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Gig City: How Chattanooga Became a Tech Hub

The Tennessee city's burgeoning tech sector is built on a vibrant startup ecosystem and cheap, fast internet from its citywide gigabit fiber network.

May 4, 2018
Chattanooga Smart City

In 2010, Chattanooga became the first US city to roll out a citywide gigabit network. In 2015, the city-owned fiber internet run by the Electric Power Board of Chattanooga (EPB) reached 10-gigabit speeds. Chattanooga's access to cheap, fast internet combined with a local government and economic push to develop smarter infrastructure has turned this picturesque midsize city on the southern edge of Tennessee into a fast-growing destination for tech companies and startups looking for an alternative to New York City and Silicon Valley.

Chattanooga's Innovation District harbors a burgeoning ecosystem of tech companies and venture capital (VC) firms attracting entrepreneurs, investors, and workers to the city. While logistics and transportation startups are the most numerous, the region is also home to companies in the digital media, healthcare, and software development spaces.

At the same time, Chattanooga is experimenting with ways to use its fiber internet to make the city smarter. We spoke to startups, VC investors, and city government officials to break down Chattanooga's transformation into a startup tech hub.

Why Chattanooga?

Chattanooga Smart City

"Chattanooga allows us to appeal to a lot of the millennial workforce that's defecting from Silicon Valley and New York and looking for a change of pace," said Luke Marklin, CEO of Chattanooga-based Bellhops, a startup marketing itself as an "Uber for Moving."

Bellhops has roughly 70 employees en route to a workforce of about 100, said Marklin, who previously served as a General Manager for the real Uber, overseeing much of the Southeast. Aside from its mountain backdrop and natural beauty, Marklin said Chattanooga offers a hospitable environment and an attractively low cost of living for new grads entering the workforce.

When Bellhops' founders graduated college, it was seed investment from a firm call the Lamp Post Group that brought them to Chattanooga in 2013. The affordability, atmosphere, and low-cost gigabit internet is why they stayed.

"Small businesses and venture-backed startups need to consider where the best place is for them to build and grow a team. Chattanooga has some of the biggest headwind behind it outside of the standard tech hubs," said Marklin, who joined the startup last year. "The affordability for starting a business here is great. The cost of living is better. I've lived in Nashville and Atlanta, and Chattanooga feels like splitting the difference."

The Gigabit Network

The Gigabit Network

The gigabit fiber network kickstarted Chattanooga's push to become a tech hub. Mayor Andy Berke, who was elected in 2013, was a member of the state legislature back in 2010 when Gig City was born. He explained that the EPB is a city-owned authority that decided to build out a fiber optic network to serve as the foundation of a smart grid for the city.

Plans start at $57.99 per month plan for 100 Mbps; it's $69.99 for 1,000 Mbps and $300 per month for 10 gigs.

The "Gig" has also turned Chattanooga into a testbed for other smart cities through public-private partnerships and research initiatives leveraging the mountains of data gathered by the network, he said.

"The fiber changed our conception of ourselves," Mayor Berke told PCMag. "The day before we turned it on, we had no belief we could become a tech city. The day afterward, when we became the city with the fastest, cheapest, most pervasive internet in the world, we started a mission to figure out how to use it."

Cheap, Fast Internet For All

Cheap, Fast Internet For All

Mayor Berke said the ultra high-speed broadband is key both for businesses and for personal quality of life in getting fast home internet.

"We see people coming to our city knowing we have this network, plus the outdoors and quality of life attributes our city has. That plus the high-speed broadband is what has brought the tech scene together," said Berke.

Santosh Sankar is the co-founder of Dynamo, an early stage venture capital fund based in Chattanooga that invests in logistics, supply chain, and transportation startups. (Dynamo's three other co-founders also run the Lamp Post Group). Several of Dynamo's startups are also located in Chattanooga, and Sankar himself only moved to the city in 2015 right as the network hit 10-gigabit speeds.

Sankar said while more intelligent infrastructure is a long-term boon for the gigabit network, the immediate benefit for startups is lightning-fast internet. He said the network has little-to-no latency and is far cheaper compared to the costs for similar bandwidth and speeds in a major city.

"Founders come here from New York and San Francisco and say 'if we had this internet at these prices, our whole business would be different,'" explained Sankar. "Other cities are starting to catch up now, but Chattanooga's gigabit connectivity at much more affordable prices than other major cities has been a really meaningful part in Chattanooga's growth."

