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Louisiana’s tech industry: Reality or virtual reality? 

How long can "Silicon Bayou" last?

click to enlarge “We’’re not just trading money with people next door. We’re adding new money to the economy here.” — Matt Wisdom CEO of TurboSquid

Photo by Cheryl Gerber

“We’’re not just trading money with people next door. We’re adding new money to the economy here.”
— Matt Wisdom
CEO of TurboSquid

Five-year-old Antonio Harris plugs away on his purple laptop, indifferent to the swirl of business pitches and presentations around him in the lobby of the Chicory on Fulton Street, the site of New Orleans Entrepreneur Week's (NOEW) "Startup Alley." As his father, Gregory, runs through the merits of Meusu, the "on-demand personal assistant" service he founded in 2013, Antonio's only distraction is a black-and-white rescue dog named Bobbie McGee, whose owner, Pupular creator Harry Boileau, is explaining his "app for your social animal."

  Welcome to "Silicon Bayou."

  Though then-Assistant Secretary of State J. Robert Wooley appears to have coined the term in 1984 while discussing proposed legislation to enforce software copyrights, "Silicon Bayou" only gained traction in recent years, as Louisiana's lucrative tax credits for digital media and software development, adopted in 2005, lured entrepreneurs, existing companies and venture capitalists. In particular, New Orleans has been the subject of glowing press describing it as the United States' "biggest brain magnet," "the coolest start-up city in America" and "the next great tech city."

  "We are the most cost-attractive place in America" for the tech industry, says Michael Hecht, CEO and president of the regional economic development alliance Greater New Orleans Inc., citing labor and real estate rates as well as tax advantages. Along with the city's distinctive cultural heritage and a sense of civic mission, Hecht adds, the boon to the bottom line has enticed a host of businesses to set up shop in New Orleans, even though the city's competitors have a two- or three-decade head start.

  "Austin has created an image of itself as a cultural destination," Hecht says. "The culture in New Orleans is historic and indigenous. It's not created. You will never see a 'Keep New Orleans Weird' campaign. That would be like having a 'Keep Water Wet' campaign."

  The Intellectual Property (IP) Building in the Warehouse District, conceived in 2009 by GNO Inc. and The Idea Village, is "the physical and symbolic heart for tech in New Orleans," Hecht says. The 80,000-square-foot, tech-friendly structure, located on Magazine Street near Lafayette Square, once was home to the 3-D model marketplace TurboSquid, as well as the collaborative workspace LaunchPad and The Idea Village, which in 2009 organized the inaugural IDEAcorps Challenge, a forerunner to NOEW.

  Tech workers and companies also congregate at several other nodes throughout the city, including the New Orleans Exchange Centre and the incubator Propeller, where Operation Spark's John Fraboni and Max Gaudin recently spent part of a stormy Fri- day, after the power went out in their offices near Oretha Castle Haley Boulevard. But the IP Building remains the nerve center of "Silicon Bayou." On a typical weeknight, the bar at neighboring Capdeville features at least a few patrons typing away on laptops while sipping beer. The development of the property was part of a concerted effort to remake the city as a center for innovation.

  "It was then that we began to develop the brand of New Orleans as an emerging hub for technology," Hecht says. "We often say that New Orleans is Austin 20 years ago. We're going to be the new Austin."

click to enlarge John Fraboni, center, on beanbag chair, and his team at Operation Spark. - PHOTO BY CHERYL GERBER
  • Photo by Cheryl Gerber
  • John Fraboni, center, on beanbag chair, and his team at Operation Spark.

  One measure of the tech world's increasing interest in New Orleans is the addition of Collision, one of the fastest-growing tech conferences in the U.S., to the city's busy festival season calendar. Founded in 2014 as an American counterpart to the popular European tech conference Web Summit, Collision is expected to attract more than 10,000 attendees when it takes place April 26-28, between the two weekends of the New Orleans Jazz & Heritage Festival — and will feature, fittingly, a day of programming related to the intersection of technology and the music industry.

  "Collision is growing at a greater scale and this requires a much larger community and ecosystem," Collision's Richard Forde wrote in an email. "Working with the local tech community and Collision co-host Chris Schultz [CEO of Launchpad] has shown that New Orleans is the perfect destination."

  Collision will distribute a number of free tickets to the conference through local organizations such as Son of a Saint, Operation Spark, Propeller and Benevolent Enabler, but the cost of accessing its full slate of talks, workshops, and networking events isn't free (as the programming for New Orleans Entrepreneur Week was). As of April 8, "General Attendee" passes run $1,799, while "Platinum" passes are $5,799.

