Others will look at the technical aspects of the company to see if they have the technical wherewithal to perform. Based on that analysis, if the SBA determines that the capacity, both financially and technically is there to perform, then the contracting officer has to award the contract to that small business. So it’s a way for small businesses to get a little bit of additional leverage to get their foot in the door in federal procurement.

ROB:     I see. Terri, if anybody wanted to find out more about your programs, what should they do? Should they go to your website or should they call?

TERI:     They might want to start off with our website because that would give them a good overview of the full range of SBA products and services. They can go to our main website of the Agency, which is http://www.sba.gov/. It provides information on all of our programs, not just the ones you and I have talked about here but others that are part of the agency’s offering. We have a lot of business how-to information. We have online training courses and evaluation tools in terms of if you’re thinking about starting a business — am I really the entrepreneurial type — What types of things do I need to consider to help me decide what would be the best business to go into — or, how I might structure that business – and where to go to obtain information! Who do I see about an employer identification number, or who do I talk to about wage issues at the Department of Labor? There is a whole lot of information there [on the Agency’s website].

ROB:     Now small business is a big part of the commercial activity in the United States isn’t it?

TERI:    Yes, small business has a very prevalent role in the economy. I’m truly convinced that small business is the reason the American economy is so dynamic. Even though we’re struggling now, I think a lot of that dynamic will help get us out of the situation we’re in now.

ROB:     Do you happen to know off the top of your head what percentage of new jobs come from small business? By that I mean I think the general definition is something like businesses that have revenue that’s maybe less than twenty million a year and starts at zero, that goes from zero to twenty million a year.

TERI:     Actually, what constitutes a small business is … there’s a short answer and long answer to that. However, our working definition is a business that has fewer than 500 employees. In some of the specific programs, there are more specific criteria as to what constitutes a small business. But I think based on most people’s definition of a small business in the public sector anyhow, probably anywhere from 50-70% of new jobs are generated by small businesses.

ROB:     Terri, thanks a lot for being on today. You’ve been very, very informative.

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INTERVIEW OF LANCE WEATHERBY OF GEORGIA TECH ADVANCE TECHNOLOGY DEVELOPMENT CENTER

(Transcript of Rob Hassett’s podcast interview of Lance Weatherby of Georgia Tech Advance Technology Development Center for Business to Business Magazine)

ROB:      This is Rob Hassett for Business to Business Magazine. This is going to be a podcast interview of Lance Weatherby with the Advance Technology Development Center. Lance, are you on?

LANCE:     I am, Rob.

ROB:      Good morning.

LANCE:       Good morning.

ROB:       Lance, where is the Advance Technology Development Center, which we know as the ATDC, located?

LANCE:      We’re located in Technology Square which is the recent development at Georgia Tech. They spread it a little bit more east off of their traditional campus. So it is a great location in Midtown at 5th and Spring Street. It’s really kind of the hub these days of the technology start up community.

ROB:       Lance, when was the ATDC first established?

LANCE:      Oh my! The ATDC was first established back in 1980 when Governor Busbee wanted to do something to keep the engineers that were graduating from Georgia Tech in the State of Georgia as opposed to them moving off to California or Massachusetts or other places. We were established in 1980 to help increase the technology base in Georgia, which is essentially to create technology companies and jobs for technologists.

ROB:       Is that the mission today?

LANCE:      Yes, our mission really hasn’t changed. It is to create jobs in Georgia, not only for technologists, but for people of all walks of life as well.

ROB:      Is it part of Georgia Tech?

LANCE:       It is. We are part of Georgia Tech. I am a Georgia Tech employee. However, the companies and entrepreneurs that we help are not necessarily associated with Georgia Tech. About 1/3 of the companies that we have in our incubator program do have some relationship to Georgia Tech, either being a graduate or the technology came out of that university, but clearly 2/3 don’t. They have no connection whatsoever, and when we look at our broader programs that we do in terms of educational programs and things of that nature, I’m sure that it’s even less than 1/3 of Georgia Tech associated people that are benefited.

ROB:       What is Venture Lab?

