Chattanooga, Tennessee has found a way to reinvent itself as a startup center of the South
- Chattanooga, Tennessee has a promising startup scene that is intimately supported by the city government.
- The city struggled for decades in the wake of post-industrialization, but was reinvigorated by city-operated high-speed internet and pro-entrepreneur policies.
- AOL cofounder Steve Case highlighted the city's scene in May through his Rise of the Rest bus tour.
- This article is part of Business Insider's ongoing series on Better Capitalism.
My introduction to Chattanooga, Tennessee hinted at what I'd find during my visit there. Mayor Andy Berke, who's led the city since 2013, visited my New York office in March accompanied by Bellhops CEO Luke Marklin, whose moving company has raised $30 million. They told me the story of the city's startup-fueled revival, and when I visited it in May, for AOL cofounder Steve Case's "Rise of the Rest" bus trip, I saw that the mayor's publicity tour alongside a local success story represented a bigger story.
Chattanooga is a fairly small city, with a population of 175,000 — and a greater metro area of more than half a million (Nashville's population is around 684,000) — but it's using that to its advantage. After speaking with the mayor, leaders in the chamber of commerce, about a dozen local entrepreneurs and hearing from more, I saw how passionately everyone wants each other to succeed, and how intimately involved the mayor is. George Brown is the founder of Aegle Gear, which wants to be the Under Armour of performance medical scrubs, and he told me that one of the reasons he loves the city is because he can get the mayor on the phone.
Berke prioritizes this image of Chattanooga, especially because of where the city has been. "The city that I grew up in was a city that was dying," Berke said, of Chattanooga during its troubled post-industrialization period in the latter half of the 20th century. There's been more than $1 billion invested in the city's downtown over the last few years, and a large portion of it has benefited the startup scene.
A pillar of Berke's mayorship is the growth of an "Innovation District" tailored to entrepreneur's needs, and that also takes advantage of the city-controlled fiber optic network, providing some of the fastest internet speeds in the US.
Chattanooga's startup scene is still in its nascent stage, but so far it's been an excellent example of what Case and his team envision.
For the past four years, Case has been leading Rise of the Rest bus tours across the United States through his Washington, DC-based venture capital firm Revolution, stopping to explore and invest $100,000 in the winner of a pitch contest. Case is convinced that while Silicon Valley, New York City, and Boston (where 75% of all venture capital in the US goes) will continue to be hotbeds of innovation, America's startup future is going to thrive across the country, as the "Internet of Things" becomes the "Internet of Everything." That is, we're shifting focus from things like light bulbs that you can control with a smartphone app to things like entirely new ways of tracking agricultural data in real time.
To facilitate his thesis, Case has built a network of 38 cities across 26 states, and put former Valley investor and "Hillbilly Elegy" author JD Vance in charge of a $150 million seed fund. The goal is not to make a bunch of mini Valleys throughout America, but to support ecosystems that play on existing industries and networks, thriving through partnerships.
"I see what's going on in the next wave of innovation, the next wave of technological change, as really depending on things that places like Chattanooga are good at, as opposed to the things that Silicon Valley are good at," Vance told the audience at a breakfast event during the Rise of the Rest bus stop.
It makes sense, then, that the Revolution team picked FreightWaves, a freight market data company, as the winner of the pitch contest that evening. Founder and CEO Craig Fuller is the son of the cofounder of US Xpress, the largest freight company in the US and the firm largely responsible for making Chattanooga a freight hub. Fuller started his own company, which provides real-time data on freight markets throughout North America, in Texas but moved it to his hometown last year. FreightWaves is now a Chattanooga success story: Fuller said it's on track for $13 million in revenue this year, it closed a $15.75 million Series A round a few weeks after the tour, and Fuller intends for it to be the first Chattanooga company worth $1 billion.
That's not to say that the city only cares about companies like Bellhops and FreightWaves. In fact, the entrepreneurial ecosystem is working to educate and propel founders who otherwise would have remained hobbyists or small business owners, unaware of their potential to build a company to scale. CPR Wrap founder and CEO Felicia Jackson is an ideal test case.
It wasn't until 2015 that Jackson turned this idea into a company with the help of Chattanooga's startup accelerator, Co.Lab, which started in 2008. She then received further training from the entrepreneur city Launch (which began in 2010, and then the Incubator (which Hamilton County opened in 2011).
Jackson sold $30,000 of her product last year and has made distribution deals with both Walmart and one of America's largest airlines. She told me that the city's resources empowered her to be the entrepreneur she otherwise never would have become, noting that while her startup path was unconventional, "Don't underestimate the power of a mother."
During the Rise of the Rest trip, the mayor and founders were open about the ways Chattanooga's startup scene needs to improve. Aside from the need for establishing a national reputation for the city, Chattanoogans who aren't involved or excited about the startup scene either don't know it exists, or are wary of it.
And if the scene's growth continues, at some point the exceptionally supportive network that has allowed Chattanooga to transform may become more competitive, and thus less exceptional.
But for now, the small Tennessee city with the memorable name and old-time hit song about a "choo-choo" is out to prove itself, and doing a good job. "This is special," Rise of the Rest partner David Hall told me. "It's got everything. I'm shocked at how well it all works out."
"Once you've been stamped as a city of entrepreneurs," Co.Lab CEO Marcus Shaw said, "you can't stop this train."
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