In '98, there were a lot of us expatriates who'd just moved home, Tim Williamson, president of New Orleans' business-accelerator The Idea Village, says with smile. "Sure, there was a lot going on in Austin and San Francisco, but we were sitting here wondering where the action was.
"The dot-com boom was one of the greatest entrepreneurial runs of the last 10 years, Williamson continues, "but in New Orleans, we were at what I call the 'terrace level.' It was like we were sitting in the top of the Superdome—you feel like you're at the game, but it's real hard to see the action.
Williamson wasn't content with the nosebleed seats. He'd moved home—after working in New York, Boston, Atlanta and Pittsburgh—to become general manager of the New Orleans Internet Studio for Cox Interactive Media, and started InsideNewOrleans.com. And he wasn't alone—a lot of "local boys had moved home to start technology companies. Besides himself, Williamson lists Darin McAuliffe, founder of NewOrleans.com, former co-owner of Turbotrip.com and president of Hotel Booking Solutions; New Orleans CTO Greg Meffert (whose wife is the Louisiana native), founder of NetEx and two other software and services companies; Robbie Vitrano, founder of Trumpet Advertising; and Allen Bell, who started Nola .com. But running a technology company in New Orleans wasn't easy.
"The founders of both Yahoo and Netscape went to Tulane, Williamson explains, "and we didn't really have a community to keep them. We've got companies starting here, but they're leaving for cities that can better support entrepreneurial activity. Williamson cites Meffert as another example: "He had raised $25 million or more in funding, and was recruited to move his office to Virginia.
Sales tax on custom software was another hurdle Louisiana IT companies faced prior to 2002. "It was a bad court decision, relates John Kelly, president of Model Software and a board member of the Louisiana Technology Council. "Several years ago, the court decided that custom software was taxable under the sales tax.
"Custom software is considered a professional service in most states, Kelly continues. "It's comparable to going to a lawyer or a CPA; they prepare a brief or a document for you—a professional service that's not taxable. However, the court determined that there was a deliverable with custom software, so sales tax applied.
"That put us at an 8 percent disadvantage, says Kelly. "Nine percent in Orleans parish. The state legislature repealed the custom software tax in 2002, and it will be phased out entirely by July 1, 2005. "But this was only after we as a local industry said this is a really bad thing, explains Kelly. "We made it our number one issue.
From Paper Napkins to Business Plans
Four years ago, over drinks at the Loa bar, Williamson, Meffert, Vitrano and four others decided to leave their business cards at the door and figure how to get a piece of technology economy. "We asked ourselves what was missing, Williamson recalls. "We knew that there weren't a lot of startups, but we believed if there were a lot of startups, if there were a lot of venture activity coming here, that would fuel our businesses.
The men continued to talk about the need to create new jobs and new businesses until one of them challenged the others by throwing two grand on the table for a business plan contest. By the end of the night, they had a plan and $10,000, and decided to call themselves The Loa Group. At that moment, the foundation for The Idea Village was born.
"We'd hit a nerve, Williamson says. The next day, a lawyer called them and offered the group $15,000 worth of free legal time; then an accounting company offered $15,000 of services. In the end, $125,000 worth of cash and services was donated to a business plan contest hatched on a bar napkin.
More than 70 business plans showed up. Some were scrawled on napkins, some were full-fledged schematics, but Williamson and his cohorts had discovered a void waiting to be filled.
The men analyzed the contenders and started to debate their merit. "We argued them down to 20, Williamson says, "then 20 to five. The five finalists made their pitches to the group, and after a spirited discussion, the men chose a company named PetroDesigns as the winner.
With more than 60 years of combined experience in the oil and gas industry, PetroDesigns founders Ralph Hicks and Matthew Steckell had created an Internet-distributed software program to help companies accelerate their engineering and design work for oil and gas production platforms.
The Loa Group sponsored a party for the contest winners at the legendary House of Blues, and the company was awarded $125,000 worth of cash and services, including office space, accounting and Web hosting services.
"It was really cool, Williamson recalls, "but these guys had a problem. They were trying to raise $10 million in the city of New Orleans, and they weren't ready. They were making the stupid mistake of going straight to the angel investors and venture capital.
As a group, the men looked around at the city and other entities, seeking resources to help PetroDesigns in its efforts, but discovered there wasn't a single organization to support high-growth entrepreneurship.