LANCE:       Well, Venture Lab is our sister organization. The Advance Technology Development Center is now part of something called the Enterprise Innovation Institute, and that’s a mouthful. So what Venture Lab does is they only commercialize technology that is developed at Georgia Tech. So whenever a professor, graduate student, or PhD. candidate has an invention/discovery, that invention/discovery is filed with the university, and then Georgia Tech sends that invention/discovery to Venture Lab. And Venture Lab has a group of folks called “Venture Catalysts” that help determine whether or not that invention would best be suited, commercialized if you will, as either a licensing opportunity, a consulting opportunity, or an opportunity to actually to go and start a company. And they, at any one time, probably have 75 or so opportunities that they are evaluating. What Stephen Fleming, who is the Chief Commercialization Officer of Georgia Tech, likes to say is that if ATDC is an incubator, then we’re prenatal care. So they take companies that are at an even earlier stage than ours.

ROB:      Do some of the Venture Lab companies eventually become ATDC companies?

LANCE:       Yes, they often do. It does just depend on the nature of the company and what they’re doing, and how well that lines up with what we’re doing and if we have the ability to help them or not.

ROB:       What does the ATDC offer its companies?

LANCE:       We have five member benefits that we kind of conveniently call the five C’s. The first one of them is consulting to get practical advice from experienced entrepreneurs like myself who have been in start ups before, been with successful start ups before and are able to provide some guidance based on that. We provide them connections to the people and resources that are necessary or best, whether that’s investors, customers, business partners or other advisors. We have a really dynamic community of entrepreneurs down here. There is a great deal of peer-to-peer learning that takes place among the companies within the incubator, and that might be one of the most valuable aspects of what we do. We have a facility that is designed for start ups with very flexible lease terms, and the type of facilities that start ups want. And finally, being associated with ATDC gives the start ups and entrepreneurs credibility. It is instant recognition. Our companies have been very successful, and when investors and some of those other people, such as I just mentioned, come to ATDC, they know that the companies associated with us have a greater chance of success.

ROB:      Lance, now I understand that you are a Venture Catalyst. I know you are very popular. I know you’re well liked among the start up tech companies down there, but as a Venture Catalyst, what do you actually do?

LANCE:       Well, as a Venture Catalyst, I do several things. I spend a good deal of time consulting with the companies that are here in the incubator. The way that we break things up are into interesting categories, and based on my background, which I was with Mindspring and Earthlink and then Cyphertrust in its early stages, I deal with the internet, the new media companies, as well as the information security companies, and I am the lead counsel for them. I also spend a good deal of time talking to applicant companies, people, entrepreneurs that are interested in ATDC, and let them know a little bit more of what we are about and whether or not there is a potential fit with us, and if there is anybody listening to this that would like to get together and talk, I might suggest that they go to http://atdc.org/inquire, and they can get in front of me and some other people to try and figure out whether or not there’s a fit. And then the last thing I do is, I spend time with companies helping them with their marketing and business development efforts, as functionally, that’s where I kind of grew up.

ROB:       How long have you been at ATDC?

LANCE:      I’ve been here for two years now. I’m having lots of fun.

ROB:       And what were your positions? At Mindspring, I know you were one of the earliest employees at Mindspring.

LANCE:      Yeah, well I was actually there pretty early and that’s actually how I ended up at ATDC. As I started with that company when it was in the incubator back in 1995. So I had a bunch of different titles there. I was what they called a market development manager, and then it turned in to the vice president of business development and from there it became an EVP of sales and marketing. In that role, I was responsible for business development, marketing, product management, and product development for a period of time. When we merged with Earthlink, Gary Betty decided he wanted his marketing guy to be the marketing guy, and I was fine with that. But I was like, well what am I going to go do then? And what I ended up doing was I started their mobile wireless business unit, and grew that into a pretty substantial business in a short period of time. I left there and went to Cyphertrust, and was the chief marketing officer there. Now, I’m hanging out at the ATDC having lots of fun.

ROB:       What was the business of Cyphertrust?

