- Hurricane Katrina in 2005 "rekindled the spirit of innovation” in New Orleans, says Greater New Orleans' Michael Hecht.
- In 2021, local start-up exits topped $2.5bn, according to GNO Inc, with about $1bn returned to the ecosystem through payouts to locally based founders and investors.
- But even as much has improved in the start-up ecosystem, the city of New Orleans faces significant challenges such as gentrification, high crime rates and racial disparities.
Even before Hurricane Katrina devastated New Orleans in 2005, the city had lost its economic edge. A lack of job opportunities following the decline of the local energy industry — coupled with decades of political corruption, crime and poor education — had sparked an exodus of young talent.
A group of enterprising New Orleanians, who had returned to their home city in the late 1990s after spending time in tech hubs such as San Francisco and New York, wanted to challenge this status quo.
“There was a leadership problem in New Orleans, the leadership was either insular or complacent,” says Tim Williamson, one of the returnees and co-founders of the Idea Village, a non-profit business accelerator launched in 2002 to identify, support and retain entrepreneurs in the Crescent City.
“The vision 20 years ago was to build a whole new generation of leadership through entrepreneurship. This was about preserving the city of New Orleans for another 300 years,” he says.
One night in July 2005 marked a first in this endeavour, when Idea Village invited venture capitalists from across the US to Commander’s Palace, a historic blue mansion Creole restaurant in downtown New Orleans, to meet seven local start-ups. Initial efforts to support early-stage entrepreneurship had shown some progress.
The mother of invention
But a month later, everything would change. In late August 2005, Hurricane Katrina struck New Orleans in what would become one of the costliest and deadliest disasters in US history. The bursting of flood levees protecting the city left about 80% of New Orleans under water and millions of its citizens homeless. Suddenly, the city and its businesses had to be rebuilt and started from scratch.
Michael Hecht, CEO of the city’s economic development agency, Greater New Orleans, Inc (GNO, Inc), says the natural disaster “rekindled the spirit of innovation” in New Orleans. “If you think about necessity being the mother of invention, then Hurricane Katrina was the biggest and baddest mama of them all,” says Mr Hecht, who led the state of Louisiana’s $250m post-Katrina small business recovery programme before joining GNO, Inc.
If you think about necessity being the mother of invention, then Hurricane Katrina was the biggest and baddest mama of them all.
Mr Williamson agrees: “The day after Katrina, everyone became an entrepreneur. New Orleans became a start-up city.”
Along with evacuees that returned to the city after Katrina came an influx of people hoping to help with reconstruction efforts and make an impact. Between 2007 and 2012, more than 44,000 college graduates moved into New Orleans, representing an increase of 20.3%, nearly double the national average of 10.9%.
Many decided to stay in the area and establish companies. More than 16 years after the storm, the efforts of some of these entrepreneurs have paid off. In 2021, local start-up exits topped $2.5bn, according to GNO Inc, with about $1bn returned to the ecosystem through payouts to locally based founders and investors. These exits included Levelset, a payments platform for contractors founded in New Orleans in 2012, which was acquired for $500m by California-based rival Procore.
Mr Hecht says the injection of capital, along with the philanthropy and founding of new companies it has enabled, is proof of how “entrepreneurship could really be a wealth-creating phenomenon”.
Among the post-Katrina influx of entrepreneurs was Patrick Comer, who had moved to New Orleans in 2008 with his wife Christina, a Louisiana native, after cutting his teeth in New York, London and Los Angeles. “We wanted to be part of the recovery,” says Mr Comer, who believed he could have more impact by starting a company in New Orleans than a larger, more established metro market.
He founded digital market research company Lucid in 2010, and says at the time “there was no one in the market” with experience as a start-up employee, or any venture capital (VC) or angel investors. “New Orleans wasn’t necessarily a market where people were going to jump into new companies; Katrina broke that mould. Everything was a risk after Hurricane Katrina,” he says.
In December 2021, Lucid was acquired by Swedish digital insights firm Cint for $1.1bn, making it Louisiana’s first unicorn. Mr Comer says that exits like Lucid and Levelset have given people greater belief in start-ups. Early-stage funding has also drastically improved, including from the set up of local venture funds such as Benson Capital Partners, which closed a $50m fund towards the end of 2020.
Peter Liu, a venture capitalist who moved to New Orleans during the pandemic and founded Revelry Venture Partners in April 2021, says there is much less competition for deals in New Orleans than in more established tech hubs. “I think you can generate better returns by investing in these underserved markets,” he says.
Insiders say that New Orleans’ strong hospitality industry and distinctive culture, which emerged from historic African-American, French and Spanish influences, make it a unique entrepreneurial ecosystem.
“Many founders in the small business and start-up ecosystem operate with a community mindset,” says Andrea Chen, the co-founder and CEO of Propeller, an incubator for social enterprises.
Experience of natural disasters such as Katrina and Hurricane Ida, which struck in 2021, also makes talent from New Orleans uniquely resilient, according to Trivia Frazier, a former academic and the founder and CEO of local biotech company Obatala Sciences. “Students from New Orleans colleges have an advantage as they need to leverage fewer resources than their counterparts in larger metro markets,” says Ms Frazier.
But even as much has improved in the start-up ecosystem, the city of New Orleans faces significant challenges such as gentrification, high crime rates and racial disparities. Ms Chen notes that despite the city’s population being 60% black, less than 2% of overall revenue goes to black-owned businesses. “This situation can be improved through greater efforts by lenders and investors to diversify their investments and loans,” she adds.
Others say there is still a need for greater later-stage funding across the board. Mr Hecht says that, while the successes of 2021 are the result of a 15-year cycle in the aftermath of Katrina, the government intends to keep pushing the ecosystem to the next level.
“There is not yet a critical mass of talent and companies in the city for the ecosystem to be self-reinforcing,” he says. “We have to do better in telling our story — nationally and globally.”
Rising Ecosystems is a series of features by Alex Irwin-Hunt exploring emerging tech ecosystems around the world. Previous iterations include:
- How Senegal’s site of human tragedy turned into opportunity
- Entrepreneurs move to unify Croatian tech community
- Zambia’s bid to become Africa’s next tech hub
- Chennai’s tech scene aims to catch Indian rivals
This article first appeared in the October/November 2022 print edition of fDi Intelligence. View a digital edition of the magazine here.