The Birth of an Accelerator
"So we just started helping them, Williamson says. "As a group we had an interesting set of dynamics. Darin was very technical, technology focused; I had more sales experience; Allen had operations; Rob had more marketing operations experience; and Greg had experience raising venture capital. This disparate set of skills and the men's Rolodexes turned out to be an advantage.
"We helped them do three things, Williamson continues. "We raised a little bit of money for them, about $50,000 to $60,0000 in angel, just to get them through this period; we introduced them to a bunch of people in the community—among us, we had a network of people—and we helped them shape up their business plan.
It wasn't long before others in the community started coming to the group for help getting their businesses off the ground. The men were all trying to run their own businesses and assist those who came to them. "But it wasn't enough, Williamson says.
To determine what resources were needed, they began to study other markets known for entrepreneurship. After analyzing places like Austin, Houston, Pittsburgh, North Carolina, Minnesota and Oklahoma, the men discovered that New Orleans, ironically, boasted all the necessary assets.
"We have an incredible university system, Williamson boasts. "Each year, some 65,000 students graduate from our universities. We have a creative culture—we create our own music, our own food, have our own holiday. And New Orleans is a worldwide brand.
New Orleans by the Numbers
Population: 1.3 million—Metropolitan area (U.S. Census 2000)
Diversity: Whites, 57%; African Americans, 38%; Hispanics, 4%; Asians, 2%. (U.S. Census 2000) New Orleans ranks 27th out 50 metropolitan areas in the Composite Diversity Index. ("Technology and Tolerance: The Importance of Diversity in High-Tech Growth, 2001)
Employment by Industries: Oil/Gas and Petrochemical Manufacturing, 17%; Tourism, 16%; Business/Professional Services, 11%; Arts/Entertainment, 10%; Shipbuilding/Aerospace, 9%; Maritime/Port-Related Industries, 8%; All other sectors, 29%. (GNO Inc. Research, 2001)
Average Annual Income: $27,133 (U.S. Census 1999)
Housing: The rental vacancy rate is 8%. An average 2,000 sq. ft. home costs $162,000. (U.S. Census 2000)
Education: Four-year higher education institutions include the University of New Orleans, Tulane University, Loyola University and Xavier University.
In addition to the Bohemian Index, the report also compared the high-technology success of 50 metropolitan areas based on their gay population, the percentage of foreign-born residents and each area's overall diversity. New Orleans fared better in other rankings. The city was 27th in Composite Diversity index—as compared to San Francisco's second place score, Atlanta's 14 and Charlotte, N.C.'s 45—and ranked 32 in the Milken Tech-Growth index, as compared to Atlanta's fifth place and Charlotte's ranking of 12.
Louisiana also harbored far more high-tech workers than anyone had suspected. Several years ago, John Kelly organized a software industry group through the Louisiana Tech Council aimed at building relationships and support networks among existing IT companies.
"At the time, we thought that there were maybe 10 software companies in the region, Kelly relates. "It didn't take long before we had 50 area software companies involved. "What's more, Kelly continues, "is that we discovered in the process that there are over 5,000 IT workers here. For example, the U.S. National Finance Center in New Orleans has 1,800 people; the Navy SPAWAR IT Center has 1,100; Entergy has 800 IT workers. According to Kelly, many high-tech professionals are classified as government, financial or utility workers in the government's labor statistics.
Organizing Free Enterprise
New Orleans may have had the assets, but "we've never actually centralized our resources to focus on entrepreneurship, Williamson explains. To fill this void, he and his Loa Group cohorts created The Idea Village, a nonprofit solely dedicated to helping entrepreneurs in the region turn their ideas into businesses and position these entrepreneurs to obtain angel funding.
"Our real mission is generating economic development, and our metrics are jobs and revenue, says Williamson. In a region known more for tourism than technology or entrepreneurship, the nonprofit aims to give emerging businesses the support network needed to not only survive, but to thrive. The Idea Village comprises existing business leaders, investors and professionals who offer operational and industry advice, along with motivation and capital.
"Everybody's different, relates Williamson. In their program, individuals or fledgling companies come in through a review period. "We figure out what they need and create a customized program: Do they need to meet people? Do they need a strategy session? Or do we need to pull in industry experts?
Last year, more than 400 entrepreneurs came to The Idea Village, and to date, the group has helped more than 52 people get their ideas off the ground. "It's real in-depth work, says Williamson. "And it doesn't matter where you are; we're just going to connect you to industry experts, service providers, resources, different programs, human capital, a database of rsums.