LANCE:      They were an enterprise e-mail security company. So they made a box that kept bad people and things out of your e-mail system, specifically out of corporate e-mail systems. That was really our focus. Companies like Coca Cola and Home Depot, you know.

ROB:      If a company becomes a part of the ATDC, what do you call them — a member or a participant or what?

LANCE:      Yeah, we call them a member company and we kind of wrestled with … rassled, that sounded kind of like the wrestling you see on Friday night. We kind of wrestled with, you know, if that’s the right thing to call them or not, because we do have some limitations in the number of companies that can actually get into the incubator program. And what we have been doing is working on ways that we can help companies that for whatever reasons, aren’t such a good fit with our incubator program. Or perhaps they’re too early to really want to join the incubator. We try to offer them resources through educational programming and online services.

ROB:      How many actual member companies do you have?

LANCE:      I believe we have about 45 right now. We’ve got a pretty vibrant group of companies that are here. We typically in any year take in 13-15 companies, and graduate six maybe. And the way that a company graduates is that they get to a point where we consider them sustainable, and just kind of as a marker, once they get around $1M revenue, that’s when we typically start saying okay it’s time for you to move on and make some room for somebody else.

ROB:       About how many applicants do you have per year for that average of 14 positions?

LANCE:       We receive about 180 applicants here, which is a lot for those slots. It’s part of the reason why we’re expanding our educational programs because we just don’t have the resources to be able to accept more. And what we do as an incubator is really pretty tightly defined. We are looking for companies that fit in their own slice of the pie of all the start ups in the world out there.

ROB:       What are the criteria that you look at to bring in, to decide whether to select a company from the 140 or so that apply?

LANCE:      There’s really five things that we look at. One, we’re looking for some innovative science or technology-based concepts. You know our companies are bioscience companies, energy companies, hardware companies, internet companies, telecommunications companies. The keyword is innovative. The question that I always ask is, what are you doing that is unique from whatever’s out there and is going to give you some competitive advantage, and that’s a big question. We look for a strong and committed management team. At least one person has to be working on the business on a full-time basis. And typically when companies come in, they have two or three people that are members of the founding team. Because of our mission to create jobs in Georgia, we look for companies that have the ability to generate significant revenue and technology jobs. And we want companies that have an interest in participating in our community. As I mentioned, one of the biggest benefits the companies get from joining the ATDC, is the community and if the member companies aren’t willing to give back and participate in that way, then it probably isn’t really a good fit. And the other thing that really has to take place is the company really has to be far enough along that they can pay rent. And oftentimes a company that comes to us in very early stages of life, with just one person with an idea or concept. You know it’s either a business person or technology person, and we help nurture those companies.

ROB:       Lance, could you give us the names of some companies that have gone through the program and graduated, that people would know about, would have heard of?

LANCE:      Yes, Relevant Knowledge is the first one that pops in to my head, that was a company way back with Jeff Levy and Tim Cobb. It got sold to Media Matrix. Mindspring obviously is probably one of the bigger ones that came out of here. A little bit more recently, a company called Cardiomem is doing pretty well. Companies we have in here right now actually are a really strong set of companies. There’s Sineva that it seems like everyone has heard about. A company called Clear Leap is doing really well in the marketplace. It seems to be getting a lot of traction that I think you’ll be hearing about.

ROB:      What do those companies do?

LANCE:       Sineva makes solar panels more efficient. As a matter of fact, they are just today starting up a plant up in Gwinnett County where they are going to manufacture solar cells.

ROB:      That’s today, which is October 20.

LANCE:       October 20th, yeah. Clear Leap, basically enables video content owners to deliver a lot more video over the cable plant. It’s really interesting technology. There’s just such a host of companies. PureWire, which is a lot of my old friends at Cyphertrust, are making a security service. They’re basically doing security in the cloud which is pretty hot these days. But the number of companies that we have in here that have great potential right now, and I think it’s probably stronger than it’s ever been. And when I start mentioning companies, I invariably mention a company that something happens and they get waylaid, or I don’t mention companies that turn out to be very successful. So there’s a little danger there.

