Intro: Broadcasting live from the Business RadioX studios in Atlanta, Georgia. It’s time for Atlanta Business Radio, brought to you by on pay. Atlanta’s new standard in payroll. Now, here’s your host.

Lee Kantor: Lee Kantor here another episode of Atlanta Business Radio. And this is going to be a good one. But before we get started, it’s important to recognize our sponsor on pay. Without them, we couldn’t be sharing these important stories. Today on Atlanta Business Radio, we have Blake Patton with Tech Square Ventures and Engage. Welcome, Blake.

Blake Patton: Thanks for having me.

Lee Kantor: So excited to get caught up with what’s going on at Tech Square Ventures and Engage. So let us know what you are up to.

Blake Patton: Yeah. So. Well, first, it’s great to be with you, and thanks for inviting me on today. As you know, we’re an early stage venture firm based here in Atlanta. We back enterprise and marketplace technology companies. We’re one of the more active firms here in the Southeast. We’ve invested in over 90 companies, 90 startups since we launched the firm. And we have our early stage fund. And we are also the venture firm behind Engage, which is an innovative corporate innovation and startup go to market program that we partnered with Georgia Tech and 14 large corporations to put together. And it’s I guess what’s what’s going on is the same as same as always, right? We are excited to be working with the best and brightest entrepreneurs here in Georgia and outside. About 70% of our companies are based in the Southeast. The 30% come from all over. And it’s just our privilege to work with amazing founders and and the really cool innovations they’re bringing to market.

Lee Kantor: Now, how have you seen the Atlanta startup community evolve over the years since you’ve since you got started? It’s been a hot minute for you since you’ve been involved in this world.

Blake Patton: Yeah, you know, I’ve gotten to watch this market evolve from multiple perspectives. I spent most of my career as an entrepreneur with some of that here in Atlanta. And then around about a decade ago, I was fortunate to be asked to be the interim head of ATC, the startup incubator down at Georgia Tech. And it was during that time that I really recognized sort of this momentum building in the southeast and farther back than that. Right? We’ve had amazing entrepreneurial success here. I got to see that during the dotcom days when I was like, so but I really saw this sort of critical mass starting to come together during my time down at ATC based here in Technology Square, I would look out the window and see the kind of collaboration between the corporates and the corporate innovation centers opening here and the the researchers and of course, the entrepreneurs. And it sort of reminded me of my time when I was in Boston, I had an office in Kendall Square and saw similar dynamics. It was more life sciences than but really saw this momentum building. And that’s that was the genesis of why I jumped in and started a tech square Ventures. I kept hearing from the entrepreneurs that they know about lack of access to capital in the region and sort of saw that as a need and opportunity. And so fast forward for what we’ve seen over this past decade, and I think critical mass is the right, right word. We finally had this base of experienced entrepreneurs from prior successes coming together.

Blake Patton: We’ve all worked with each other for years, enough angel and seed capital to support more and more of that activity, enough entrepreneurs to build those management teams. And it’s really about connecting the ecosystem. So when you look at our firm and what we’ve done, there’s really sort of two things that that we’ve tried to build around. First was this recognition that what entrepreneurs need more than capital is access to markets and customers. So they need that connectivity. And then second, we realized the best way to do that and build that ecosystem here, and that’s really was the power behind Engage. And we can talk more about how that came together. But the vision there was connecting these these large corporates with the innovation that was impacting their ecosystem, connecting them with each other so they could gain cross corporate learning and, and helping the ecosystem grow. So out of that, we get all the market insights from listening to those companies, essentially the customers of what would be our the startups we invest in. And we get to apply that into the insights that we invest in. We get to use that to help better diligence and then obviously to help the entrepreneurs. So on the engage side, we celebrated our fifth anniversary this year. Super excited about that. We’ve had over 120 contracts between those big companies and the startups since we launched Engage. And so I think the short answer to what’s going on in Atlanta is just a lot of momentum, and that’s really happening because we’re connecting our ecosystem.

