Louisville: Cyber sector contender– Tech developments Could Make Louisville One of America’s Emerging Digital Cities

October 5, 2015, published in The Lane Report, Ky.’s Business Magazine

Louisville: Cyber sector contender–

Tech developments Could Make Louisville One of America’s Emerging Digital Cities

By Susan Gosselin

Louisville could be one of the nation’s emerging tech centers.

It might seem unlikely, given that Louisville Mayor Greg Fischer’s own Competitive City Update in 2013 ranked Louisville 11th among its 15 peer cities in percentage of the workforce with technology jobs. A spate of recent initiatives, however, are giving business and civic leaders the sense that Louisville could be ready to close that gap – quickly.

Dawn Yankeelov, President and Founder of Technology Association of Louisville KY

A feeling of momentum was tangible Aug. 20-21 at the city’s first TechFest, a semiannual conference and trade show that drew 300 registrants, 34 sponsors and 19 exhibitors downtown to discuss the future of tech innovation in the city. It was put on by the Technology Association of Louisville KY (TALK, talklou.com), a three-year-old group tied into the Technology Councils of North America (TECNA), which is a network dedicated to advocating for technology, local networking, identifying workforce talent, and professional education.

TALK founder and president Dawn Yankeelov, president of Prospect-based PR/marketing firm Aspectx, said she hopes events like TechFest will showcase how much tech is already brewing in Louisville and be a “big tent” the entire tech community can enter.

“The tech community here is quite broad. On one hand, you have a big selection of startups, and on the other, large tech companies like Zirmed and Genscape,” Yankeelov said. “Then you have incredible discoveries being made in the healthcare space, like Neuronetrix’s FDA-approved work to combat Alzheimer’s. And even our familiar market leaders, such as Humana and others in (Louisville’s) healthcare industry, are using mass analysis of population healthcare data to make care delivery more proactive and efficient.

“They are great examples of where Louisville is going as a tech-driven community. TALK, and by extension TechFest,” she said, “gives us a chance to unify and encourage the tech community already developing here, and raise the flag for Louisville as an important Midwest outpost for Silicon Valley companies.”

KentuckyWired and Google Fiber

Mike Hayden, KentuckyWired program director

Some recent studies have ranked Kentucky dead last nationally in Internet connectivity. But the commonwealth soon could become one of the nation’s most wired states, thanks to the combination of the KentuckyWired initiative and the potential entry of Google Fiber to Louisville.

KentuckyWired’s initiative will bring ultra-fast Internet speeds to every one of the state’s 120 counties with a $324 million optical fiber network, funded by $30 million in 30-year state bonds, $20.5 million in Appalachian Regional Commission funds and the rest from the equity market – Australian investment firm Macquarie Capital signed a public-private partnership deal to provide the rest of the money (see “Statewide Broadband By 2018,” The Lane Report, April 2015 bit.ly/1dodVuR).

Significantly for Louisville, the project will bring “lit” optical fiber into downtown from four routes: northern, eastern, western and southern.

KentuckyWired’s “middle mile” network will directly upgrade 1,100 government and education sites around the state. But access to the massively faster speeds and capacity it will offer should be a big attraction for tech companies looking to grow, according to Mike Hayden, program director of KentuckyWired.

“The average capacity of a standard T-1 line is 1.5 megabytes (of data) transmission per second,” Hayden said. “KentuckyWired will average around 1,000 megabytes a second, for the same price. Other communities have done this, but they have been just a town or a neighborhood – little islands of connectivity. Considering that 29 states have laws making it illegal for the state to lay their own fiber, what we are building is a big deal.”

The commonwealth still will need local Internet service providers to link to KentuckyWired’s capabilities and build out the “last mile” to people’s homes and businesses. That’s why the announcement last month about Google Fiber potentially entering the Louisville market was met with such fanfare. Google Fiber, which is currently working on a feasibility study of the Louisville market, promises to bring 1,000-megabyte – gigabit – level connectivity through the last mile.

Google Fiber now provides gigabit service for $70 a month in three cities: Kansas City was first in 2013, followed by Austin, Texas, and Provo, Utah. Construction is underway in Atlanta, Charlotte, Nashville and Raleigh-Durham, N.C. Louisville is among a “next tier” of communities being assessed along with Portland, Ore.; Phoenix; San Jose, Calif.; Salt Lake City; and San Antonio, Texas.

A combination of KentuckyWired and Google Fiber services would give Louisville some of the best, most affordable Internet service in the nation by 2018, Hayden predicts.

