Study: Chattanooga trails other U.S. cities in tech, job growth

Chattanooga boasts the nation's fastest Internet service, but a new study finds that local job and technology growth is still slower than in most of the country.

In its annual rating of the best-performing cities, the Milken Institute rates Chattanooga among the bottom 10 percent of metro areas for jobs and industry growth in technology over the past five years, trailing all other major Tennessee and Georgia cities.

But local entrepreneurs and city promoters insist the self-proclaimed "Gig City" is about to mount a tech takeoff, especially if it can convert its Web technology and new entrepreneurial capital and training initiatives into successful businesses.

"Chattanooga really needs a win, that would put us on the map," said Taylor McDonald, president and co-founder of Second/Site, a Chattanooga augmented reality tech company. "I think the Gig is great, and it's exciting that it's within reach of most people. But we need to show how we can really use the Gig."

EPB in Chattanooga launched citywide gigabit-per-second Internet service four years ago and the city since has capitalized on the first-in-the-nation service with a variety of tech startup forums, including the Gig Tank, 48Hour Launch and Will it Float?

Next year, local entrepreneurs will be aided as Chattanooga becomes the first Southern city in the U.S. to become a Sandbox hub for tech startups and the Scenic City adds Tennessee's first angel fund created exclusively to promote female-owned businesses.

But Chattanooga's race to gain jobs and capital from the technology and entrepreneurial sectors is starting well behind many other U.S. cities.

Researchers for the Milken Institute crunched employment, wage, shipment and other economic data to rate America's 200 largest metropolitan areas on their overall performance. The best-rated cities -- Austin, Texas; Provo, Utah; San Francisco; and San Jose -- are all Western municipalities with universities that are fostering the highest growth rates in technology and other jobs. Most are home to either energy resources or high-tech universities.

"If you can locate your city on top of shale, you're doing well. But absent that, the cities that are doing the best are those that have invested in the innovation infrastructure and have the universities and education culture to succeed," said Minoli Ratnatunga, an economist who co-authored the study for the Milken Institute.

In the top-rated Austin metro area, 40.5 percent of all workers have a bachelor's degree. That's nearly double the 22 percent share of Chattanoogans with college degrees, Ratnatunga said.

Chattanooga ranked 174th among the 200 biggest metro areas in Milken's best-performing city list, down from its above-average 80th place finish in 2012. Only Ithaca, N.Y., had a bigger drop for 2013.

Chattanooga's growth rates were slowest in technology industries compared with other cities.

Some of Chattanooga's relatively poorer performance reflects the region's traditionally more stable growth pattern.

"Our growth tends to be less volatile, so we didn't decline as much as some areas during the recession, and we didn't grow as fast as some areas bouncing back from the downturn," said J. Ed. Marston, vice president of the Chattanooga Area Chamber of Commerce. "We're still adding jobs; we're just not adding them as fast as some cities right now."

The Chamber's "Can Do" campaign has added 7,466 jobs since 2011 -- nearly halfway through the 2015 goal of 15,121 direct and indirect jobs.

"We're confident we will meet our goals, and we continue to work toward getting the word out about Chattanooga," Marston said.

That word reached a new global tech-oriented venture in Zurich, Switzerland, this summer, where young scientists, computer programmers and successful entrepreneurs still in their 20s agreed to include Chattanooga as the latest hub for its worldwide "Sandbox" initiative. Sandbox was started in 2009 to identify ambitious young people, and the movement has grown to more than 800 young changemakers in 25 cities worldwide.

Tiffanie Robinson, the former director of creative strategies for RiverCity Co., who is an ambassador for Sandbox, returned from London this week after pitching Chattanooga as an entrepreneurial city to become one of only a half-dozen Sandbox hub cities in the U.S.

"They recognized that Chattanooga has a lot of very interesting initiatives going on and a growing talent of millennials," Robinson said. "Sandbox includes some of the most ground-breaking scientists and social entrepreneurs from around the world, and we'll be looking to find those people and bring those people here to Chattanooga."

Robinson, who is launching a new talent recruitment company for millennials to help serve new business startups, is confident Chattanooga's natural attractions and increasingly supportive tech culture will change the city's performance.

She is among a half-dozen women executives who launched a new female-oriented angel fund, the Jump Fund, to raise and invest at least $2 million in area businesses headed or owned by women.

"Probably in the next five to 10 years, Chattanooga is going to be a completely different city than it is today," Robinson said.

Already, Chattanooga is luring mobile entrepreneurs who enjoy the region's relatively low cost of living and abundant outdoor activities.

"I've been to Austin, but I'd much rather be in Chattanooga," said Ryan Cox, chief executive for HATponics, a Rossville-based company that produces portable, high-density farms using a hybrid of hydroponics and aquaculture.

HATponics was picked by LaunchTN as one of the 10 top startup ventures in Tennessee, and Cox expects to triple or quadruple sales next year.

"We have this picturesque landscape, and you've got to love your work here," he said. "As a transplant myself from Ohio, I know Chattanooga is a startup place where people around you care for your success."

Staff writer Ellis Smith contributed to this story.

Contact Dave Flessner at dflessner@timesfreepress.com or Ellis Smith at esmith@timesfreepress.com.