ROB:       Yeah, that’s true. Well, Lance, I really appreciate your working with me today and being on the podcast. We’re supposed to try to keep this under 16 minutes and we are there.

LANCE:       Excellent. Thank you very much, Rob, for having me on the show. And again, if any of your listeners would like to learn more about the ATDC, I suggest they go to our web site which is atdc.org and they can find out more information about it.

Uncategorized

INTERVIEW OF KNOX MASSEY, MANAGING DIRECTOR AND MEMBER OF ATLANTA TECHNOLOGY ANGELS

 (This is a transcript of Rob Hassett’s interview of Knox Massey who is a member and managing director of the Atlanta Technology Angels for B to B Magazine)

 

 

ROB:              This is Rob Hassett with btobmagazine.com.  Today, I’m going to be interviewing Knox Massey who is a member and managing director of the Atlanta Technology Angels.  Knox, good morning.  It’s good to have you on.

KNOX:           Thank you.  It’s great to be here.

ROB:              Knox, before you came back to Atlanta, I know you grew up here, you were working for AOL, is that right?

KNOX:           That’s correct.  I worked for America Online in the late ‘90s.

ROB:              In what capacity?

KNOX:           I was the sales manager of an office here in Atlanta, and I covered the territory in the southeast.  Most of my business was done in Georgia and Florida, with a little bit of business in Alabama and South and North Carolina.

ROB:              And then you went to get an MBA at Georgia State?

KNOX:         Yeah, I entered the program in 2001 and finished up in 2002 over at Georgia State.  It’s a great program.  It’s called the Global E-Management Program, which I don’t think actually exists any longer, but it was geared towards sort of an MBA program and it focused on technology, which is what I was focusing on at the time, and of course still do with the Atlanta Technology Angels.

ROB:              Knox, when did you first become a member of the Atlanta Technology Angels?

KNOX:           I joined ATA, we call the Atlanta Technology Angels “ATA” for short, in 2001.  I met a person by the name of Mike Dickerson who I had met over at E-Hatchery, if anybody remembers that.  And he introduced me to the folks at ATA and I joined in the middle of 2001.  Then I became the managing director I believe, it was in late June of 2002.

ROB:              When were the Atlanta Technology Angels first formed?

KNOX:          The group itself was formed in late 1998.  They did a little bit of leg work and visited some Angel groups up in North Carolina, which had some early Angel groups back in the early to mid ‘90s.  The group actually started meeting in ’99 after they sort of formed the group, which is actually a C-Corp, a non-profit C-corp.  So the group started meeting in ’99 and started investing in, I believe the first investment was in October, 1999, in a company which is now called Connecture and is still an ongoing concern.

ROB:              What is the mission of the Atlanta Technology Angels?

KNOX:          The mission of ATA is to fund young Georgia-based technology companies, and young sort of means early stage formations of a company, and also to help the entrepreneurs.  So, it’s sort of a double mission.  We put capital in to the young companies to get them up and running, but we also will pick one or two or three individuals that may invest in that company, and have them work with the management team over time.

ROB:              What are the requirements for being a member of ATA?

KNOX:        Well, generally, you have to be an accredited investor to invest in a lot of these young companies.  So as an accredited investor, you have to have an affinity for technology, be it you started or worked in a technology company.  Of course, you have a commitment to Atlanta and more broadly the state of Georgia.  So it’s a fairly simple requirement — if you’re willing to take a little bit of time and effort and capital and work with young companies to get them up and running and started in the state of Georgia.

ROB:             How many members do you have?

KNOX:          We’ve had as many as 75 members and as few as about 25 members.  We tend to stabilize right around 50-55 on an annual basis.

ROB:              What is the process, Knox, for an entrepreneur that’s interested in trying to obtain an investment from the Angel investors, from your group?