A Logistics Hub

A Logistics Hub

Chattanooga has a history of logistics and supply chain innovation—the first Coca Cola was bottled there. Marklin said the city's geographic location makes it an ideal home base for southern operations; Bellhops is currently in 22 cities with plans to expand into 50 in the next year.

Similar startups setting up shop in the city include Steam Logistics (another Lamp Post Group-funded company), which does international logistics including cargo freighters and planes. UPS-owned Coyote Logistics also has an outpost in Chattanooga. Workhound is a Dynamo-funded startup providing a data and feedback app for truck drivers.

Dynamo funds logistics companies across the US and spanning the globe, but Sankar said there's a reason the firm is based in Chattanooga and has investments in a number of startups helping make up what has become a specialized focus for a bulk of the city's tech sector.

"We focus on opportunities that are transformational to the state of global trade and commerce, specifically supply chain and transportation. Chattanooga has a long history in logistics. Two of the top 25 trucking companies and a large warehousing outfit named KENCO are based here. We maintain strong relationships with both FedEx and UPS, which is very important to our [startup] founders who have chosen to be here versus New York or San Francisco," said Sankar.

"We're based here because we're close to potential partners, people who use the supply chain, and incumbent companies in the industry with 20-30 years of lessons learned in logistics," he continued. "It also doesn't hurt that within a few hours or a day's drive you can get to almost every major US population center."

The Innovation District

The Innovation District

The Innovation District in downtown Chattanooga is a public-private partnership spearheaded by the local government to build the city's tech sector from the ground up. Set up like a Silicon Valley campus with things like bike sharing, cheap public transportation, and open communal spaces, the Innovation District houses a growing number of startup offices as the city builds new co-living spaces like the Tomorrow Building.

Beyond logistics startups, the district has attracted bigger tech companies like no-code app development platform Skuid, sales software startup Ambition, and digital consulting agency VaynerMedia. They operate alongside nonprofits like the Enterprise Center, which is dedicated to smart city research and development.

The startup community has "a very close relationship with the local government to the extent that we can say 'hey we're having a hard time filling this role' and I can call the mayor and he'll say he's happy to allocate some local resources to help solve a problem," said Marklin.

Mayor Berke confirmed that the point of the Innovation District was to foster collaboration through proximity.

"We've developed an immense amount of support and resources for the startup world," said Berke. "We wanted to create a vibrant tech scene, and to do that everyone needs to be close by. The Innovation District itself is a five-minute walk around, and there's a public space that in the last two years has had more than 60,000 people come through it for more than 4,000 events. We're building a new park in the middle of the district, too. We want to produce the quality of life that people working in these businesses would appreciate: affordable housing, music, nightlife, all the things we know attract talent."

Building the Tech Ecosystem

Building the Tech Ecosystem

This approach is already paying off for Bellhops, which is in the midst of a hiring spree. The company has recruited from a growing in-area talent pool rather than relying on convincing employees to move.

"Now that we've opened up positions, we're seeing candidates from these other companies too," said Marklin. It makes the jump or move to Chattanooga from someone on the outside more attractive because they know this isn't a one-stop city. There are options."

He also said there's enough diversity in the types of businesses and tech companies in the city that the startups aren't competing in the same market. Marklin believes that has made it easier to share ideas and resources.

"A lot of the tech talent is very close to the employees at other companies. I can count the meetings where we say 'hey they're doing this at Skuid' or 'Ambition has thought about it this way.'"

Chattanooga has a growing number of healthcare tech companies, too. VisuWell is a virtual care startup where you can get a diagnosis, treatment plan, and prescription online from board-certified nurse practitioners. American Exchange is a Lamp Post Group-funded health insurance and medicare marketplace. There's even a large managed services provider (MSP) based in Chattanooga called Pioneer Technology, which provides IT services to a number of hospitals and healthcare institutions.

Dynamo's Sankar pointed to an AI company called Pylon that's working on improving the custom conversational abilities of voice assistants like Alexa and Google Assistant. Chattanooga hosted an Alexa developer conference earlier this year, and will host it again in 2019. Sankar also talked about the TenGIG Festival, which launched last year and brought thousands of Esports players to Chattanooga. For those nascent spaces hungry for fast connectivity, the gigabit network is a huge factor in making the city a destination for emerging tech.

