At the fifth annual New Orleans Entrepreneur Week (NOEW), New Orleans and it’s highly touted entrepreneurial community have come to a pivotal cross road – five years of celebrating startups and five years until the city’s tri-centennial. This year, sandwiched in between such important milestones, entrepreneur week held the answers to a few of my burning questions – where is this effort going? Is it sustainable? What’s next?
Over the recent years, New Orleans has been lauded for its growing entrepreneurial “ecosystem.” Several national articles, mine included, praised the city’s unique culture and success, even before local media caught on. The city was glorified as “America’s coolest startup city” and “the best city for young entrepreneurs.
And, indeed, it is.
I will admit that I drank the proverbial Kool-Aid. I was smitten with the passion the city’s new business owners had, and this new growth, specifically in tech, that I never knew New Orleans – the slow, fun-loving town – was capable of cultivating. It’s been euphoric to be involved, and even more satisfying to share with a national audience. And, who couldn’t help but want to share it? Every credible publication wanted to write about the city’s rebirth after Hurricane Katrina. CNN, The Wall Street Journal, Inc. – they all caught on.
The more I read about the same story being told, the more I started to think that the city was now hitting a plateau. This is, in fact, an entrepreneurial “movement” that everyone has been talking about. Even Walter Isaacson, in his keynote speech during NOEW, called this era the city’s third entrepreneurial “wave.”
I wondered, though, if this movement or wave is about to settle, as all waves and movements eventually do.
As the city approaches Katrina’s eight anniversary this year, New Orleans is now standing on its own two feet. The city has rebuilt, in several ways, better than before, drawing in new residents, industries, and startups, as a result. It’s been deemed one of the best places for startups and has been ranked highly on several business lists. New Orleans has officially come out from Katrina’s shadow. However, now there is the task of proving that this progression can continue down a path towards success.
So, can New Orleans continue this momentum and sustain its entrepreneurial culture? Absolutely. However, as more and more of these startup hubs emerge around the country, a few things have to be realized to make entrepreneurship a sustainable effort and not just a fad.
After the honeymoon
The city’s startups are now at a critical precipice, and soon the celebration over creating this new entrepreneurial hub will be over. New Orleans has already proved to have the unique culture, financial opportunities, and community support system that draw people in and help them turn their visions into businesses. It’s why New Orleans has been regarded as America’s coolest startup city.
Now, the task is to make sure that the city successfully turns those startups into job-creating enterprises, and show that New Orleans has the ability to sustain them. Otherwise, those startups just become hobbies and projects.
“In order for this to be sustainable, we have to demonstrate the viability of our entire people,” said Michael Hecht, president of New Orleans’ regional economic development organization GNO, Inc. “We have to stay the course over the next 2-3 years while we continue to build on our critical mass.”
Hecht added that staying the course involves continuing to leverage the opportunities that drew entrepreneurs, both young and old, in the first place. It includes the low business costs, culture, financial incentives, and the focus on entrepreneurship from all levels – state down to non-profits. Those who are already in the region need to continue the momentum to make sure their startups remain viable in Louisiana.
That end of the honeymoon phase comes with a cost, though. Every entrepreneur eventually comes to the point when they realize they are no longer a startup, losing specific luxuries such as the flexibility to attend weekly hackathons and tech meetups. Eventually, there comes a point when business owners need to worry about those challenges that come with growing a business. Those challenges include paying employees, paying back bank loans, meeting deadlines, and making sure that all the legal and accounting issues are taken care of.
“Ninety-five percent of all businesses won’t succeed,” said Aaron Dirks, a New Orleans based business owner. “Not everyone is armed with the tools to help them get through those challenges.”
Dirks, a serial entrepreneur who has found success in several businesses that range from limousine fleets to renewable energy in New Orleans, trained with the military before becoming a businessman. He said that his extensive training and tour in Bosnia prepared him for the new experiences and unexpected challenges that come with owning a business. He calls these experiences “invisible backs.”
“You would face the same challenges anytime you do something for the first time,” Dirks added. “If you run a marathon for the first time, you might want to just give up at mile 10 when it starts to get harder.”
However, Dirks explained that New Orleans has something that is very unique – Katrina.
“What you have here is a community that has collectively suffered a challenging scenario,” he explained. “The community became a source of energy and encouragement after surviving a disaster with resilience. That encouragement and resilience naturally broke down the walls that would usually keep someone from doing something new.”
Dirks continued by explaining that, in a way, Katrina trained entrepreneurs in New Orleans the same way the military prepares soldiers for the unexpected.