KNOX:        The best way is, if you’re a young entrepreneur and you’re looking to raise capital in Atlanta, that you do a little bit of leg work and pound the pavement and find the people that are in the area of capital raising, and you usually can find them fairly simply in Atlanta.  All the way from Nora Moseley or HIG down to ATA, which is sort of a private group, as well as maybe the ATDC Seed  Fund or some other private investment groups around town.  So really you have to do a little bit of leg work or due diligence, and find the people in the community.  If you can find someone that knows me, that’s an obvious and they can do a quick introduction.  We have some very public investment criteria on the web.  We’ve got a web site and I’ve got a blog, so there are numerous ways you can find us.

ROB:              What is the web site?

KNOX:           It is http://www.angelatlanta.com.

ROB:              And what is the process once they contact you?  Should they send you an e-mail with a business plan or what?

KNOX:          Typically, we’ll ask for a short executive summary or a short business plan.  So a short executive summary of one or two pages describing the business, the product, or the service, and the management, or a short business plan, maybe a little bit more detailed maybe four to five pages.  That gives us an idea of the company itself, the product and the company and the management.  We quickly take a look and see if it meets the investment criteria.  And if it does, which can be very broad-based in terms of what technology we look at, then we’ll move it in to a screening process that we have.  It meets twice a month.  Usually anywhere from three to eight members of the group will sit down for three to four hours, twice a month, and review the companies. We actually bring the companies in to do a short presentation.  And then at the end of every month, we have a formal meeting where we invite all the investors of the group to come listen to at least two companies.  And generally, we’ll also have a speaker.  At that time, after the companies have presented, we can determine if there’s a high enough interest that would make an investment viable for that company as well as the group itself.

ROB:              And does the group ever invest or just the individuals that decide themselves whether they want to in          vest?

KNOX:          Well the Atlanta Technology Angels is not a fund.  Members of ATA have invested in over 40 companies through ATA, so hopefully we’ve learned something.  But typically each individual will make an individual investment.  But we’ll take those investments and aggregate them into one investment, and we will form an entity, generally an LLC or partnership, and that partnership or that entity will invest in the company itself.  We do that for many reasons.  It’s easier for the company to sort of handle those multiple investments.  It’s actually easier for the Angel group because what we do is take one person and we make them the general manager of that entity, and that person is responsible for interacting with the company as well as the other investors.  And last, most of our companies, about 80-85%, go on to get venture capital, and the institutional capital likes to see a very clean cap sheet or structure.  And what we want to show to them that it’s not nineteen different investors they have to deal with; it’s one entity as well as maybe the founders and maybe some early friends and family money.  So it’s easy for the institutional investor to understand and work with as they go forward.

ROB:             So after a presentation is made to the formal group, anybody that’s interested would tell you if they’re interested, and then if there’s enough interest.  So if four members are willing to put up enough money for it to work, then you say okay, you guys, go ahead and do it.

KNOX:          Well what happens is a group will really form from within the Atlanta Technology Angels.  Let’s say, for example, we’ll have a meeting at the end of the month and eight people have a high level of interest.  What we’ll probably do, and we all pretty much know each other in the group, and we all will show the interest, we’ll find out who’s interested and we’ll put together most likely either one or two, depending on what we need to understand, due diligence sessions after that formal meeting where the company presents to the Atlanta Technology Angels.  And that’s a chance for the investors to come in and spend more time on maybe the product or maybe the financials, maybe a little bit more about the background of the management, it just depends.  Every investment is a little bit different in terms of what we concentrate on.  So that group will concentrate doing their due diligence and once they’re satisfied then they’ll put the investment together like I mentioned a little bit ago.  They’ll create an entity they’ll invest in to the company themselves.  And that’s also a process as well.  I’m not sure we want to go in to it right now though.

ROB:              What’s a typical investment that the ATA group members would invest in?  I mean what’s a typical amount?

KNOX:          Well, there’s no typical investment.  Generally, the investments range from about maybe $250,000 up to a million.  It just depends on the situation; it depends on what the company’s trying to raise.  If a company is raising as much as a million, generally you’re probably … well, a group like us, is probably going to have to co-invest with another group, for example, Imlay Investments or another Angel group.  So you have a small syndicate that would invest for those larger amounts.  ATA has done multiple investments in the range of 200, 250, to up to $500,000 individually.  Not individual persons but a loan as a group.  So it just depends.