Lee Kantor: Now, if you were to look back, you know, decades ago and you would see the in the investment kind of community here, it was primarily like real estate developer driven. And at some point, like you said, probably around ten years ago, there was this evolution to more startups. Angel type investment happening. Why do you think that was? Was it the fact that so many there had been some exits and the people decided to stay here and reinvest in the community? Is it because of the diversity of the economy that there are so many different little clusters or industries or niches here that allowed that kind of collaboration and less kind of cutthroat? If there was one industry and there was only one kind of major player, would be maybe you wouldn’t have this kind of collaborative environment that we have today.

Blake Patton: Yeah. Look, I think it’s a mix of a couple of things. I sometimes joke and say all of us com kids are now in their fifties and forties and fifties and, and so sort of that stage in the career. But, but one I think it is I think for sure what you said I think that the way a healthy startup ecosystem works as when they’re startup success that creates not only the future entrepreneurs and managers to build the next set of startups, but it also creates wealth. And those people are more comfortable investing and supporting that ecosystem. I think hopefully in Atlanta we’ve moved past this idea of it being giving back and that it’s actually just a smart thing to do and it’s a rewarding thing to do, I think. Second is this past decade, obviously, for lots of macroeconomic reasons, alternative investments became very attractive. And to your point, historically in Atlanta, that has meant real estate. But the need for both institutions and high net worth individuals to put more more to work in alternative assets was good timing for all the activity that happened to be building in Atlanta. And then third is we had a lot of visible successes over the last decade. This those exits that we talked about earlier, where people made money and dozens of experienced entrepreneurs and managers came out of people outside the region also noticed that.

Blake Patton: And we’re when you think about investing in startups, this activity that has generally been associated with the valley and then the coast and the New England starts started to. Brought out people realizing these large successes were coming from all over the country. And if you think about having coverage there, this is an area that most of the prior investments weren’t weren’t covering. So there was more interest in allocating capital and managers that were taking advantage of the opportunities in those regions. So I think a lot came to a lot of things happened and came. Came together that fueled all that and the then. You know, I think there were things that probably longer than this call even, you know, a lot of the what we now call late stage venture capital, you know. 20 years ago was was was really private equity or public markets, companies just staying private longer. So lots and lots of capital that had to be put to work in these private companies at later stages drew more awareness to the asset class from those capital allocators. They started to notice and pay attention to where those opportunities were being funded. Um, upstream from them and that attractive capital.

Blake Patton: So, look, I think there’s just so much going on here and a lot, lot came together and the last thing I’ll say is I think the. Each ecosystem has its own strengths, and I think Atlanta really finally started playing to his strengths. And from a timing perspective, happened to coincide with when, you know, ten, 15 years ago, large companies started to look outside their four walls at innovation. They recognize, you know, 50, 60 years ago, the average lifespan of a company on the S&P 500 was something like 40 or 50 years. Now it’s like 17 or 20. So they recognized the pace of disruption was happening faster and and started to look at innovation outside their four walls. Started out. You heard the phrase open innovation from consulting firms. And it’s just grown to be sort of de facto instead of just being large tech companies thinking about it at all. Companies became tech companies and start to think about innovation outside their four walls. So in Atlanta, we’ve been able to take advantage of that and use that to connect all of those different players. And once you start to connect an ecosystem, that’s how you get the flywheel turning. And I think that’s really what you’ve seen in the past decade here.

Lee Kantor: And I think you’re talking about engages work. Can you talk a little bit about maybe the early stages of Engage when you were having those initial conversations with these enterprise level companies and kind of pairing them with startups and working together, you know, on projects and maybe beta testing things and seeing if there are fits, Were those conversations easy or hard, and what are they like today?

