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Lucy Beard with the company Feetz speaks during a luncheon Wednesday, July 16, 2014, hosted by the Chattanooga Technology Council at the Business Development Center in Chattanooga, Tenn. Three GigTank teams presented startup ideas at the luncheon related to 3D printers.

Local groups that aid entrepreneurship:

* Foundations and a group of leaders who organized angel investment

* Entrepreneurial support organizations that provide space, resources and expertise to startups

* Public entities – including the mayor's office, an Enterprise Center and EPB – that think strategically about how governmental infrastructure can facilitate entrepreneurial growth

* The Innovation District, a public-private enterprise that created a specific space for entrepreneurial development

City strategies to promote buisness startups:

* Be a cheerleader. Discuss the importance of entrepreneurship and recognize successful local entrepreneurs.

* Identify major local entrepreneurs and cultivate relationships with them.

* Establish a committee or task force on entrepreneurship to set the vision of the city.

* Convene and broker entrepreneurship supporters, such as nonprofit organizations, local anchor companies and local universities.

Source: Kauffman Foundation

The title of the study is as good a place to start as any: "Little Town, Layered Ecosystem: A Case Study of Chattanooga."

The recent report from the Kauffman Foundation looks at why Gig City has been a good place for entrepreneurship. It also touches on Chattanooga's shortcomings when it comes to startups.

To sum it up succinctly, this is what's been key: collaboration and a sense of ownership.

"Chattanooga is a smaller town that is its own sort of area and relies on itself," said Chris Jackson, a Kauffman research assistant who worked on the report. "One thing I heard from everyone we interviewed was about 'the Chattanooga way.' It made people really aware of their deep connection to everyone in the city, that they're working toward similar goals."

It's fairly easy to get involved in Chattanooga because, with a population of about 175,000, it's manageable in size and "there aren't gatekeepers to keep people out," Kauffman research assistant Emily Fetsch said.

What's more, the reverse happens: many different entities, from government to private, are working with each other to get people in.

"The long history of public-private partnerships, going back to when Chattanooga was facing a lot of pollution, to building the waterfront," Fetsch said. "That's continued today."

The startup community has emerged because of the combined efforts of city government, entrepreneurs and entrepreneurship support groups, according to Kauffman. The report identified three layers of "intertwined supporting organizations" in the city: two philanthropic foundations (Lyndhurst and Benwood); four entrepreneurship support organizations (The Company Lab, Chambliss Startup Group, Lamp Post Group and Launch); and four organizations in the public sector (the mayor's office, Electric Power Board, Enterprise Center and Innovation District). Also important: Launch Tennessee, which sponsors Co.Lab, and Chattanooga Renaissance Fund, an angel investor group.

The mayor has played a crucial role as cheerleader for the startup community, locally and nationally, researchers found. So has EPB's fastest-in-the-nation web speeds of up to 10 gigabits per second.

Gig service, which has been available in the city 2010, was not created with entrepreneurship in mind, but it's helped. It "presented the impetus for the spark of entrepreneurial energy that runs through Chattanooga," the report says.

Mayor Andy Berke, elected in 2013, didn't come from an entrepreneurship background, but that wasn't a hindrance, researchers found.

"When I got elected there were a number of activities that were occurring, but it didn't feel organized," Berke said in an interview. "People who worked in the area came to see me and said they were frustrated by some of our lack of progress. I said I would get much more involved."

He did.

"Mayors can be honest brokers. They can look and speak to the benefits of a city without angering one group or another," Berke said. "If I say I need something to happen, it's not like one company thinks I'm trying to help them to the disadvantage of another."

That's been good, the report says.

Berke "elevated entrepreneurship as an issue that was one of the city's highest priorities," the report says, by creating a "Technology, Gig, and Entrepreneurship" subgroup for one of his study groups. That task force developed into the Enterprise Center, which created the Innovation District downtown.

Still, Berke says his support of startups and technology isn't exclusive.

"We need a technology sector – and an automobile sector and a financial industry sector and so on, so we can withstand (business) cycles," he said.

Lamp Post Group, the venture incubator that has backed 22 startup businesses over the past six years, has been critical too, the report found: "Without the collection of resources Lamp Post Group provides, high-growth potential startups would find themselves at a disadvantage and look outside Chattanooga to find the support they need."

But even with that, not all startups can find everything they need in the city, though in the early stages, they often can, thanks largely to Co.Lab and local angel investors. Feetz, a darling of Co.Lab, the public-private startup accelerator, moved its headquarters to Silicon Valley after being in Chattanooga for almost two years because of demands from at least one investor and to find the talent it needed.

"Talent is something entrepreneurs everywhere struggle to find," Jackson said. "Partially due to Chattanooga's size and location, that talent isn't always in high supply."

Mike Bradshaw, Co.Lab's executive director, says the talent equation can be viewed differently.

"Having a shortage of talent in town and having to bring that in is a good thing," he said. "I'd much rather have the need to pull people in than not have it."

The Kauffman report, however, notes: " 'creative' people are attracted to places with tolerance and diversity, measured by openness to gays and Bohemians, and those 'talented' people create innovations, contributing to economic development of the region."

San Francisco and Austin, big startup hubs, rank highly in that creative index, the report says. Chattanooga ranked a low 237 out of 276.

Still, all of that has not been a setback for some startups. Skuid, for example, has grown to 63 employees with offices in London and San Francisco because the three-year-old software startup is based in Chattanooga, according to Ellie Gamache, its public relations manager.

"Folks we hire here are very loyal," she said. "There's a shared vision, shared values."

Downtown rental housing is another shortcoming, though its's poised to get about 2,000 new units in the next few years. Chattanooga has historically been a buying market more than a renting market, with most homes outside of downtown.

"Public officials said they are looking to address that," Fetsch said.

Berke said a way to keep companies in Chattanooga is to capitalize on what the city has compared with more established startup hubs.

"We have a great quality of life, an excellent outdoor world, a low cost of living and the fastest, cheapest, most pervasive internet in the world," he said. "We will never be the city for everyone, but we have a great opportunity for lots of companies."

Kauffman Foundation zeroed in on Chattanooga, after Berke attended its annual mayors conference in 2014 and urged the foundation to come to Chattanooga.

"We really tried to get a good understanding of how things worked in Chattanooga," Jackson said, "so we could take things we learned about Chattanooga to use them for other cities."

Contact Mitra Malek at mmalek@timesfreepress.com. Follow her on Twitter @MitraMalek.

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