Chattanooga Finds Fresh Identity as a Tech, VC Hub

Chattanooga, Tennessee, one of the first places in the nation to install citywide fiber-optic gigabit-speed Internet cable, boomed during the pandemic thanks to an influx of remote workers and venture-backed startups, the mayor said.

Tim Kelly, a businessman and founder of a startup that was inaugurated last April, said the city received about 10,000 new residents between March 2020 and August 2021, according to a survey of people who started electrical service at the time. He attributed remote working during the pandemic to the increase, adding that transplants were drawn to Chattanooga because of the superfast internet and high quality of life.

“Oddly enough, the pandemic had a silver lining for us,” said Mr. Kelly, a resident of Chattanooga. “The city fell a little bit.”

Chattanooga Mayor Tim Kelly in the New York office of The Wall Street Journal.


Photo:

Steven Rosenbush / The Wall Street Journal

Chattanooga is one of many smaller cities in the US whose populations grew or remained stable last year, while most of the country’s largest cities faced increasing population decline as the pandemic continued to encourage Americans to look for more space , according to census estimates released Thursday. In July 2021, Chattanooga had about 182,000 people, slightly more than in July 2020, according to the census figures.

The city made early tech investments in 2010, when Chattanooga’s EPB, the city-owned power distribution and telecommunications company, rolled out a fiber-optic backbone at gigabit speeds. In 2015, the network was expanded to provide speeds of up to 10 gigabits per second.

Since then, the city’s residents have enjoyed the speed: For example, a two-hour high-definition movie can be downloaded in about three seconds, Kelly said.

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

Chattanooga has cushioned some of the spillover, said Cameron Doody, co-founder of Brickyard, a venture fund startup in Chattanooga. As workers from established tech hubs flooded places like Atlanta and Austin, residents of those cities moved to places like Chattanooga, he suggested.

“People come here and are like, ‘This reminds me of Austin 20 years ago,'” said Mr. kelly. “As mayor, I now have this kind of Goldilocks problem.”

Some of Chattanooga’s growth can also be attributed to local venture capital and startups, he added. mr. Doody’s Brickyard invests in technology companies from around the world, whose founders then come to work intensively on their product at its Chattanooga headquarters, where they have access to a sauna, steam room, gym and cold dip.

There are no strict rules about how long they can stay in Chattanooga and there are no set schedules for demos, he said.

“If you’re trying to find a product/market fit, all you have to do is lay your head down and grind,” said Mr. doody. “So it’s a space for founders to remove distractions, but not isolate.”

In its first eight months, Brickyard has invested a total of $3 million in 15 companies ranging from gaming to crypto to logistics, Mr. doody. He expects 70 to 80 percent of businesses will choose to locate in Chattanooga in the long run, he said.

Cameron Doody, co-founder of venture capital fund Brickyard.


Photo:

Steven Rosenbush / The Wall Street Journal

Mr. Kelly said Chattanooga doesn’t offer the financial incentives to move that other cities have, instead focusing on fostering a culture in which families can thrive.

mr. Doody said the shift in the way the city’s talent works is akin to moving from a business-to-business model to a more business-to-consumer model. Instead of bringing in “the whales” or big companies, it’s now about creating an environment that appeals to individual talent, he said.

“They can build the right features and solve the right problems in the city that really matter, and they don’t just convince some big company to move there because you get the benefits or kickbacks,” said Mr. doody. “That’s a big responsibility for cities.”

Another goal, said Mr. Kelly, was closing the pay gap in the city by investing in education and raising small businesses. The city offers free broadband to all students who receive free or discounted lunches or additional Nutrition Assistance Program benefits, he said.

As the pandemic changes how – and where – professionals work, some smaller cities and regions are offering hefty relocation incentives to attract remote workers to boost their local economy. WSJ met a family who accepted an offer to build a new home in the Ozarks. Photo: Craig Kauffman for the Wall Street Journal

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

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