Blake Patton: Yeah. So. Well, first, it’s probably helpful to share a little bit about the genesis of Engage. The CEO of INVESCO, Marty Flanagan, and Bud Peterson, the president of Georgia Tech, had some conversations with different business leaders that were asking that question and what what could be done. And I think we’re wise enough to recognize that it’s about connecting the ecosystem. It’s not just about is there enough money here? And they reached out to me and the three of us started brainstorming what what would bring what would bring that connectivity to the region. And that’s ultimately what became engaged. And so. You know, we did what any good startup would do. We kind of hit the road and did customer discovery. In our case, it was about talking to the CEOs of these large enterprises, large companies, mostly based here in Atlanta. And the. Overwhelmingly positive reception. We we had I think we had 11 initial CEOs we talked to and wound up getting, Yes. Yeses from ten of them. And what we heard from them was really three things pretty consistently. They were looking for access to the innovation that was mattered to their industry. So things that were happening at the edge of their industry, how do they connect with the right startups? How do they get a lens into what was going on? Second, they cared a lot about cross corporate learning. They wanted to connect their leaders and they wanted them to.

Blake Patton: They wanted to see how other industries were applying these new technologies, right? How are they leveraging them and seeing how they can apply that in their industries? And then third, they recognized and cared about, recognize the need and cared about Atlanta and the Southeast being a leading tech hub. It mattered for them as well. If they were going to track the talent they wanted, they needed this region to elevate. So so there was so from the very top level, there was a lot of support. And so we what we did is we put together this really unique collaboration. We asked them to invest in the fund. We asked the CEOs of those companies to serve on a board, and then we ask each of those companies to assign call a quarterback or advisory board members, but kind of a senior innovation person that understood the corporate corporations, strategic and innovation kind of mandates and goals, and could also help us navigate and find the right people in those companies to find the right business units. And we started to work with them through a partnership with Georgia Tech to understand their strategic focus areas. And we would and we developed working groups and looked at areas where they had common interests, things like supply chain logistics, AI, data analytics, future work, sustainability, topics like that. And we would take those insights we got and go start sourcing startups that were solving those problems that they cared about.

Blake Patton: And so in the course of doing that, you know, you’re navigating through these companies, you’re connecting hundreds and now thousands of executives from across these companies and. And really kind of closing that closing that gap and that that startups have always had is, you know, how do I get how do I get to sell and partner with these large companies? And then also helping start at the large companies figure out, you know, these are the startups that are working on the problems you’re solving and helping coach them on. How do they engage with these startups successfully. And so I think the what what engage I sometimes. But only half jokingly tell people it’s really a big pickup basketball game that just gets all the right people together. And when you get the right people together, that’s how innovation happens. And so it has not been hard. Quite the opposite, I think. I think fast forwarding today, five years later, I think our biggest challenge is actually that we’ve their expectations are higher now than they were five years ago. And so if we have any challenge, it’s not their level of interest. It’s it’s in keeping up with their appetite for innovation and for us to continue to help build that tool that helps them do that.

Lee Kantor: Now, how do you kind of manage the expectations of both sides? You know, from one side you have the entrepreneur that you know is dreaming of, you know, the dog, dreaming of catching the car and then catching the car. You know, it sounds good in their head, but when you’re actually working with a large company, you have to be able to kind of scale to their desired outcome. And then you have the large company who maybe isn’t used to, you know, a failure rate of startups that politically might not be good for their career, you know, to betting on a horse that may not make it.

Blake Patton: Yeah, that’s a great, great question. The right question, the. So I think with the Engage program. You know, we’ve cracked the code a little bit. So from the beginning, the corporate our corporate partners are actively involved in helping us select the companies that will go through the accelerator program. So they have they have they’re not meeting the startups for the first time after we’ve already brought them through the program. And so they’re part of a selection process that leads to us choosing 5 to 8 companies twice a year that go through a cohort, 10 to 12 week cohort experience. And during that cohort experience, we do a couple of things. We work with the startup to refine their enterprise, go to market and then coach them through it. And we’re also working with the corporates to identify which of the startups might be relevant to them. And then facilitating these one on one conversations and our team sits in those meetings kind of two or three meetings deep with the corporates and helps identify potential target areas. And I think both sides, one of the beauties of the Engage program on the corporate side. But part of what it’s done is it’s given those executives inside the company some degree of air cover to take a risk that might be harder to do with something outside the Engage program. They know they’re committed to it. They trust us as a partner. And so the business unit leaders and business unit heads facilitated by their quarterbacks and their innovation leaders in their company can maybe take risks that would be harder to take outside of engage.