Tech companies need investment funds

Louisville-based Jason Falls, senior vice president for digital strategy with social/digital PR firm Elasticity, is a founding member of Louisville Digital Association, a professional organization for marketing tech and social media marketing. Tech growth in Louisville is heating up, Falls said, but has a long way to go to catch neighbor cities like Indianapolis.

“One of our biggest problems is the investment community: Our angel investors are not willing to take risks on businesses they don’t understand,” he said. “For instance, Louisville had a great company created here – Backupify – that had to move to Boston because they didn’t have investor support here. We don’t need to keep repeating that mistake. We need a base of investor support, and coordinated help in general from the business community.”

That message, so often repeated in the tech community, is getting through.

James Seiffert, of the Stites and Harbison law firm, presented at TechFest about a potential new multimillion-dollar “double and triple bottom line” private equity fund for Louisville now being studied by Strategic Development Solutions and Economic Innovation International Inc.

DBL/TBL funds, as they are known, aim not only for traditional dollar profits but additional “bottom line metrics” such as community benefit or environmental responsibility. SDI’s website identifies DBL/TBL fund goals as market-rate returns to investors; investment in projects or businesses that create jobs and economic opportunity within low-income communities; and support for environmentally friendly and sustainable green buildings and activities.

Working together in various markets, SDI and EII have built DBL/TBL funds that, combined, surpass the $2 billion mark. And they hope to create a similar, multimillion-dollar fund in Louisville.

According to Seiffert, JP Morgan Chase, the Kentucky Cabinet for Economic Development, the University of Louisville, Kentucky Science and Technology Corp. and Kentucky Highlands Corp. all have expressed interest in funding a $250,000 study to assess whether the right investor pool can be created in Louisville. An affirmative finding would be an important step for a city that does not now have serious investment funds dedicated specifically to tech as its own vertical.

Lisa Bajorinas, director of the Kentucky Innovation Network, is quick to point out, however, that many tech entrepreneurs do find success getting funding from Kentucky accelerators dedicated to tech development in certain fields. Those focused accelerators include XLerate Health, for healthcare technology; Innovate LTC for aging-care technology; and Village Cap Ag Tech, with an agricultural tech focus.

Public entities help fill finance gap

Tech companies benefit also from the Kentucky Economic Development Finance Authority’s formation of Kentucky Angel Investors, an accredited investors group interested in putting money into Kentucky-based companies of all kinds. Fiscal 2015 was the group’s second year, and membership is up to 69 registered investors who meet regularly to hear pitch presentations.

The state is making it easier for tech investors with the Kentucky Angel Investment Act Program, which offers tax credits of up to 50 percent for investments in qualified companies that create jobs and promote development. Very popular immediately, at least 160 investments so far have been approved for 150 investors who’ve received tax credits of $3 million, according to Jack Mazurak, a spokesperson for the Kentucky Cabinet for Economic Development.

Kentucky is one of only four states that match federal grant money for startups from the Small Business Administration – up to $150,000 for Phase 1 companies and up to $500,000 for Phase 2. Last year, the state awarded 24 companies more than $6.8 million in matching funds on $12.4 federal grants, Mazurak said.

Many tech companies have also found support, Bajorinas said, through Kentucky’s longer-standing capital sources such as the Commonwealth Seed Fund, Enterprise Angels, Enterprise Angels Community Fund, Kentucky Enterprise Fund, and VenCap Kentucky.

“Tech is an exploding area of development, and one that we want to maximize for Louisville and the rest of the state,” Mazurak said. “We want to be sure we are removing as many obstacles as we can to developing here. As technology itself continues to evolve, the financial and technical barriers to entry for tech entrepreneurs are going down. We want to be part of that – encouraging entrepreneurs at all levels and ages to pursue their business dreams.”

A TechTown branch in Louisville?

Dreaming about a future in tech should start young, before children have a chance to decide a tech career is beyond them, according to TechTown, a non-profit designed to engage kids ages 7 to 17. The first Tech Town, in Chattanooga, Tenn., has been a beacon of STEM curriculum in the area; it has a vast facility capable of handling 400 students a day, and even adults for their “night out at TechTown” events.

“We take kids of every income level, from the lower-income schools to the private-school kids with their blazers on, and we sit them down beside each other,” said Paul Cummings, TechTown founder and a speaker at TechFest. “Our facility is full of the latest equipment, and the teachers are world class. By the time (students) have left after their program with us, they will have written their own computer game, or made a 3-D animated film, or designed and programmed a robot, or created an app.