While The Idea Village doesn't have capital of its own to invest, it does seek to accelerate an emerging business toward obtaining angel and venture funding. "What might take a business six months could be collapsed to a month if we help, Williamson enthuses. "Everyone wants money, but what they really need is knowledge. We provide a knowledge infrastructure to accelerate a company's early stages of development.
According to Williamson, angel investors are especially excited about The Idea Village, because of the nonprofit's assistance in screening and vetting companies, thereby building a network of contenders that are worthy of investment.
It Helps to Know the Mayor
"We started out lucky, says Williamson. "I call it the MN [Mayor Nagin] factor. Ray Nagin, a former vice president and general manager for Cox Communications in Southeast Louisiana, who had never held political office, defeated New Orleans police chief Richard Pennington in the mayor's race in early 2002.
"He's entrepreneurial, says Williamson. "He understood business; he understood what we were talking about. There was finally a sense of possibility that we could actually create a world-class entrepreneurial community.
"What's critical to this is vision, continues Williamson. "The mayor stated that his vision is to make New Orleans the entrepreneurial capital of the world.
The Idea Village, along with the city of New Orleans and Greater New Orleans Inc., is now developing a public/private plan for entrepreneurship. According to Williamson, he and Tommy Kurtz of Greater New Orleans Inc. have been working on different programs to build the ecosystem. The city is also evaluating what it needs to do in terms of permitting and programs.
The Idea Village has also forged partnerships with the city of New Orleans, business leaders and two major universities: Tulane and the University of New Orleans.
"We have the foundation to be on the offense, not the defense, Williamson exclaims. "The next cycle, you're going see New Orleans aggressive. We're going be the ones at the forefront, recruiting here, now that we have the entrepreneurial networks to support entrepreneurs. So, if you bet on cycles, we think we're positioned.
Challenges, Change and Opportunity
Can New Orleans transform itself into a world-class entrepreneurial center? Can its economy become less focused on tourism and hospitality, and attract the high-tech businesses city leaders hope will bring greater economic security? As an LSU graduate who still has family and friends in the region, I certainly hope so.
The city faces some serious challenges, which Mayor Nagin acknowledged in his "State of the Workforce report released on Labor Day, 2003. The report claims that 51 percent of employable adults in New Orleans aren't working—a statistic that omits the elderly, disabled, homemakers and those in jail. While many have discounted the figure, instead citing the Bureau of Labor Statistics' official rate of 6.3 percent, it should be noted the unemployment rate is determined by tracking only those actively seeking employment. For example, the Bureau of Labor Statistics reports that only 63.8 percent of the United States' working population was employed in 2001.
The Louisiana Department of Labor has predicted that 81,000 new jobs will be added to the metropolitan area by 2008, but nearly two-thirds of those jobs will be in services and retail, including entry-level positions in hospitals and restaurants.
Another strike against New Orleans is the city's basic literacy rate. The mayor's report cites the Greater New Orleans Literacy Alliance estimate that more than 124,000 city residents function at the lowest measurable level of literacy. Portland University Ph.D. Stephen Reder's report "The State of Literacy in America estimates that 39 percent of the New Orleans adult population is functionally illiterate. Furthermore, according to the U.S. Census Bureau, 24.8 percent of the city's population lives below the poverty line, compared with 9.2 percent in San Francisco.
It's not all doom and gloom, however. The mayoral administration has focused on the economy, in part, by renaming and refocusing the Office of Workforce Development (now known as JOB1) to better serve the city's population, and in August 2004, Mayor Nagin named former Louisiana Secretary of Economic Development Don Hutchinson as Director of the Mayor's Office of Economic Development. At the state level, Hutchinson has a promising track record of keeping and expanding existing businesses, including the expansion of a GM plant in Shreveport.
The city has also found success attracting new high-tech businesses. The University of New Orleans' 56-acre Research and Technology Park already houses more than 12 companies, including the Navy Computer Center, which handles personnel and payroll data for the Department of Defense. In 2003, Science and Engineering Associates announced the pending move of its headquarters from Albuquerque, N.M., to New Orleans, making it one of Louisiana's largest IT companies.
Will New Orleans become an entrepreneurial haven? "It's just a vision, says Tim Williamson, "but we've come together to showcase what we have here. Two-thirds of new jobs are grown through entrepreneurship—and our vision for entrepreneurship started in the Loa bar: one person meeting another person, engaging and building networks of people.
Southeast Louisiana: Sampling the Digital Delta
Southern expat and Managing Editor Tamara Carter holds a Master of Fine Arts in creative writing from Louisiana State University in Baton Rouge, La. Geaux Tigers!