ROB:             What’s the typical form of the investments that the members make?

KNOX:       Most of the investments are in preferred shares and/or convertible notes.  The convertible note being a debt instrument that will convert to a preferred share at a later point.  We rarely, rarely due common stock.  In fact, I think the last common stock investment we made was maybe in the year 2000.

ROB:             Do the ATA members offer anything other than money?

KNOX:         Well, I mentioned earlier that often we’ll pick one or two or maybe as many as three members from that investment group that will work with the management team and mentor them over time.  Again, that depends if we can find someone within the group that has the capability and expertise that can help that management.  If so, then  they’re an obvious choice and they can go on and serve as a mentor.  So yes, we don’t advertise that we have some sort of wonderful added value beyond the money because we want to make sure that our members helping makes sense before we have that person help the company.

ROB:             What type of business plan are you looking for?

KNOX:          Well, you know, the Atlanta Technology Angels are technology oriented.  Georgia based, and very broad.  And we do that on purpose.  A lot of our members have varied backgrounds.  They could be semiconductors or internet security, or telecomm, or sensor related and so on.  So we try to keep it very broad because the membership has a broad interest base.  We don’t want to narrow that so that we only see software and we can only see semiconductors.

ROB:             Knox, what do you want to see in a business plan in the sense of how many pages are you looking for in general?  Are you looking for something long and deep, or short and sweet?

KNOX:        The shorter the better.  Generally, I mentioned earlier, an executive summary of one to two pages, or a short business plan.  Maybe the most is four to five pages.  Most of the information that we need to see can be put into four to five pages.  We don’t need a fifteen page or twenty page business plan just to show that you can create one.  We’d rather have shorter so that we can quickly review the company, the product, the service, the management, the financials if they’re there.  So we can determine if it’s a good opportunity that we’d want to review.  I mean over the years we’ve looked at thousands of business plans.  We generally know what we’re looking for pretty far up front.

ROB:             Are you more interested in them going directly to you or do you appreciate it when they have a go-between?

KNOX:         You mean a broker?

ROB:             A broker, right.

KNOX:         Generally, we don’t work with companies that have brokers.  And one big reason is that all the money that we invest we want to go to the company.  For example, if the company raises $750,000 and a broker takes $75,000, that’s $75,000 which, in our world is a lot of money, that can help that company.  We prefer that the company not use a broker, and that’s one reason.  Another reason is we want to hear from the company and the management.  We don’t want to hear from a broker.  We want to understand the management, know their backgrounds, see how they work in front of a group, can they tell the story.  If a broker’s doing that, you don’t get the full impact of how the management team is going to work going forward.  Those are the two main reasons.

ROB:             Knox, you had mentioned to me that there was a particular reason that North Carolina did so well early on in the high tech area.

KNOX:         Well, from what I could determine, they passed a tax credit, I believe it was in 1996.  I’d have to go back and look at my notes.  But the tax credit gave a specific tax credit to investors in early stage technology companies.  There were some provisions in that tax credit bill which stipulated that the Angel groups or early stage investments groups had to form a fund.  Actually, I believe the fund may have gotten the tax credit which flowed down to the individual investors.  So you saw really an explosion of Angel groups happen in North Carolina based on that tax credit.  And since that time, I believe there’s over twenty states that have implemented tax credits; Hawaii, Wisconsin are two of the ones that are very, very successful.  I believe North Carolina still has the tax credit, and there’s numerous others.  In 2007, me and one other ATA member, Dan Pompilio, put forth a bill in the legislature and it was called House Bill 435 which was a tax credit bill for early stage investors in technology companies.  Unfortunately, it did not succeed and we tried again last year.  That did not succeed based on some other bills that had higher priorities.  We’ll probably continue to try that, but I think it is absolutely needed in the state of Georgia … that the state encourage private investment in young companies.  The tax credits for early stage individual investors, in my opinion, is needed and is very, very essential especially in these tough economic times.

ROB:             So twenty or more states have the credit right now, and Georgia has none.