Entrepreneurship is not an easy feat, and people need to be prepared to handle those kinds of tasks and unexpected challenges that aren’t typically brought up at the networking events or over cocktails after coworking. For example, an article on Silicon Bayou News entitled It’s a Good Day to Become an Entrepreneur in New Orleans came with an accompanying tweet that read, “How I started a company in 48 hours!” Then, over entrepreneur week, I received a flyer with “Launch in 54 hours!” across the title.
It sends a message that entrepreneurship is that easy. I wondered if Oprah was running around the streets of New Orleans yelling, “You’re an entrepreneur! You’re an entrepreneur! And, you’re an entrepreneur!” as if she were giving away homes or cars on her talk show. Instead of a Yaris, though, she would be giving away business cards with “CEO” written across it. I was tempted to go onto the Secretary of State’s website, register a corporation, and wait for Oprah to arrive with my prize.
I say this as a reminder to all to focus on growing the business, not just starting it. Focus on being an entrepreneur – generate money, create jobs, and pay your employees. Your job is only starting when you give yourself that title, so don’t be so quick to congratulate yourself just for signing on to the Secretary of State’s website or creating a minimally viable app during a weekend hackathon. Be prepared for those “invisible backs.”
Only when your company succeeds, can your city become a sustainable place for creating and growing businesses. Otherwise, it will just be a startup hub. And, like airport hubs, people will stop, start their businesses, and change planes before heading off to their final destinations.
The money is in your town
One thing I’ve picked up on while covering entrepreneurship is that there are huge misconceptions about where and how to get financing for a new company. One of the biggest is that the funding is only in Silicon Valley or New York City. As a result, a few New Orleans-based startups have started to relocate in order to try to get the attention of investors in New York and California. The truth is, while there are far more investors in those areas, the access to the money is not much easier.
Angel investors along the south are starting to emerge with the growth of the entrepreneurial scene. Venture capital funds aren’t far behind. However, the percentage of Louisiana startups getting funded is typical of what is seen around the country, experts say.
“On a national basis, only 3% of startups that apply for funding, actually close a deal,” said Clayton White, founder of South Coast Angel Fund and Simmons and White, a New Orleans based business-consulting firm. “New Orleans is right on track with the rest of the nation.”
While New Orleans is on par as far as funding goes, many new business owners continue to ask where the money is in Louisiana and when New Orleans will start to see the type of investors that are found in Silicon Valley. Let’s also not forget that Silicon Valley took decades to get to where it is today. New Orleans startups have barely even had half a decade of vying for these kinds of funds.
“Mostly, what we see are good ideas, but very little expertise on turning them into well run businesses, “ added White. “Almost every entrepreneur drank their own Kool-Aid, and can sell their vision. However, the focus needs to be on their market.”
That passion that allows people to turn their ideas into businesses is evident in New Orleans, but it’s the business plan that seems to be keeping people back from getting funding. However, White adds that it is not a geographically specific issue. The nature of the beast seems to be that people are too anxious to get in front of funding when they are not yet prepared to be asking for it.
“What we want to know about a business is how they are going to sell to their market and deliver,” continued White. “If you can’t sell it, then you don’t have a company. It’s just a hobby.”
Even though what New Orleans is seeing is typical, the lack of venture capital funds stills leaves something to be desired. Those funds might be on the horizon for New Orleans, but it does leave the region at a catch 22 – are there companies in New Orleans that are even ready for that kind of funding or are companies not going beyond the early stages because those funds aren’t available?
New Orleans Entrepreneur Week has been a platform for these early stage startups that are vying for seed money. This year, there were over 8 pitch competitions that gave startups the opportunity to win anywhere between several thousand dollars worth of in-kind business services to $100,000 in seed money. And, in New Orleans fashion, the entrepreneur week festivities included a unique experience for startups that are ready to receive larger checks.
At NOEW’s annual Coulter Challenge, four companies competed for the chance to win a trip to San Francisco, where they will be personally introduced to some of the country’s most prominent investors through billionaire investor Jim Coulter. The opportunity is one that is even unattainable to those entrepreneurs that currently reside in the investor-rich city.
Education analytics platform, Kickboard, won last year’s challenge, and was just awarded $2 million a few weeks before this year’s entrepreneur week kicked off. Now, ChapterSpot, an online management platform for fraternities and sororities, will have the opportunity to meet with several investors in order to find a deal that will help them scale their platform into other industries. Up until now, ChapterSpot has been personally financed by the company’s founders, Brendan Fink and Joe McMenemon.
Overcoming the Identity Crisis
New Orleans has something that is very special – a unique culture and diverse people. While its exoticism drew people in, its the culture that inspired an almost 300-year-old city to continue to thrive. Such a thing must be capitalized.