Blake Patton: And then also, we’re helping them identify appropriate pilots. We’re sharing best practices. That we know about Georgia Tech is helping. And then we’re also there also sharing those best practices with each other. So we. We identify appropriate scale pilots to help mitigate that risk. You talked about, hey, maybe you don’t roll this out to all your customers on day one. Maybe we design a pilot that’s more manageable. And then the startup side, same thing there are. We’re helping them to understand why those sales cycles are different. What does enterprise sales look like? And. And coached them through that and delivery. And so they’re getting all sorts of valuable feedback, even in just the nose. And I think that’s the difference, is we are bringing those startups and those corporate executives together. And I always remind people we in the startup community, sometimes we get in this habit of saying, Oh, these are big, slow companies, or they don’t get innovation. And that couldn’t be farther from the case. These companies are leaders in their industries because they have the smartest people in the world at what they do working for them. And these people are amazing mentors for us and for the startups. And and to your point, right, they don’t necessarily have the muscle memory.

Blake Patton: They have all sorts of things that matter for a big company. If you’re a very large company, you’re very process oriented, process driven, which can be the enemy of innovation. But when you create a program like Engage, where everyone builds relationship and a trust with each other and you can you have those those engagements sort of prescheduled like we do with our accelerator program, everyone shows up, it’s game day, gets the right feedback, and we work with both the corporates and the startups. On Where does it make sense to spend your time and energy? And it’s been very successful. I think I mentioned earlier we’ve had over 120 contracts between those companies and startups. So it’s the magic is less than you think. It’s about creating a set of activities that are valuable, so valuable for everyone that they’ll participate. And then when they participate, they build those relationships and trust. They see how each other are doing it. And, and you sort of have this. Patience and the Sherpa of the Engage program to work through it. And we see that with the startups we invest in out of our early stage fund, too. Some of them have gone through the Engage program, some of them not. But as they mature, they go through that learning as well, and we’re able to help coach them through that. We’re able to help make introductions and connections and leverage those same learnings and insights.

Lee Kantor: But I think that the secret sauce to this is the is the engaged program engaging the being that intermediary is what allows these things to happen at a speed that they wouldn’t happen at all, maybe never if there wasn’t engage in the middle of the interaction.

Blake Patton: Yeah, no doubt about it. And then to take that one step further, it’s the commitment and vision of those executives. These are leading companies Chick-Fil-A, Coca-Cola, Cox, Delta, Georgia-Pacific, Georgia Power, Goldman Sachs, Home Depot, Honeywell, ICE Inspire, Invesco, UPS, Well, Star. So these those logos are all great and those names are all great. But if you pause and think about it, it’s also those are leaders in airline communications, energy, health care, financial services. It’s the it’s the breadth of expertise that they bring. And so their vision and commitment to this and it’s really about building those those relationships and that connectivity. So that’s that’s why I come back to it’s the pickup basketball game in the middle of it all that empowers that empowers it all. And I think what. Uh, part of the magic of Engage is, you know, hundreds were really now over over a couple thousand of corporate executives and startup leaders that don’t know each other now know each other. And we’ve had when we first launched Engage, I would sort of joke with the corporate executives that we’ll know it’s working when one of their executives quits to start a startup. And we’ve had startups incubated inside these big companies that we spun out with the help of Engage and a company like Clovelly that was incubated and developed an idea and conceived of it Southern Company. And then through Engage, we helped them nurture that into down a path. And as it became clear, it was a good opportunity. You know, our our tech square early stage fund provided the seed capital for that, and we helped put together the management team and built that into a stand alone startup that’s now doing very well. So you’re starting to see what a connected ecosystem looks like. And I think Engage has played a huge role in helping accelerate that kind of connectivity. And Atlanta that’s benefiting not just engage, but really the region and all the participants, right?

