Entrepreneurs, tech-based startups and business incubators converge in Chattanooga's Innovation District

Staff photo by C.B. Schmelter / Mayor Andy Berke, left, and Brookings Institution scholar and author Bruce Katz stop inside of Bingo's Market, located inside Patten Towers, while touring the downtown Innovation District recently.

We find Chattanooga as a model of a quality place beginning to grow an entrepreneurial innovation ecosystem to be very replicable. You're representative of a much broader part of the country.

Three years ago, Chattanooga leaders looking to jump-start the city's entrepreneurship economy set up an Innovation District downtown.

Now, the time has come to take the district to the next level, says Mayor Andy Berke.

Part of that effort is to better secure the University of Tennessee at Chattanooga's involvement, he says. Also, plans are to use the city, including EPB's so-called smart grid, for what the mayor terms "a platform for innovation."

photo Staff photo by C.B. Schmelter / Brookings Institution scholar and author Bruce Katz takes notes at the intersection of East 11th and Market streets in front of the Edney Innovation Center while touring the downtown Innovation District recently.

Bruce Katz, who studies and writes on the challenges and opportunities of global urbanization for the Washington, D.C.-based Brookings Institution, says Chattanooga has put together "a quality of place" downtown with the needed anchors within bicycling distance.

"Then you gave everyone high speed internet, which no one else has," he says. "If you make the right kind of moves, this will become a real entrepreneurial area."

Innovation districts are seen as places where entrepreneurs, tech-based startups, and business incubators can mesh and create a so-called innovation ecosystem.

The 140-acre district in Chattanooga centers around a former Tennessee Valley Authority office building at East 11th and Market streets known as the Edney Innovation Center.

Within a few years, the Edney has been transformed from TVA office space to a home for one of Tennessee's most successful business accelerator programs, Tech Town training for youth and disadvantaged people, research programs by the Enterprise Center and a host of business start-ups.

Katz, an expert on innovation districts, notes that EPB, located nearly across Market Street from the Edney, and the utility's ultra-fast internet is "your major anchor."

"They've made this incredibly smart investment - talk about a platform for a 21st century economy. No other place has as its core anchor a public utility, and it's smack in the downtown," Katz says. "You've got a very interesting play there."

Also, the Oak Ridge National Laboratory has opened an office downtown in the city's Innovation District, inside EPB's headquarters, and business people and officials believe it will go a long way to unlocking collaboration and technology transfer.

U.S. Rep. Chuck Fleischmann, R-Tenn., says he has long advocated connecting ORNL's state-of-the-art technology assets with Chattanooga's entrepreneurial strength. ORNL is partnering with EPB in areas such as researching the performance, security, and efficiency of Chattanooga's electrical system. The research is viewed as helping make power systems nationwide cleaner, safer and more efficient.

"Oak Ridge plays a major role in cybersecurity and national security," Fleischmann says.

Katz says that Chattanooga has built "a platform for entrepreneurs to be here."

"You're very well positioned," he says. "You're big enough that the market will recognize you and small enough to maintain this kind of collaborative, cooperative sense."

Matt McGauley, president of Chattanooga-based real estate company Fidelity Trust Co., says his business has invested in multiple office buildings within the Innovation District to house ventures and people who want to be in the area.

One sizable investment was the makeover of the former Krystal Co. headquarters building at Seventh and Cherry streets. That three-story, 20,000-square-foot structure was redone into office and retail space in a $2.7 million project.

"Absolutely it has paid off," he says of Fidelity's investments. "A lot of folks want to be in the Innovation District and the downtown environment. They're drawn to buildings that can offer a lot of historical character."

McGauley says people want to be more urban and downtown as they look for a 24-hour-a-day, seven-day-a-week lifestyle.

photo From left, Mayor Andy Berke, Brookings Institute scholar and author Bruce Katz and Enterprise Center President Ken Hayes walk down Georgia Avenue while touring the downtown Innovation District on Monday, Jan. 29, 2018, in Chattanooga, Tenn.

"The Innovation District was a great idea," he says. "It accelerated a lot of growth with a concentration with the type of companies and people that really make that happen in a meaningful way."

McGauley says Fidelity's investment has led to nearly 100 percent occupancy in its buildings.

"We've done multiple redevelopment projects in the Innovation District working with buildings 80 to 130 years old," he says. "We're blending modern style and energy efficiency and technology and creating a blend that's attractive."

Also active in the district has been Lamp Post Group, a venture incubator that has provided capital and mentorship to growing start-up businesses. Lamp Post Properties, which is backed by Lamp Post Group, has been involved in buying several downtown properties.

The aim is to make available office and living space within the district to hold budding entrepreneurs and innovators.

Moving forward within the district, McGauley says he'd like to see local government work with the private sector to improve roads, sidewalks, cleanliness, safety, lighting and street art.

"The whole package," he says. "You can have beautiful buildings but if the area is dirty with cracked up sidewalks with traffic and vandalism problems, it's hard to get [people] to stay. We need a holistic approach."

McGauley says the refurbishing of Miller Park in the center of the district is "a great first step" in making the area appealing and helping it "go to the next level that it can achieve."

Meanwhile, Katz says there's a new localism in America that involves problem-solving from the bottom up and that's horizontal rather than hierarchical and vertical.

"We find Chattanooga as a model of a quality place beginning to grow an entrepreneurial innovation ecosystem to be very replicable," he says. "You're representative of a much broader part of the country."

For a good portion of the U.S., including Chattanooga, there's an enormous amount of power and latent capital that can be locked and unleashed, Katz says.

In Chattanooga, a real estate consulting firm, U3 Advisors, has been hired to lead a planning process to help take the Innovation District to the next level of success.

That firm has offices in New York, Boston and Philadelphia, and has worked with universities and major businesses and cities across the country to help develop research parks, urban gathering places and innovation hubs where next generation businesses and urban ideas can be developed.