In just six years, Red Hat has surprised, ascended, and dominated the technology pyramid. A forerunner in the Southern tech industry, Red Hat software opened its doors in 1993, before its home — the Research Triangle Park — came to define and dictate business south of the Mason-Dixon line.
Earlier this summer, the leading developer and provider of Linux-based operating system solutions issued an IPO and then promptly opened offices in Europe and Japan. As the world domination spreads, Red Hat is sharing its success and industry buzz with the prospering Raleigh-Durham area.
In the following story, former Southern entrepreneur and Red Hat General Manager Paul McNamara discusses the staggering progress of RTP, the Raleigh-Durham appeal, and the relationship-building business atmosphere that permeates the South.
When I founded my technology business in 1994, the Research Triangle Park had a large pool of knowledge workers and strong universities nearby producing really, really good technology workers, but Raleigh-Durham hadn’t hit critical mass. The formation of capital inside RTP was still a big problem. Venture capital firms in the area tended to behave more like bankers than venture capitalists. They studied every deal at great length to make sure the entrepreneurs owned all the patents in the industry and those sort of details. The hurdle rate was nearly impossible.
In the past four or five years, RTP has built up a good base of startup companies. We’re now getting a lot of venture capital from outside the area, in addition to locally funded VC companies. The formation of capital now has increased significantly, and that’s really helping to create such a strong foundation.
Learning By Example
RTP is fostering many successful startups now, including Red Hat. Some have grown organically without any outside funding. That phenomenon has attracted the attention of the big outside venture-capital firms. They recognize that we now have a reliable base of startup knowledge workers. In the near future, we will reach a point in the curve where we will hit critical mass. We will be considered a technology corridor.
Growth in the Linux space has been really dramatic in the year and a half since my arrival at Red Hat. The Linux operating system has gone from an obscure hackers’ technology to a household name. We’ve entered the mainstream consciousness.
A Distinct Brand
There are a lot of distinctions between RTP and Silicon Valley. Silicon Valley is narrowly focused on semiconductors and software. At RTP, you’re seeing companies in industries as diverse as biotech, software, and synthetic gems.
Also, Silicon Valley has reached a point where it’s impossible for young workers to come in and buy a house. The cost of living is just out of touch for early career individuals, and that’s creating a problem for Silicon Valley. We don’t have that problem in RTP.
Finally, the South has a very distinctive style of doing business that tends to be more relationship-oriented. Building long-term relationships is our way of doing business. That outlook transcends the “make it or break it in two weeks” mentality.
Welcome to Tech Mecca
The RTP area has been very good for Red Hat’s growth. Now that the Internet is allowing us to conduct business on a global scale, companies want to locate where they can draw upon a good base of knowledge workers and afford the quality of life they desire. RTP fits that bill.
Technology workers look for several things when moving to a new area. People are a lot more mobile these days, so they’re looking for a thriving high-tech startup economy. One of the characteristics of any startup company is high risk. For every one that succeeds, there may be 10 dead bodies on the side of the road. So most workers in the startup sector want an economy full of thriving plan Bs.
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