  As Silicon Valley giants like Facebook, Google, Twitter and Apple come under fire for gentrifying their footprint and their lack of gender and racial/ethnic diversity in the workplace, becoming a boomtown of the "knowledge economy" is not free of negative consequences. The state's ongoing budget crisis threatens to reduce or curtail digital media and software development tax credits, but the greatest challenge for "Silicon Bayou" isn't the cost of subsidizing the nascent tech industry — it's the unequal distribution of its benefits.

Estimates of the industry's impact on the labor market vary, depending on which occupations are deemed tech-related, but data compiled by the Louisiana Workforce Commission shows growth in tech-sector employment. Between 2009, when the incentive expanded to include consumer and enterprise software and web-based and mobile applications, and 2014, the state added nearly 3,400 jobs in the "computer and mathematical occupations," an increase of 20 percent. (Last year, the legislature approved a three-year, 28 percent rollback of the program, reducing the credit for in-state payroll to 25.2 percent and the credit for qualified production expenses to 18 percent.) The Computer Industry Trade Association (CompTIA), which defines the tech sector in broader terms, is more bullish, reporting that Louisiana added 2,892 tech jobs between 2014 and 2015 alone.

  Pupular founder Boileau, a Tulane graduate, created his app after moving back to New Orleans from Los Angeles in 2014 and realizing that meant "no more dog friends" for Bobbie McGee. In the course of developing the app, which facilitates dog meetups by connecting owners, he discovered the advantages of building an early-stage startup here, including a tighter-knit social and professional network than he might have found in California.

click to enlarge Gregory Harris of Meusu. - PHOTO BY CHERYL GERBER
  • Photo by Cheryl Gerber
  • Gregory Harris of Meusu.

  "For the size of the city, the fact that there are multiple accelerators, co-working spaces and mentorship opportunities is really great," Boileau says. "The community believes in what's going on very strongly."

  The state's losses from the digital media and software development tax incentive reflect the growing number of companies claiming the credits, increasing from $377,000 in 2009 to $15 million in 2014. Ninety percent of the expenditures that qualify for the incentive are "workforce-related," according to Chris Stelly, executive director of Louisiana Economic Development, which administers the program.

  Advocates argue these costs — amounting to less than 10 percent of the $250 million outlay for the motion picture tax incentives in 2014, and an infinitesimal fraction of the $7.7 billion lost to all state tax exemptions — constitute an appropriate investment in high-paying jobs. For 2014, the Louisiana Workforce Commission counts 20,340 residents earning an average wage of $62,366 in computer and mathematical occupations statewide, while CompTIA's latest report, which includes 2015, lists 49,151 tech jobs in Louisiana, with an average wage of $74,515.

  "We're not just trading money with the people next door," says Matt Wisdom, CEO of TurboSquid and an author of the original digital media tax incentive. He estimates the collective revenues of the top 50 tech companies in New Orleans exceed $250 million per year. "We're adding new money to the economy here," he says.

Importing the tech industry into the state also means importing one of its most intransigent shortcomings. PBS NewsHour reports that the workforce at leading Silicon Valley tech firms is 71 percent male and 60 percent white, and Louisiana's tech sector reflects a similar lack of gender and racial/ethnic diversity, relative to both the total labor force and the population as a whole. According to the Louisiana Workforce Commission, women make up 51 percent of the population and 48 percent of the total labor force statewide, but only 34 percent of computer and mathematical occupations. Minorities make up 36 percent of the population, 34 percent of the labor force and just 18.5 percent of those occupations.

  The greater New Orleans region fares no better. Women, 51 percent of the population and 48 percent of the labor force, comprise 39 percent of computer and mathematical occupations; minorities, 40 percent of the population and 38 percent of the labor force, fill a dismal 16 percent of those occupations. This disparity is not only present in Louisiana and New Orleans.

  "This is a problem that we know is endemic to the software industry nationally, and because we are relatively late to the game, we can come at it from a starting point of wanting more diversity and more inclusion in innovation," Hecht says. "I think we're seeing New Orleans taking on a very real local problem, beginning to address it and being seen as a model for the rest of the nation."

click to enlarge “For the size of the city, the fact that there are multiple accelerators, co-working spaces and mentorship opportunities Is really great..” -  — Gregory Harris creator of Pupular, an app for dog owners. - PHOTO BY CHERYL GERBER
  • Photo by Cheryl Gerber
  • “For the size of the city, the fact that there are multiple accelerators, co-working spaces and mentorship opportunities Is really great..”
    — Gregory Harris creator of Pupular, an app for dog owners.

  Efforts to improve underrepresented groups' access to tech-sector education and employment are underway, including PowerMoves.NOLA, a New Orleans Startup Fund initiative to increase the number of venture-backed, minority-founded companies locally and nationally, and Operation Spark, a nonprofit organization offering courses in software engineering and application building using JavaScript, the programming language used throughout the Internet."

