Why New Orleans Is the Coolest Start-up City in America

This is a re-post of an article by Donna Fenn for Inc. Magazine.  You can read the original article here.   By Donna Fenn@donnafenn | Apr 6, 2011

Everyone in New Orleans has a Katrina story, and those tales are typically tinged with loss, frustration, and grief. Five years after the storm, you still hear them, of course, and you still see evidence of the devastation that killed over 1,800 people and left more than one million homeless. But Katrina gave New Orleans another story to tell, and it’s one that just may have a happy ending for the city’s entrepreneurs. Each year from 2007 to 2009, 450 out of every 100,000 adults started up businesses in the New Orleans metro area, well above the national average of 320, and more than double the number six year ago. 

“Katrina did two things,” says Tim Williamson, the CEO of Idea Village, which recently sponsored New Orleans Entrepreneurship Week (NOEW). “Everyone became an entrepreneur because everyone was starting over in some way—we became a start-up city.”  Second, he says, “our networks scaled globally.”  Williamson and four fellow entrepreneurs founded Idea Village, a not-for-profit organization, in 2000 in order to identify and support local entrepreneurs. But it wasn’t until after Katrina—when the city’s plight triggered a huge influx of people who wanted to help rebuild—that the organization gained real traction.  Among those who showed up were MBA students from top business schools who opted to spend spring break rolling up their sleeves to help New Orleans entrepreneurs rather than hitting the beaches.  One of those MBAs was Daryn Dodson from Stanford; the following year, he returned with 25 fellow Stanford MBAs, who were supported by alum Jim Coulter, co-founder of Silicon Valley private equity giant, TPG. “Stanford would not have come here if it weren’t for Katrina,” says Williamson.  He and his partners saw that the time was right for New Orleans to attract world-class resources in order to nurture its homegrown entrepreneurial talent.

That was three years ago and since then, Idea Village’s efforts have grown from matching a few MBAs with local entrepreneurs to a full-blown week of events where over $1 million in cash and services are pumped into the local economy.  Workshops, taught by local business leaders as well as by executives from Google, Salesforce.com, and Cisco, are offered to hundreds of New Orleans small business owners. Mayor Mitch Landrieu‘s office is now on board, as is Tulane University, Goldman Sachs, and a few local economic development groups. Even James Carville and Mary Matalin got in on the action; they hosted a reception for NOEW attendees at their posh Uptown antebellum mansion. To make things more financially interesting, New Orleans law firm Jones Walker financed NOEW’s $50,000 “Water Challenge,” a competition for entrepreneurs with innovative water management solutions. The winner: NanoFex, which developed technology to use Louisiana sugar cane and crawfish shells to purify contaminated groundwater. And TPG’s Coulter now sponsors the week’s culminating event, IDEAPitch, an American Idol-like competition (moderated this year by yours truly) where five entrepreneurs pitch the audience and investors from TPG, Bain Venture Capital, Redpoint, Prism, IBM Ventures, and American Funds. The winner is flown out to San Francisco to meet with potential investors.

Last year’s IDEAPitch winner, Big Easy Blends, makes frozen cocktails (“Mar-GO-Rita”) packaged in Capri Sun-like pouches. Co-founder Craig Cordes says that while his San Francisco trip didn’t result in a big investment, he did “get a ton of press and we increased revenue 350 percent and increased distribution from five states to 12.” By the end of this month, the company, which just landed $350,000 in local angel investment, will have distribution in 30 states.  We’re betting that this year’s winner, NOvate Medical Technologies, will attract significant investment dollars when its co-founder, 24-year old William Kethman, makes his pitch to investors in San Francisco next month. The bow tie wearing Tulane med student wowed the audience and judges with a medical device called Safe Snip, a disposable, plastic clamp that cuts, seals, and disinfects an umbilical cord. Kethman designed it for use in developing countries, where string and razor blades are widely used for severing umbilical cords, causing a host of potential health problems. “The strong impact of the product and the simplicity bodes well for the potential of the product,” says Coulter.

For me, though, the highlight of NOEW was the MBA pitch competition. The whole week is strategically scheduled in March to coincide with spring break so that teams of MBAs can be paired with local companies for a week of brainstorming, planning, and reinvention. This year’s teams came from Berkeley, University of Chicago Booth, Cornell, Northwestern Kellogg, Loyola, Tulane, and Stanford. And if you’re thinking these kids put in eight-hour days, then headed to Bourbon Street, think again. “We didn’t get a lot of sleep,” one number-crunching Kellogg student told me. He was hoping to get a taste of French Quarter night life once the competition ended, after the teams presented plans for their respective companies to a judging panel, which included executives from TPG Capital, Goldman Sachs, McKinsey, Tulane University, and Whitney Bank.

The judges had their work cut out for them.  The team from Loyola came up with a plan for NOLA Brewery to address bottlenecks in production and to increase distributor incentives; Tulane worked with Bideo, an online auction house for pictures and video, to develop a marketing campaign targeted to college campuses; and the Cornell students found manufacturing space and a potential distributor for Spa Workshop, a maker of computerized, multi-header showers.  But the big prize (which included a trophy, a chauffeured limo ride to Carville/Matalin reception, and a crawfish boil delivered to their campus) went to the Northwestern team for their work with Rare Cuts, which sells very high quality meat to consumers from a single store in Uptown New Orleans.

Rare Cuts owner Henry Albert says sales last year, his first year in business, were “right at about $580,000. And if I can orchestrate what the Kellogg guys came up with, it’ll be $1.2 million this year. I was taking a buckshot approach to marketing, thinking everyone is a potential customer because I sell food. They helped me identify my core customer: The foodie cook.”  He plans to revamp his website and begin selling his meat nationwide via e-commerce. He’ll also ramp up his social media presence and rebrand his store. “I was going to raise capital for a second store,” he says. “But now I’m going to hold off and see how the web goes. The Northwestern guys laid out a framework for the site architecture and I thought it was spectacular.” Albert notes that “the company that won the MBA Challenge last year [Naked Pizza] has exploded,” so he’s hoping that Rare Cuts will experience the same success. He’s currently negotiating with one of the Kellogg MBA’s to come to New Orleans for an internship this summer to help him execute his new plan.

“This whole thing has been very grass roots,” says Williamson. “We had MBAs from Stanford, and then those kids went to work for Salesforce.com and Google and now their companies are involved.” One of the IDEAPitch finalists this year, Rebirth Financial, a peer-to-business lending platform, was founded by Xavier Cabo and Chonchol Gupta, Tulane MBA grads who won the competition last year for their work with Jack and Jakes, a local organic market. This year, their own business got some significant help from the Chicago Booth MBA team. “They helped us go from having $26,000 in loans on our platform to over a $1 million,” says Gupta. “And they gave us a marketing strategy for the next nine months,” adds Cabo. “That’s beautiful.”  That kind of mentoring—peer-to-peer and intergenerational—is what helps create and sustain an entrepreneurial ecosystem that not only draws upon local talent, but is vibrant enough to attract global resources. “New Orleans along with San Francisco is constantly creating vibrant ideas and products to the landscape in music, food, architecture, and entrepreneurs” says Coulter.  New Orleans isn’t Silicon Valley yet, but give it some time. As Mayor Mitch Landrieu likes to say, the place “gets all up in ya.”  True dat.