What do entrepreneurs do? They find an itch that needs to be scratched and go at it. After the devastating hurricane of 2005, New Orleans definitely had a lot of itches.
Years of effort to attract entrepreneurs and encourage locals to start something as an alternative to the corporate jobs that were lost are paying off. The city now boasts entrepreneurial enclaves like Entrepreneur's Row, Idea Village and Entergy Innovation Center, all of which is basically real estate housing startup efforts. And the Big Easy also counts several groups and events that have sparked a vibrant community, such as Net2NO, BarCamp, Social Media Club, Startup School, WordCamp, and TribeCon. Though New Orleans lacks an abundance of local capital, the state helps out with a 25% tax break for digital media companies, plus 10% on human capital costs.
It's still early days for this nascent hub, but one startup may put it on the map: Receivables Exchange. Started by a transplanted New Yorker, the company's product is a market for companies' receivable accounts. It recently closed a $17 million Series C round from Bain Capital, Redpoint Ventures, and Prism Ventureworks.
Chris Schultz, president of Internet firm Voodoo Ventures, spoke with Fastcompany.com about what makes New Orleans' startup scene unique.
What makes New Orleans a great place for startups?
Well, I think New Orleans is a fantastic place for startups, and the city as you know has reinvented itself post Katrina, but some incredible things have happened and that starts with the people that have moved to New Orleans since Katrina. We have this incredible influx of young people, energetic people, people that wanted to be here and want to kind of be part of the recovery. And a lot of folks realized that the best way to do that was through creating jobs by starting companies, so a lot of interesting entrepreneurs moved down. The community in general I think became a lot more open.
More specifically, I'd say the bullet points would be it's the type of place that I think is right for our times right now from a cultural standpoint. It's an incredibly creative and historic city with a rich quality of life.
But why should anyone choose New Orleans?
Startups can be anywhere and obviously we recognize that we're not Silicon Valley or New York, but I think that the virtualization of business as a whole is really benefiting us down here. And so, people can choose to be here because of the quality of life and, significantly, the lower cost of living.
You can build a business for much less down here. So that's an important factor too. Finally, I'd say that one of the things that has been very significant down here is the organizational and governmental support for the startup community. The state government has a number of tax credit programs. They're geared at digital media and specifically modeled after one in the film industry. Six years ago they launched this, a 25% tax credit on money you spend in Louisiana. It vaulted Louisiana to the third largest production in the country after New York and California.
And they've just done the same thing with digital media—the same tax credit, up to 35% of what you spend on building a tech company. So they're very curious about it and providing credible support.
Are there particular types of startups that do better in New Orleans than others?
I think that we're honing in on our identity as a community. One thing we are seeing is purpose-driven companies. I don't want to give the impression [that it's] non-profits or purely cause-driven companies. But companies that, you know, sort of the triple bottom line. The idea of doing well while doing good. We're seeing a lot of those companies down here and I think that that really [matters to] the people that moved here after Katrina, wanting to build companies that are kind of purpose driven.
How would you say that New Orleans is better or different for entrepreneurs than other cities?
Well, that's a good question. I moved here from L.A. in 2002, above all for the quality of life and I mean by that, the people that are here. I was searching for authenticity and, you know, soulful people and people with character and strong character and that's a lot of what you find down here.
And I think that's sort of what attracts a lot of people here. In October, we did the first Tribe Conference, which is a conference about leveraging power of community to create change. And three of the speakers that came to the conference—one is from L.A., another from Virginia, and another guy—all moved down here after that conference. Literally, moved to New Orleans because of the connections they've made, and the power and the spirit of community down here.
In a lot of ways, New Orleans is the city for our times, it fits the post-financial-crisis world. We dealt with our knockout blow in 2005 and the people here literally have rebuilt and re-imagined the city. We are ahead of the rest of the country that is just now dealing with the financial crisis. We're already well into recovery and growth mode, so it's an exciting time.
There's something kind of magical that's going on right now and it's that gelling at the very beginning of an uprising where things really become a movement.
Are there any companies that are sort of representative of where New Orleans is headed?
Yeah, absolutely. One that I think is at the top of everybody's list is a company called Receivables Exchange. Through the downturn, through the recession, they've had tremendous success as some of the banks and some of the companies with real problems turn to them. They literally created a market where there wasn't one for helping companies with their financing.
Is there much in the way of local capital?
Right now, there's not enough startup capital and I think that's one of the biggest gaps down here. But I do think that there is capital coming. There's a new fund that actually has just put their funding together and is looking to hire a CEO. Leapfrog Ventures is opening up. There's a venture capital fund called VCE Capital that is here, but we don't have as much as we need.
What kind of a talent base is there?
I think there's a very strong talent base that's both homegrown and also [comes from] people moving here. A lot of people are moving back. A lot of people left New Orleans at some point and now are finding the opportunity, the time to move back.
From a marketing and branding standpoint, New Orleans has always been a creative place and has had a lot of ad agencies. A lot of those ad agencies are moving into the startup scene. Specifically, Trumpet Advertising has launched a division called Trumpet Ventures and they're working with a startup called Naked Pizza that has just raised some financing from Mark Cuban.
One of the things that's happening more and more is: I'm seeing a lot more of the actual techies, the developers, the UI designers, the coders that are actually building software, moving in and there's been a lot of activity in the grassroots coders groups and that type of stuff that is sort of prospering and nurturing that environment.
What's happening in the ecosystem there that will make it sustainable?
I think one of the biggest assets that we have in New Orleans right now is the entrepreneurial spirit driven by collaboration. There's a tremendous amount of collaboration over competitiveness with each other and everybody is looking to offer a hand, make an introduction, offer an idea, help you get your idea out there in a way that I think only New Orleanians kind of have because of what we went through.
There's a big sense that this is something that's real, it's happening and it's going to be the economic driver going forward for the City of New Orleans.
For more from this series:
- Why you Should Start a Company in...Austin
- Why you Should Start a Company in...New York
Why you Should Start a Company in...Los Angeles
- Why you Should Start a Company in...Chicago
- Why you Should Start a Company in...Boston
Laura Rich is a freelance writer and co-founder of Recessionwire.