A regional magazine with its finger on the pulse of Southern business innovation, digitalsouth concentrates its editorial attention on the burgeoning digital economy in cities such as Atlanta, Raleigh-Durham, and Austin. Concerned with high-tech and business innovation brewing south of the Mason-Dixon line, digitalsouth is widely respected as an authority on the New Economy of the New South.
In the following interview, digitalsouth Editor Jason Kelly discusses the clash between tradition and innovation in the South, promising areas of economic growth, and the necessity of coopitition.
New South = Same Old Strife
digitalsouth defines the “South” as an area stretching from Baltimore or Northern Virginia down to Florida and west to Texas. The New South really is a region where so-called traditional businesses are colliding with the Internet economy. As is the case with any collision, the resultant friction has the potential to break things apart.
Some big companies are suffering because their employees have “option envy.” They see friends and former colleagues being lured away to more flexible and potentially lucrative startup opportunities. Atlanta and Charlotte are struggling with the New Economy because, on the surface, they are embracing it, but they are implicitly resisting it at the same time. These are cities that were built on the backs of traditional industries — banking (in both cities), telecommunications (especially in Atlanta), and real estate (especially in Atlanta). Industries such as these require a different approach to growing and maintaining a business. While an experienced executive at a large company like Coca-Cola or First Union may have great management skills, she may not easily transition to a startup culture.
The biggest challenges for the South are recovering from collisions between traditional business and the new economy. In parts of San Francisco and New York, little time is wasted talking about new business models and new business practices. In many parts of the South, a certain amount of education still has to occur in terms of the building and financing entrepreneurial ventures. We hope to see a continued expansion — both in sheer numbers and in sophistication — of the service providers surrounding high-tech companies.
Because financial services and telecommunications always have been important industries here, the best opportunities are related to those fields. In effect,each individual community needs to focus on core competencies. Atlanta, for example, claims the headquarters of BellSouth, as well as major hubs for AT&T and MCI Worldcom. MindSpring Enterprises is both a beneficiary of that heritage and a contributor to that trend. Quite honestly, I think there’s a tendency to focus too much on billing a city as “the” place for a certain industry or a certain segment. A city can best differentiate itself by being a place where all kinds of business can succeed.
Lawyers, public relations firms, and accountants are becoming more prominent and respected in many local areas across the South. Companies aren’t necessarily looking to San Francisco or New York City for representation, and Silicon Valley Silicon Valley law firms have begun establishing satellite offices in this region. Brobeck Phelger Harrison’s Austin office is a great example. Other times, law firms are grown locally, as is the case with Hutchison & Mason in Raleigh, or Morris, Manning, and Martin in Atlanta
We also hope to see a continued proliferation of high-profile, publicly-traded technology companies, ones that go from cocktail napkin to the Nasdaq. MindSpring Enterprises in Atlanta is a great example. Red Hat software in Durham, North Carolina is one example. Public companies provide intangibles — mindshare on Wall Street, more press, etc. — as well as tangibles. Public company stock is a much sought-after commodity for making additional acquisitions, and it often leads to wealthy, active angel investors, and entrepreneurs.
But the South has something of an identity problem to overcome. Outsiders sometimes view the region as everything from “a little slow” to downright “backwater.” That’s changing, and clearly isn’t true across the board, but it’s an issue.
Coopitition or Death
In general, companies and communities really need to warm to the philosophy of coopitition. It’s often hard to get across the idea that the proverbial rising tide raises all boats and that companies need to work together to bring talent to the area. Executives and engineers are hesitant to come to an area if they think it’s not rife with opportunity. Also, we have not seen an executive-led focus on education that places like Silicon Valley have inspired. Smart people are very interested in education, especially when it comes to their kids. If you’re trying to convince them to relocate, the school system one of the first things they’ll look at. Finally, local and state governments need to encourage venture capital investment. Texas has done a good job of that, and Governor Bush is much beloved by the tech community because of his efforts. North Carolina has done similar things.
I would put Austin, Atlanta, and Northern Virginia at the forefront of the Southern economy. The transition from “traditional” to “new economy” is happening in Atlanta, especially as quasi-governmental agencies like the Chamber of Commerce start to “get it” in terms of building a more progressive economy. There’s a program the Chamber has started called “Industries of the Mind” that examines different ways to foster high-tech companies and culture.
Atlanta, however, has encountered problems selling itself as a hotbed for startups. The city lacks a coherent community of innovation, perhaps because its startups are not centrally located. Atlanta’s financial infrastructure (i.e. venture capital) is now beginning to take more risks and become more Internet focused. For a long time, entrepreneurs had limited local resources for funding their ideas and companies. A new breed of investors, including Jeff Levy, Jeff Arnold, and Bert Ellis are taking more active angel-investing roles in startups.
Austin also is thriving, but for different reasons. Although the city is traditionally a relatively sleepy college and government town, it has embraced technology in a major way. Many people point to Dell as the catalyst for creating Austin’s high-tech image. This is somewhat true, but it’s largely because of companies like Tivoli, which was bought by IBM earlier this decade. Tivoli has spun out a number of people, including Bob Fabbio (now of TL Ventures), who started Dazel Software and is now a venture capitalist. That company and others provided the intellectual and financial capital to start the bevy of startups that now populate Austin. The city also has had a string of companies go public, including Hoovers Inc. and Vignette, thereby improving the city’s reputation on Wall Street and beyond.
Northern Virginia has several benefits as well. The government, which trained a lot of today’s tech entrepreneurs during the Star Wars and Cold War days, continues to be a centerpiece of the economy up there. Also, AOL, PSINet, and MCI have trained a number of high-profile people and created a lot of wealth that’s been reinvested into the area. Organizations like the Morino Institute, the founders of the Netpreneur program, have created a very entrepreneur-friendly environment.
Finally, the Research Triangle area is now becoming what it has long promised to be — a real haven for technology in the South. The area has long been home to major research facilities for companies like IBM and Cisco, but high-flying tech companies are now starting to emerge there as well. Specifically, Red Hat Software and OpenSite Technologies are very well-regarded, venture capital-backed companies that have grown to be big employers and role models. In RTP, the Council for Entrepreneurial Development has done an excellent job of educating people about entrepreneurism and the issues that surround a high-growth business.
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