Chattanooga discovers a new identity as a tech hub, VC Hub

The mayor of Chattanooga, Tennessee, one of the first places in the country to install gigabit fiber optic cable citywide, has thrived during the pandemic thanks to an influx of remote workers and venture capital-backed startups, the mayor said.

Tim Kelly, the entrepreneur and founder of the startup that opened in April last year, said the city welcomed nearly 10,000 new residents between March 2020 and August 2021, according to a survey of people who started electric service at that time. He credited the increase to remote work during the pandemic, adding that transplants were drawn to Chattanooga by its high-speed internet and high quality of life.

“Strangely, the pandemic has had a positive side for us,” said Mr. Kelly, a Chattanooga native. “The city kind of fell upside down.”

Chattanooga Mayor Tim Kelly at The Wall Street Journal’s New York desk.


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Stephen Rosenbush/The Wall Street Journal

Chattanooga is one of many smaller American cities whose population has grown or settled in the past year, while Most of the country’s major cities have experienced a growing population decline As the pandemic continues to encourage Americans to seek more space, according to census estimates released Thursday. Census figures showed that as of July 2021, Chattanooga had a population of about 182,000 people, up slightly from July 2020.

The city made early technology investments in 2010 when Chattanooga’s EPB subsidiary, the city’s owned power and communications distribution company, rolled out a gigabit fiber-optic backbone. In 2015, the network was made to offer speeds Up to 10 Gbps.

Since then, city-dwellers have been up to speed: a two-hour HD movie, for example, can be downloaded in about three seconds, Mr. Kelly said.

He added that Chattanooga has benefited from a rebalancing of the technology industry from major coastal metros to cities across the country. A recent report from the Brookings Institution showed that tech employment in the first year of the pandemic slowed in places like San Francisco, Seattle and Los Angeles and grew in markets like St. Louis, Philadelphia, San Antonio and Nashville.

Cameron Doody, co-founder of Brickyard, an early stage venture fund based in Chattanooga, said Chattanooga has discovered some surplus. He suggested that when workers from established technology centers flooded places like Atlanta and Austin, the residents of those cities moved to places like Chattanooga.

“People come in here and say, ‘This reminds me of Austin 20 years ago,'” Mr. Kelly said.

He added that part of Chattanooga’s growth can also be attributed to local venture capital and startups. Mr. Doody’s Brickyard invests in technology companies from around the world, whose founders then come to work extensively on their products at its Chattanooga headquarters, where they have access to a sauna, steam room, gym and cold plunge.

He said there are no strict rules about how long they may be in Chattanooga and no set schedules for demos.

“When you are trying to find a suitable product/market, you just have to screw your head and grind,” said Mr. Doody. “So it’s a space for founders to remove distraction, but not isolate.”

In its first eight months, Mr. Doody said, Brickyard invested a total of $3 million in 15 companies that run the gamut from games to crypto to logistics. He said he expects 70% to 80% of companies will choose to establish roots in Chattanooga over the long term.

Cameron Doody, co-founder of the Brickyard Venture Fund.


picture:

Stephen Rosenbush/The Wall Street Journal

Mr. Kelly said Chattanooga does not offer the financial incentives to relocate those other cities, instead focusing on fostering a culture in which families can thrive.

Mr. Doody said the shift in the way city court talent is being pursued is like moving from a business model to a business to consumer model. Instead of reeling at “whales” or big companies, he said, it’s now about creating an environment that attracts individual talent.

“They can build the right features and solve the right problems in the city that really matter, not just convince some big business to move there because you get the perks or kickbacks,” said Mr. Doody. “This is great accountability for cities.”

Another goal, Kelly said, is to close the city’s wage gap by investing in education and sponsoring small businesses. He said the city offers free broadband to all students who receive free or reduced lunches or Supplemental Nutrition Assistance Program benefits.

As the pandemic changes how and where professionals work, some small cities and regions are offering big incentives for resettlement to attract remote workers to help revitalize their local economies. The Wall Street Journal interviewed one family who accepted an offer to build a new home in the Ozarks. Photo: Craig Kaufman for The Wall Street Journal

write to Isabelle Bousquette at Isabelle.Bousquette@wsj.com

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