“They’ll see that anyone can do it, including them,” he said. “And it makes them think differently about what is possible for their lives.”

The notion to bring Cummings to Louisville occurred when Yankeelov met him at a conference and suggested he begin working with Tech Councils to find expansion cities, starting, of course, with Louisville.

With the first TechTown successfully operating in Chattanooga, Cummings, a successful tech entrepreneur and investor, is looking to invest $750 million with his partner Cordell Carter in up to 200 locations globally, building them within 10 years. Currently he is looking at Portland, Ore.; Seattle and Tacoma, Wash.; New Orleans; Nashville; Gulfport, Miss.; and Washington, D.C. His speaking engagement at TechFest coincided with numerous meetings with area leaders about the project.

Getting TechTown to Louisville will take coordinated public support and foundation funding for a building and programs. However, Bill Weyland of City Properties is spearheading an effort to work on potential locations. Currently under consideration are potential sites at the Oak Street Corridor, near Spalding University; a location on one of the University of Louisville’s campuses; or maybe in Liberty Green, a multiblock mixed-use development located between UofL’s downtown medical complexes and NuLu, or a number of others.

Weyland also is funding a feasibility study to determine what foundations, individuals or organizations would be interested in helping fund the Louisville TechTown Foundation.

“We’re hoping that $2 to 4 million in investment can come from TechTown, and our market would match that with money from the foundation,” Yankeelov said. “If every thing goes well, we could be looking at opening in 2017.”

Talk of TechTown coming to Louisville has “turned a light bulb on” for the community, she said.

“People have seen this project happening and thought, if this is possible what else could we do? It was a key factor in getting the attention of Google Fiber; and it shows the city is taking a step in the right direction to develop a strong tech-savvy workforce,” Yankeelov said. “It is a sign Louisville is stepping forward, finally getting national attention, and will no longer be considered a ‘mid-tier’ tech community.”

Fertile ground for growing tech companies

“Louisville should blaze a trail so everyone follows us. If we leverage it right, we can do what Austin (Texas) did,” said Andrew Prell, CEO of Silica Nexus, a Louisville-based augmented-reality gaming company.  Prell is actively working toward a day when Louisville could be a global hub for augmented reality game development, and his company could be the “anchor tenant.”

It’s not as far fetched as it sounds. Prell was one of the early pioneers of augmented reality in the 1990s, with his company, Agora Interactive, rising to become one of the world’s two leading companies creating augmented reality, multiplayer, multilocation games.  Though that company has since dissolved, Prell says advances in devices, fiber capacity and programming have created what will be the new dawn of augmented reality – for the masses.

His new company, Silica Nexus, has a 14-person team and 120 volunteer developers creating what he calls the world’s first massive multiplayer, walk-through, cross-screen, cross-device, augmented reality game. The game can be played with everything from an Oculus headset to a simple Google Cardboard viewer to a high-end simulator.

He hopes to grow Silica Nexus, and one day organize a global augmented reality conference in Louisville that will put Louisville on the map as an AR hub.

Prell is not the only one who sees great things on the horizon for Louisville’s tech community. Others, like Yankeelov, point to the thriving Louisville tech community’s explosive growth in tech events, education organizations and hacker/maker confederations such as iHub Nucleus, Louisville Startup Weekend, KidTech Summit, Code Louisville, Level One, Louisville Build Guild, CIO Practicum, Louisville MUG, My Mobile Ville, Louisville Hardware Startup Meetup, and Louisville Cocoaheads.

Bajorinas points to announcements in the last six months of growing Louisville companies that have been acquired but plan to stay and expand as proof Louisville has staying power as a city that can grow tech companies. Specifically, she cites tech firms Stonestreet One, a Bluetooth software development company, and Indatus, a data analytics software and hardware provider, as part of this group. She also notes that recently acquired NicView, OPM Financial and Deyta are companies that use technology as their backbone but are considered members in other industry verticals.

Falls highlighted the continued growth of startups such as investing intelligence app company LikeFolio, business communications app creator RedeApp, and mobile video production app company Switcher studio, as proof that tech-driven companies can develop and grow comfortably in Louisville, too.

“You can feel the pace of innovation speeding up,” Falls said. “Our local tech industry is already running 10 times faster than it was just five years ago. If we keep up this level, I think we are on the front end of ‘hockey stick growth’ on the growth charts. If we can grow and build our tech community, if we can polish and combine our development resources, I think we are on the front end of an explosion of development.”