Lee Kantor: It’s helping the corporates, it’s helping the startups, it’s helping the entire community. And you might equate it to a pickup game, a basketball game, but engages the court, the ball, the ref and the coaches on each team. I mean, there are key player as part of that equation.

Blake Patton: Yeah, for sure.

Lee Kantor: So now are you seeing because you have your finger on the pulse of a lot of the new new technology that’s happening? Is there any areas right now in this area of the country of the world that is most exciting for you as you look forward to 2023?

Blake Patton: Yeah. You know, at Dexter Ventures, I think because of all this activity we’re doing that we’ve just talked about through the engage partnerships, we really follow, we call it a market led investment approach and market led insights, investment approach. And so a lot of times the themes that we get interested in are things that we’re seeing through the lens of these market leaders, and we’re hearing from them firsthand what they’re seeing and why. That’s why that’s unique, is it gives you the hardest part to figure out about what are emerging areas isn’t necessarily what are the hot or emerging or new areas, what’s changing the world. The hardest thing to figure out is the timing. The example I use with my wife is none of us are sitting around wondering if autonomous vehicles are part of our future. But it’s harder to pick. It’s harder to predict the timing and what applications will adopt it first. And so some areas that we see for sure, obviously artificial, broadly artificial intelligence and machine learning, data analytics, that that is a driver of lots of things. If the Internet boom was really about connecting first millions and then billions of people and then mobile phones and now the past decade devices connecting millions and billions of devices. Now, now we’re to the stage of we’re just all these opportunities that are that didn’t exist ten years ago because of these advancements and in AI and not just the data analytics, but actually all the technologies that had to exist first for us to have access to that data.

Blake Patton: So so the influence of that will be huge in the coming decade. We’re super excited about logistics and supply chain. That was a harder, harder thing to explain to people before COVID. I think the last two years, lots of people understand why logistics and supply chain is a big opportunity now. Certainly, sustainability in energy is producing lots of necessary innovations. So those are those are some of the bigger areas that we’re excited and focused on, along with the things that we’ve always been good at and our strengths here in the region broadly, kind of infrastructure and automation, cloud SAS tools and then customer experience and vertical platforms. A lot of what we’ve seen, a lot of successes you’ve seen here in the past decade where. It was about bringing these picks and shovels that enable the things we just talked about. And then there’s very deep vertical applications of those. What how do you apply that to financial services or how do you apply that to supply chain? And what are the types of companies that come out of that? So those are some of the things that we’re excited about and focused on. And and you kind of see that reflected in our portfolio. You see that reflected in the early stage companies that we’re investing in out of our early stage fund. And you see that in the companies that are being selected for the Engage program as well.

Lee Kantor: Now, I know this isn’t your area of expertise necessarily, but it’s an area that I think that impacts any time you talk about this level of disruption and change. How would you advise a politician or somebody that is a leader in government right now to, you know, partially stay out of the way to let these things kind of blossom and bloom in the way that they can get some traction, but also be recognized at some level of regulation is going to be needed at some point. But you don’t want to be too premature. You’re seeing some regulation happen, you know, way late. And maybe they start regulating a group that isn’t even relevant anymore by the time it gets to the politician in Washington. Any advice for political leaders on how to manage this level of change and the speed at which it’s happening?

Blake Patton: Yeah, a huge topic. What’s interesting is you phrased this out of the way. I don’t think it’s even that simple. If you think about what makes what drives innovation, right, ideas and people and capital and a lot of times the things that the government can do actually is just sort of remove some of the pebbles and the dam that have built up sort of some of the unintended consequences and regulations, you know, things, things where making it, you know, for sure. Right. Things like immigration are a big deal. Sometimes when we get in debates about things like capital gains tax, it’s it’s easy to have these examples of these big giant firms benefiting from it. And we forget, right, that that’s a driver behind the math, behind venture capital and things like that. So I think some of it’s just awareness and saying, okay, what do we what can we do to to do that? And, you know, look, in the past decade, the government has actually been pretty good at that. It’s the point where people are asking questions like you’re asking, hey, should should they have stepped in and regulated crypto earlier or whatever? But I think it’s policies around access to capital. There’s a lot of complexity.