KNOX:          That’s correct.

ROB:             Now what is the Angel Capital Association you had mentioned to me?

KNOX:        The Angel Capital Association is a trade organization that was formed in 2003, and it is comprised of over 150 Angel groups throughout the nation.  All the way from Florida up to Maine, over to California, Texas, etc.  I believe that there’s quite a number of international Angel groups as well in the group.

ROB:             And you are an executive of that organization?

KNOX:          I’m on the Board, that’s correct.  I joined the Board in 2007, so I’ve got a three year stint, so through 2010.

ROB:             And there’s a major meeting planned in Atlanta shortly right?

KNOX:        That’s correct.  We have an annual summit.  Last year it was in San Diego in May.  This year, I convinced the Board to bring it to Atlanta.  So the Angel Capital Association Annual Summit will be in Atlanta this year April 15-17 at the Intercontinental Hotel in Buckhead.  We are just now distributing the agenda.  If you go the Angel Capital Association web site, you can find the agenda and more information on the summit.  Last year in San Diego, we had 300 Angels there, which represented about a hundred Angel groups.  So I imagine we’ll have just as many this year here in Atlanta, even with the tough economic times.  I would encourage all individual investors who are interested in this field to attend.  We’re inviting entrepreneurs to attend the Thursday night cocktail reception where we give a specific reward to an Angel who’s done a lot in the field.  It’s a great way to meet Angel groups and Angel investors.

ROB:             And any one that’s interested in attending that event, any entrepreneurs that want to attend that event or Angels that want to attend the summit, should go to the Angel Capital Association web site?

KNOX:         Yes.  Well, the actual summit is for Angels only, so investors only.  And it’s a crowd of Angel investors and Angel groups, and we talk about specific content about this type of investing.  We always invite local entrepreneurs to the event on Thursday night which is about a three hour cocktail reception that we have for the attendees as well as local entrepreneurs and local businessmen.

ROB:             And Knox, there was a web site you mentioned that entrepreneurs could use to find out who the Angel investment groups were.

KNOX:         There is on the Angel Capital Association web site, there is an area  … I’d have to take a look, but there is a listing of all the Angel groups that are members of the Angel Capital Association by geography.  So literally southeast, northeast, midwest, west.   I believe I looked at it last week, it’s listed by state.  So it’s a very, very easy way to find out what Angel groups are in what states and in what geography.  So it’s easy to find out who runs the Angel groups, what they do, etc.  Most Angel groups have web sites, or there is the ability to find them fairly easily.  And there’s no charge at all to access these Angels.  In fact, the Angels and major Angel groups want to hear from the entrepreneurs.

ROB:             And is there a particular stage in a company’s business life that you are looking for?  Do you guys, in other words, fund start ups generally or fund companies that have already gone through initial seed capital and they’re looking for the next round?

KNOX:         Well, people can have different definitions for seed capital, or start up capital, or early stage capital.  A lot of times, those terms get intertwined.  Typically, and every Angel group is a little bit different.  So it’s very important for a company or an entrepreneur looking to raise capital to understand what metrics that Angel group or Angel is interested in investing in.  So our group will do early stage.  What does that mean?  It probably means that you have a small team; you have identified or have management on board, meaning a CEO.  You have a product that is maybe finished, maybe in beta.  We have funded start ups, literally stuff written on napkins.  That was very common in ’99 through 2001.  That doesn’t happen that much.  Some Angel groups may do that.  We typically don’t anymore.  Typically, we’ll come in after their friends and family monies.  So the company’s up and running; it’s been established; it’s raised a little bit of capital maybe from the founders, maybe from friends and family.  They have a good idea of the product or service.  They’ve identified the management, or they have the management on team, and then it’s very obvious.  Hey look guys, and then we’ll dive right in.

ROB:             Knox, thanks a lot for being available today.  You’ve really been a big help, I believe, to a lot of entrepreneurs that will listen to this.

KNOX:          Sure.  Glad to do it.

ROB:             Thanks.

KNOX:          Okay.  Talk to you soon.