  "I can't change what people are doing, but I can help them find what they need," Operation Spark founder John Fraboni says, noting that participants in the program, many of whom receive full or partial scholarships, receive networking opportunities in addition to technical instruction. "On the training side, we've got to mobilize," he says.

  Others cite the region's relative dearth of tech talent as a major hurdle "Silicon Bayou" needs to clear if it wants to continue expanding.

  "Steel sharpens steel," says Bossier City native Chris Cummings, founder and CEO of Pass It Down, a kind of digital scrapbooking/social media hybrid that allows users to record and preserve their family histories online. "Two years ago, when I was in Baton Rouge, there weren't a lot of tech companies. We left [for Chattanooga, Tennessee] at the time because we wanted to be able to find resources and build a platform where we could build next to other people."

This shortage of engineers and software developers is exacerbated by the uncertain fate of the state's digital media incentive, several people told Gambit. Established companies are less likely to move major operations to Louisiana — and, by extension, support investments in technical education as GE Capital did at the University of New Orleans and IBM did at Louisiana State University. Tech entrepreneurs are less likely to form and grow their businesses here. And venture capitalists are less likely to list New Orleans alongside Silicon Valley, Austin, San Francisco and Boston as breeding grounds for the next Facebook, Google or Twitter.

  Indeed, the biggest homegrown successes have landed elsewhere. After management issues thwarted Perry Chen's efforts to bring two DJs to New Orleans during New Orleans Jazz & Heritage Festival in 2002, he developed the idea for the crowdfunding platform Kickstarter, which is now based in New York. Kenner's Kevin Lin sold his live video-game streaming site Twitch to Seattle-based Amazon in 2014 for $970 million.

click to enlarge Pass It Down founder Chris Cummings. - PHOTO BY CHERYL GERBER
  • Photo by Cheryl Gerber
  • Pass It Down founder Chris Cummings.

  "We've not had that big company that went public or had a big liquidation event that created the wealth and entrepreneurs, the halo effect, that an event like that inevitably does," Hecht says.

  The question is whether nonprofit organizations and public-private partnerships can find scalable solutions to the linked problems of skilled labor and diversity in tech without action from policymakers. Though the Board of Elementary and Secondary Education approved a proposal last month to count Advanced Placement Computer Science toward the state's high-school graduation requirements, efforts to improve engineering and computer science education in Louisiana public schools are still in the early stages, according to Wisdom.

  "What a lot of companies want is a pipeline of talent from the universities, which means you need curriculum alignment, and we have not had that in New Orleans," he says. "It's not where it needs to be."

Given the importance of tech talent to the future of "Silicon Bayou," it's reasonable to ask if there's a disconnect between the seemingly piecemeal approach to training and diversity and the taxpayer-funded incentives that have allowed tech companies themselves to thrive.

  Programs like Operation Spark — which is now piloting a project called High School to High Wage at four area schools — suggest that a more inclusive tech sector also might be a more sustainable one: Of the 10 graduates from its first "senior class," which completed the organization's three-tiered training in January, all are now employed by or interning with companies in tech or tech-adjacent fields, including General Electric and 365 Connect. The problem is that such initiatives have limited resources and may not close the gap between supply and demand fast enough.

  "Unless somebody gave me a shit-ton of money, I couldn't make a dent," Fraboni says.

  The lack of diversity in tech is not simply a "pipeline problem," of course: The New York Times reported in February that a combined 14 percent of bachelor's or advanced degrees in engineering and computer science are awarded to His- panic and black students, while Hispanic and black employees together comprise just 4 per-cent of the workforce at top tech companies.

  Meusu's Gregory Harris, who is black, suggests that unconscious racial/ethnic bias also contributes to the diversity gap, though he acknowledges this is not limited to the tech sector.

  "One reason I keep my dreadlocks is I want the people coming up who look like me to have someone to identify with," he says, adding that he feels he's been unfairly "dismissed" in the past because of his appearance. "It happens in everyday life. It happens in pretty much any industry. We have to break down the barrier of entry and say, 'Listen to these people. Give them a chance. Hear them out.'"

  In a region where women comprise more than half of the population and nonwhites more than one-third, the failure to encourage diversity in tech education and employment is, by definition, the failure to ensure that "Silicon Bayou" becomes a permanent feature of the local economy. Without such an effort, Louisiana's tech sector may lose future employees like International High School sophomore Grace Clark, whose passion for the subject comes through as she describes creating a Magic Eight Ball application and a video game character selection screen at Operation Spark. The 16-year-old plans to pursue tech as a hobby and not as a career, but she's clear-eyed about the industry's inclusion problem.

  "I find it disappointing that there isn't more diversity in the tech world, because I'm proof that girls can do it, that African-Americans can do it, that anybody can do it," she says. "It's not gender. It's not race. I think it's kind of silly that it's set up that way."

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