Blake Patton: And and the venture landscape that I think was designed to protect people during a different time period doesn’t make a lot of sense that some of the people that work for our startups somebody that. You know, it’s probably more qualified than 99.9% of the people to make a decision whether or not to invest in a startup. Can’t because they’re not accredited yet. That same employee can go to Vegas and take a spin at the roulette. We also there’s all sorts of things, and I think it’s more I think it’s more about removing pedals than adding new regulations. But anything that affects talent, capital formation, those are all important policy decisions. And I think what politicians can do is, is think about in the broader context of things they’re doing. Are there unintended consequences for early stage companies and for that access to capital? And then in their whatever their particular domain is, whether it’s local. Our national economic development has always kind of bent. Economic development is maturing as well, right? Economic development was about recruiting things that aren’t here to come here. And I think Atlanta, we’re really blessed to have Metro Chamber here and Atlantic City for progress and a lot of economic development organizations that I think are pretty forward thinking and get it that innovation is about building, building locally.

Blake Patton: It’s about building the conditions locally that will support and foster that. And so it’s about empowering what’s already here and building on that. It’s not something you can depend on picking up and moving here from somewhere else. So lots of lots of things on that front. But look, new, new advances, you know, everything, blockchain, crypto. Yeah. Know you see the consequences of of some some of that lack of regulation. But I don’t think anybody should be critical. I think I think that I think that we’d rather err on the side of letting that innovation grow. And obviously maybe there should be a little more oversight in some of those areas, but you don’t want to stop it from spreading. And and the real promise that the blockchain and tokenization has may not may not look like the Internet was a great, great example of that. If we went to the same thing in the in the nineties right with there was a lot of question of should it be regulated more differently? And had it been, we certainly wouldn’t be sitting where we are today with, with some of these innovation categories.

Lee Kantor: Right. I agree. I think I.

Blake Patton: Would encourage them to think about unintended consequences of what they do and how they can help facilitate and support their the local activity. It’s just a giant flywheel. And if that ecosystem gets built and that ecosystem has local support, local capital, local talent, all of those things, it will flourish and to whatever degree policy decisions can help with that. That’s that’s what that’s what will foster innovation.

Lee Kantor: Right. I agree. I think you have to get comfortable with some level of chaos and just let it play out a little. Let the market tell you what’s going to be here tomorrow. Not some politician that’s picking winners.

Blake Patton: Yeah, I like to I like to remind people that. You know, in 2010, kind of sort of the peak of the pain after the great financial crisis. I read somewhere San Jose, California, and Austin, Texas, had the lowest unemployment rates. And I don’t think that’s an accident. I think it’s because they had local thriving innovation ecosystems that were continuing to fuel that growth.

Lee Kantor: Well, Blake, thank you so much for sharing your story today. If somebody wants to connect with you, learn more about Tech Square Ventures are engaged. What’s the coordinates, websites, things like that.

Blake Patton: Yeah so tech square ventures dot com and engage VC. So either of those websites will get you get you to us if you’re an early stage company looking to raise capital. That’s what our early stage fund does that’s the tech square ventures dot com. And if you’re interested in the Engage program for startups, that’s the engaged VC and you can reach out to anybody on the team. All of our email links are on our team page and we would love to talk to you.

Lee Kantor: Well, Blake, thank you again for sharing your story. You’re doing important work and we appreciate you.

Blake Patton: Well, thanks for having me, Lee. And and thanks for giving us a chance to share it.

Lee Kantor: All right. This is Lee Kantor. We’ll see you next time on Atlanta Business Radio.