Want a Smarter City? Feed It More Data

Want a Smarter City? Feed It More Data

As the gigabit network has served as the main attraction for Chattanooga's growing tech sector, the government has also been experimenting with a variety of ways to use the wealth of data it collects to make the city smarter.

The EPB oversees the gigabit network and power operations from its command center, where engineers man an array of screens processing real-time data. Mayor Berke said that a decade ago, before the implementation of the smart grid, the EPB was collecting 2-3 million data points per year from its grid. Now it's more than 16 million per day.

"The fiber optic network has huge capacity beyond the grid itself, so one of the obvious places to use that capacity was for data," said Mayor Berke.

One way the city is doing this is through research partnerships. Chattanooga is part of MetroLab Network, a group of more than 35 city-university partnerships focused on bringing data, analytics, and innovation to city government.The city has received several grants from the National Science Foundation and other organizations to examine transportation and health issues.

One project involves researchers at the University of Tennessee at Chattanooga (UTC), who are exploring how autonomous vehicles can handle complex urban driving scenarios using real-time machine-to-machine (M2M) communication on fiber and 5G networks. It's part of Chattanooga's more ambitious goal of using both its network data and logistics expertise to improve large-scale fleet management for smart cities.

"Dr. Mina Sartipi, who's a professor at UTC, is the recipient of a lot of these grants," said Mayor Berke. "She's doing a lot of work around connectivity and sensors as it relates to health and transportation. One of her main focuses has been an experiment on vehicles communicating with each other. So if four vehicles are in a row traveling in the same direction, she wants to test how vehicle four is getting information from vehicle one about a pedestrian walking into the street."

The city is looking to expand its research partnerships, Mayor Berke said. It's lending its gigabit network to artificial intelligence research and data-driven computing, and Oak Ridge National Laboratory opened a Chattanooga office in 2016.

"Oak Ridge has the fastest supercomputer in the world and immensely talented researchers," said Berke. "We want people like that in our city working alongside us to figure out how to harness its power."

A Startup Destination in the South

Chattanooga Smart City Downtwon

In March, Mayor Berke unveiled an updated framework for the Innovation District. The city is planning more affordable housing and office space, new research buildings and cultural centers, and a new downtown UTC campus to more tightly integrate the academic community with the tech ecosystem.

It's all part of the city's larger designs on an educational and talent pipeline to feed Chattanooga's tech innovation back into schools. The Enterprise Center's Tech Goes Home initiative partners with schools, nonprofits, and other institutions across Hamilton County (the county surrounding Chattanooga) to give kids from early childhood through high school access to computers and mobile devices, tech classes, course material, and other resources. There's a local coding boot camp called Covalence that graduated its inaugural class last year. Mayor Berke said the city provides services for seniors as well.

"It's not just about the workers. It's also about the young families who need to set ground rules for their kids interacting with the web. It's about seniors left out of our current world who we can give basic skills like setting up an email address," said Berke. "We want to full people from the inside. If we're going to succeed, we need more local talent heading toward these innovative businesses. That's why we put businesses together with the UTC engineering department and why we partner with the school system on things like 4K microscopes."

Berke hopes these educational initiatives ultimately feed back into the economy to help the city sustain its tech boom. Other cities are catching up to Chattanooga's gigabit network as we inch closer to the 5G revolution, but the midsize Tennessee city has made the most of its head start.

"We've developed a true ecosystem," said Mayor Berke. "If you work in a startup and the startup fails, there's another job around the corner."

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About Rob Marvin

Associate Features Editor

Rob Marvin is PCMag's Associate Features Editor. He writes features, news, and trend stories on all manner of emerging technologies. Beats include: startups, business and venture capital, blockchain and cryptocurrencies, AI, augmented and virtual reality, IoT and automation, legal cannabis tech, social media, streaming, security, mobile commerce, M&A, and entertainment. Rob was previously Assistant Editor and Associate Editor in PCMag's Business section. Prior to that, he served as an editor at SD Times. He graduated from Syracuse University's S.I. Newhouse School of Public Communications. You can also find his business and tech coverage on Entrepreneur and Fox Business. Rob is also an unabashed nerd who does occasional entertainment writing for Geek.com on movies, TV, and culture. Once a year you can find him on a couch with friends marathoning The Lord of the Rings trilogy--extended editions. Follow Rob on Twitter at @rjmarvin1.

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