NOLA’s Silicon Bayou struggles to stay afloat

13th November 2012   ·   0 Comments

By Christian Villere and Christopher Tidmore
Contributing Writers

Let’s say I discussed with you where I wanted to build a technology startup. Most likely you would tell me to go to New York, San Francisco, or Silicon Valley. Maybe you would even say Austin, Texas. For the first time, though, one city making that list is New Orleans. With an unfettered aggressiveness, New Orleans is quickly becoming not only the technology hub of the south, but a destination for technology startups.

For Peter Ragusa of VoiceHit, a company dedicated to improving the patient provider relationship through a more cohesive delivery of data analysis to the provider, New Orleans was a natural place to grow VoiceHit “We are from Lake Charles and our grandparents lived in New Orleans.” And they saw the chance to build their business as part of a community. “The opportunity to be part of something larger than myself is exciting.” Since the decision to start a business also must take into account the bottom line, New Orleans enables technology entrepreneurs to save cash in ways they otherwise couldn’t in New York or San Francisco.

“Cost of living was a big deal for us” says Brendan Finke of Chaptorspot.com, a website en­abling structured group organizations the ability to conduct necessary group business at a one-stop shop online platform. “When your bootstrapping trying to build your 1st product, it is important to keep your costs low.” The higher cost of living in major market cities requires startups to acquire financing more quickly, which means it might take more cash to reach profitability. Needing to find more cash in our current economic climate is something startups want to try to avoid if at all possible. In addition to the cost of the city, the cost of starting a technology company has dropped as a result of tax incentives.

The digital media tax credit is one reason why VoiceHit believed New Orleans was the right place for his business. Initially the tax credit was issued only to videogame companies and later expanded to digital media and software firms like VoiceHit and ChaptorSpot. As a result of these efforts to develop the technology sector in New Orleans, job growth in the technology field has outpaced the rest of the country since 2005. New Orleans is definitely on its way to making itself a permanent fixture in the conversation of top places to start a technology company. However, with no big commercial successes to latch onto for the rest of the country, and the world, to identify, New Orleans still has much work to do before it can lay claim to the title of Silicon Bayou.

Part of the reason there has yet to be one of those household name success stories is the lack of promotion about the tax incentives available to technology startups. “Small business people don’t even know about the law. People involved in venture capital, they have no idea. A lot of people don’t understand what’s going on here with technology” says Steve Sabludowsky of Bayoubuzz.com. According to Mr. Sabludowsky, “Government can be a great cheerleader,” and when they fail to do so, it makes the process of spreading the word about such tax incentives more difficult.

Making New Orleans the Silicon Bayou entails achieving that big well-known success, but also improving the general business climate as a whole. In this area, New Orleans appears to be on its way to eradicating the “brain drain” that has occurred since the 1960s.

Before small business incubators and accelerators, Idea Village Co-Founder Tim Williamson, cites, “lack of awareness, insular networks, complacency in the business community, and a propensity for risk aversion” as reasons why small businesses struggled to flourish in the South, specifically New Orleans. Fighting against a culture unwilling to embrace an entrepreneur poses as big a risk to small-business success as excessive overhead.

The question those working at the Idea Village and local government contend with is no longer, what if it fails?, but, how do we manage and grow our success? Successful companies with that work with Idea Village are now facing an obstacle entrepreneurs relish: how do we scale our business to sustain growth? Where will we get our next round of funding? Do we need to hire more employees? What technology do we need to accomplish our goals?

Its no secret that all around New Orleans, small businesses, like nolacajun.com, are springing up everywhere. This entrepreneurial environment is most apparent in the renaissance of Freret Street and Magazine Street in Uptown. Explaining the growth of small business is both simple and complex. Simple because the emergence of small business is due to a convergence of many changes all at once, yet complex since it is difficult to say which factors were more influential, according to New Orleans City Councilmember Kristen Palmer.

Besides the cultural reticence, entrepreneurs face uncertainity in the government when starting a business. At the moment, Palmer explained to The Louisiana Weekly, the city government is working toward a master plan that would streamline the processes a prospective business owner would execute to start a business in New Orleans.

The next step New Orleans must take to become a true technology hub involves finding more people with the skills startups are looking for. According to Ragusa, “there are startups that wouldn’t be able to survive without outsourcing some of their work.” In addition he adds, the city must improve the ability of investors to find opportunities amongst all the startups in New Orleans. “There are people that want to invest, but they can’t because they don’t know how or where to do it.”

New Orleans is far away from being the next Silicon Valley. Steps have been taken to make the city accessible and enticing to possible technology entrepreneurs. Hope­fully, more will be done, so that New Orleans can rightfully lay claim to the title of Silicon Bayou.

This article originally published in the November 12, 2012 print edition of The Louisiana Weekly newspaper.