Editor’s note: On Feb 1, Tom Snyder, Executive Director of RIoT, hosted the annual “State of the Region” address at HQ Raleigh’s monthly happy hour. Once again embracing the State of the Union theme, Tom discussed domestic and foreign affairs, looking first within our state’s borders, then beyond. He also discussed North Carolina’s progress, opportunities, threats, and defense—and offered a call to action. Any economy has all these ingredients. Economies that maximize potential are the ones that work with energy and in cooperation.  So how does North Carolina stack up? Hear it from Tom himself.

Welcome to the State of the Region

RIoT

Hello.  I’m Tom Snyder and lead the RIoT organization.  If you don’t know us, come see me or any of my team and we’ll be happy to share. Last year I gave a State of the Region and folks enjoyed it, so I’m thankful to HQ Raleigh for asking me to come back again this year. And they stepped it up — at the live event, I spoke behind a podium and in front of a draped North Carolina flag. Maybe next year I’ll don a stovepipe hat to go with my Lincoln beard.

In the spirit of the theme, I’ll start out with a discussion of Domestic Affairs. Then I’ll talk about foreign competition, the economy, and projections for 2019.

Domestic Affairs

Positive trends continue across the board. Let’s examine the key ingredients for businesses large and small. These can be summed simply as resources and customers. Every company needs resources like space, money and talent – and you need customers that pay for all that.

  • Space to Work

It’s easier than ever to find to find space. Our partners, HQ Raleigh, just announced a partnership with NC State and have an additional building coming online mid-2019, which will eclipse 100k square feet of coworking space across all the HQ properties. American Underground has expanded and the opening of the Chesterfield, and BioLabs in Durham brings a significant new physical space to the region for Life Science companies.

In Charlotte, we see Advent Coworking and Launch Factory both doubling in size, and Hygge has just opened another location. In Winston-Salem, Venture Café celebrated its first birthday last spring and has completely catalyzed the entrepreneurial community. We see new spaces opening across our state.

And the energy and success of the region has captured international attention. No longer is the Triangle one of those under-recognized regions. The heaviest of heavyweights in coworking – WeWork – has opened in Durham and is in construction both in Raleigh and on a second location in Durham. Let the competition begin!

  • Fundraising

Perhaps the most covered topic in startup news is fundraising and once again the region continues to raise the bar.  Starting hyper locally in the Triangle, you see companies like Precision Hawk, Pendo, Teamworks and K4 Connect all making eight-figure raises in 2018. Last fall, I was moderating a smart cities panel with four startups at the NC State Smart Cities Summit and realized that all four of the companies on the panel had made eight-figure raises that year. And that’s just in one vertical.

HQ Raleigh itself has over 230 startups in their ecosystem that collectively created over 500 jobs and nearly $60M capital raised.

Members of the crowd watch the “State of Region” address. Photo by Sarah Glova.

But the attraction of capital is not constrained to the Triangle. Out in Asheville, the first Asheville Venture 15 was announced to track the 15 fastest growing startups in the region. Collectively they amassed nearly $52M in revenue in 2018 and raised over $3.5M in capital. On the other side of the state, Lapetus Solutions, based in part on IP developed at UNC Wilmington has raised $4.6M.

On the exit front, Scott Wingo just released his annual Tweener list and he reports that in the Triangle, 17 companies were acquired last year for somewhere between $200M and $400M. That’s a great outcome.  Tresatta, in Charlotte, became the third unicorn company in that city alone. Three private companies valued over $1B in the Queen City.

Talent

Less reported, but even more critical than money as a resource is talent. This year we see incredible outcomes, some remaining opportunity and some cool new initiatives.

NC State was recently ranked #11 in Princeton Review for undergraduate entrepreneurship. What is amazing is that just two years ago, the university was not even on the Princeton list at all. To advance to #11 in two years is truly meteoric. I can’t wait to see what the expanded partnership with HQ Raleigh will create.

In late 2017 we witnessed a setback as the Iron Yard shut its doors. Momentum Learning has stepped firmly into the void and just graduated their 3rd cohort of students, continuing their reputation for near 100% job placement after graduation. Tech Talent South, that operates in this facility plays a similar critical role helping people reinvent themselves both mid and early-career and prepare themselves for the entrepreneurial community. They just won an Impact Partner Grant from the City of Raleigh.

Wake Tech has been active in the community, but there is still more to be gained from having one of the largest community college systems in our backyard. We are still not leveraging out HBCUs as much as we can and should. But it is exciting to see so many academic partners sharing space here at HQ, including St Mary’s, Meredith, Campbell, SKEMA and NC State.

While we have made significant positive strides, we still have work to do in creating opportunities for diverse founders and employees. American Underground has done a fantastic job with the Black Founders program. And that Asheville 15 I mentioned a moment ago – half of those companies are female founded. We are making progress, but I ask all of you to keep pushing for more.

NC IDEA has raised perhaps the most significant initiative on the talent front, launching the Ice House program to help develop an entrepreneurial skill set for 100,000 people, greatly expanding the impact across the state and in particular out into rural communities. RIoT is working with a number of partners to provide greater support in 2019 to citizens outside our urban centers and in rural communities. HQ is working on new main street initiatives you’ll hear more about in the coming months.