I’ll explain by starting at the beginning. Two hundred and ninety five years ago, a gentleman named Jean-Baptiste Le Moyne de Bienville and the French Mississppi Company discovered the swamp that we now call New Orleans. Over the years, New Orleans’ diversity started to take shape as the city witnessed an influx of Americans, French, Spanish, Creoles, Germans, Irish, and Africans. In the early 1800’s thousands of refugees began to arrive from Haiti after the end of the Haitian Revolution, adding to the wealth of diversity that had yet to be witnessed anywhere else in the country at that point.
As a result, New Orleans started to witness several waves of entrepreneurship and business prosperity beginning with the creation of the cotton gin and steamboats in the early 1800’s to the late 1800’s with the rise of Creole cookbooks and literature that exalted the region’s unique culture and diverse roots. Then, in the 1960’s, there was a decline in entrepreneurship and the city’s business wealth, coincidentally as segregation was on the rise. It eventually led to decades of an outward migration of people in the area and a depleting business climate.
Now, the city is witnessing a rise in entrepreneurship as people from all over the world continue to migrate into the region, continuing to prove that the city’s diverse community and unique culture is directly correlated to the rise in entrepreneurship.
Residents, both old and new, still adamantly argue that the city’s unique culture is why they have come and stayed in New Orleans. As do the city’s entrepreneurs. Yet, people can’t help but ask if New Orleans Entrepreneur Week can be the next SXSW or how long it will take for New Orleans to become the next Silicon Valley. In fact, the city’s young entrepreneurs have affectionately dubbed the region as Silicon Bayou, as others continue to attempt to follow in the footsteps of the Bay Area’s Silicon. New York now has Silicon Alley, the Midwest has Silicon Prairie, Texas has the Silicon Hills, and then there’s Silicon Beach in L.A.
Capitalizing on what makes New Orleans a unique place to live and do business is what will continue to make the city a place for great ideas and growing businesses. It’s been proven in the city’s history. Forget that, and the city loses all its charm while it becomes just another Silicon.
So, here comes the identity crisis: how does New Orleans capitalize on its unique culture, yet become competitive enough to compare to larger cities? Three hundred years of tradition can’t be changed, but the city shouldn’t try to become another Silicon.
“New Orleans is unique in that we do encourage partnerships,” said Terry Verigan, Vice-President of CompuCure, a boutique IT firm that has proved to have large-scale competitiveness after working on several big data projects within the Federal Government.
Verigan added that it is through the partnerships they have forged locally that they have been able to view their larger competitors as peers. While they’ve been able to grow their firm to five times the number of employees they began with, most of their talent is contracted out for the larger projects, bringing in the experts that will help them cater to their clients’ needs. In the past year, CompuCure has seen a revenue increase of $4 million.
“We have the confidence to go after large firms because of the talent we have available in New Orleans,” explained Verigan. “We don’t mind sharing the success with someone else.”
And, that seems to be a theme in New Orleans: when one business succeeds, as does the entire city.
I remembered what makes New Orleans a unique place for businesses during entrepreneur week’s culmination this past Friday. The closing event, The Big Idea, featured 15 small businesses that ranged from e-commerce and retail to education technology and food service. Each entrepreneur showcased their business in a convention-like setup along one of New Orleans’ pedestrian promenades, Fulton Street. Attendees were given the opportunity to vote for their favorite startup with chips worth $50 each. The top three contestants would then pitch for the grand prize of $50,000 seed money.
Dinner Lab, a membership-only club that features rogue dinner parties in secret locations with up and coming chefs, created a dining experience with food and drink samples from some of their featured chefs. A music platform that cues efficiency in schools, Education Everytime, had young students demonstrating the different musical selections on iPads. Pierce Industries, inventor of a structure that separates the sediment from the crashing waves along the marsh in order to reverse coastal erosion, showcased their patented Wave Robber and gave attendees samples of soil from the Louisiana coastline.
The top three entrepreneurs pitched in front of 1,700 entrepreneurs and community members for the $50,000 cash prize. When a crowd favorite couldn’t be determined, two awards were given out for $50,000 each to Education Everytime and food delivery system, Your Nutrition Delivered. Even the entrepreneurs, who lost an opportunity at $50,000, were genuinely proud of the success of others.
While other cities continue to create their own entrepreneurial communities, it’s important to note that there won’t be another Silicon Valley, even if you prefix your region’s topographical orientation with the word Silicon. However, each city can create their own business culture, as long as they make it their own.
The bay area has its engineers, New York has the finance, and New Orleans has a creative culture and resilience. The question is: what does your city have that will make it a sustainable place for entrepreneurship?