Foreign Competition & Defense

Overall, we score high marks on domestic affairs.  But what about our foreign competition?

  • Opportunities Lost

One of the biggest stories in tech this year was the courting of Amazon by 20 cities across North America.  We all know the outcome now – we didn’t know it was possible, but real estate prices and traffic are now even worse in New York City and Washington DC. But we also “lost” to perhaps our closest rival – Austin, Texas.  First the Army Futures Command and then Apple chose that blue spot in Texas over the Triangle. What does that mean for us locally?

Personally, I think we are much better off for this. There are obvious benefits – our rising costs and traffic are more reasonably metered, giving our municipalities the opportunity to manage more controlled growth. Taxpayers benefit by not having our money given to corporations that, frankly, don’t need it.

  • Opportunities Won

But companies are moving here. Docker operates a significant east coast office outside Silicon Valley. Advanced Auto Parts just moved their headquarters from Virginia to North Carolina to take advantage of our ecosystem.  Honeywell just moved their headquarters to Charlotte. Telit runs their US headquarters from the Triangle.

Within the RIoT community, BruVue relocated from Ohio to be part of the IoT ecosystem and now is growing over in the HQ Loft. Green Stream has just relocated from Virginia to Raleigh. We are fielding requests from the countries of Argentina and Germany to help them plug into our ecosystem, creating international business opportunities for companies we work with. I’ll say that again. Foreign governments and trade associations are contacting us to tap into our ecosystem. That’s pretty cool. RIoT is happy to help play Secretary of State for North Carolina.

From where I sit, it appears that foreign competition is healthy and we are responding.

The Economy

Let’s take a moment to look ahead to 2019. What exciting things are just around the corner?

Growth is critical for any region to be healthy. Population growth for a geographic region happens from two sources. Birth rate – which is a pretty long pipeline to grow a workforce. And immigration. Economic growth likewise can be created entirely from within and by attracting from the outside. It is healthy for North Carolina to attract the best companies, the best talent and outside capital into our state, while investing in what is already here. You need both.

Economic growth requires a diverse and inclusive society and frictionless integration of new talent. Big Top recognized that and has been a great resource for our region. Despite what our politicians in Washington DC might claim, building walls is contradictory to economic growth.

But let’s break this down.

●  Starting here: On the birth rate side, we see from Silicon Valley’s example that it is vitally important when companies – and more importantly employees – have exits. Exit events create the opportunity for experienced founders and employees that have capital to create new startups. Perhaps the biggest news story of 2018 was the $34B acquisition of Red Hat by IBM. It will be interesting to see how many entrepreneurs born at Red Hat will now start new ventures. I suspect the Red Hat family tree will be huge and positively impact the next generation. Similarly, Bandwidth’s IPO over on Centennial Campus will lead to birth-rate style growth.

●   Investing here: But we see lots of immigration-style growth as well. Danville, just to our north is a smaller town with significant population growth, resulting from a decision a few years ago to invest funding back into their own citizens and into entrepreneurship instead of tax incentives for big corporations.

●   Reinventing here: The City of Wilson, just to our east, invested in themselves, building fiber optic infrastructure and a technology foundation that has saved the city and its citizens millions of dollars in municipal operations. Now the city is reinvesting that money into building a downtown innovation hub and resources for job creation. Rural towns can turn around decades of decline by participating in the data economy with investment in their own people and basic utilities like broadband communications.

Statewide Collaboration

We are seeing clear examples of statewide collaboration.  Just a few months ago, our friends here locally at the Research Triangle Cleantech Cluster and the Joules Accelerator in Charlotte partnered to create a cleantech corridor.  The federal government has invested $750k into the effort to get it off the ground.

Out west, Asheville has launched a new micro-grant program, awarding $5k non-dilutive grants to qualified early stage startups.  INC 5000 has named Wilmington-based Untappd as the fastest growing software and tech company in North Carolina.  Even towns as small as Yanceyville are capitalizing on the tech economy with the recent relocation of the Ag-tech startup mesur.io headquarters to Yanceyville, creating 24 jobs and $1.5M in economic impact.

And has the City of Raleigh been deterred by the snubs of Amazon and Apple?  Absolutely not.  In fact, they have responded with a new Impact Partner Grant program designed to specifically invest in local businesses that are aligned with their mission to make this a top city for business.  I mentioned before that Tech Talent South is a recipient.  RIoT is honored to also be part of their first cohort and will, among other things, help champion smart city partnerships between startups and the city and offer educational courses for existing small businesses to adapt to emerging technologies.

The future is truly bright.

Call to Action

I’d like to close with a simple call to action. We are all part of a community and an ecosystem that is much broader than just our close neighbors. Get to know someone you have not met. Figure out some small way that you can help him or her. Pay that forward. Work together. Be inviting.  I’m so thankful that at no point during this State of the Region event at HQ did everyone on the left clap while everyone on the right sat silent. Life’s too short for that kind of nonsense. Together, we will continue to create opportunity and be successful together. Thank you.