Charleston's tech scene, dubbed “Silicon Harbor” by PeopleMatter’s Founder & CEO, Nate DaPore, has come a very long way since the naval base shutdown in the mid-90s. In fact, the entire area has seen rebirth and growth, along with a diversification of industries, becoming a hub for travel and leisure, and, of course, the massive influx of new residents.

And for the past several years, our tech scene has grown considerably; notable IPOs have occurred, companies have expanded operations, and startups abound. This is due in no small part to the wonderful support offered by Charleston Metro Chamber of Commerce, Charleston Digital Corridor (Ernest Andrade), and new-comers The Harbor Entrepreneur Center (Patrick Bryant and John Osborne).

But for the past two years, we have lagged behind¹ and are not getting the traction in new, pressworthy, fundable ventures (and before you say "but Zubie!", please realize that Zubie is a spin-off of a Best Buy incubator, it is a corporate initiative). Though, I would point to PhishLabs as a rising star². So why is this?

To begin, I would like to point out that despite Charleston's booming economy, we are still relatively small. With just over 700,000 year-round residents, we have around two-tenths of one percent of all of the people in the United States. Now, we have been fortunate to count among us exceptional startup founders rooted in Charleston: Shawn Jenkins, Nate DaPore, Mitchell Davis, and Grier Allen immediately come to mind. But they are exceptional. Unfortunate as it may seem, Charleston cannot do a talent search within its own boundaries and expect to come up with more than a handful of truly capable entrepreneurs. So what do we do? How do we create more exceptional, high-growth startups right here in Charleston?

Well, the solution, of course, looks simple on paper, the trick lies in execution. All we need to do is recruit talented entrepreneurs from around the world; we need to make Charleston the next hub for extremely motivated self-starters.

Here is a list of ingredients we can blend to cook up a more innovation-friendly Charleston³:

1. Presence of a Top Research University

Our local universities have done a fantastic job of attracting out-of-state students. But are they just looking to surf and tan, or can they bring more to the table? We need to continue to bolster our computer science, mathematics, life sciences, and business programs. I know that CofC has made strides to expand these departments (CofC School of Business is on the rise), so I would cut them a little slack… nevertheless, keep pressing forward. MUSC has a long standing tradition of producing Life Science innovations - thumbs up! In the future, I would expect that the allocation of funding towards departments with positive quantified results (without negatively impacting departments related to the humanities and the arts) would net a higher retention rate of top talent. Let's make these programs more competitive - bring in the top professors from their fields⁴.

2. Grade "A" Mentorship

We need to keep in mind that there are three major requirements for founders in considering relocation: opportunity for mentorship, availability of capital, and quality of life. Tweak these, but be strong in at least two areas. Take Y Combinator for example. The mere notion of working alongside Paul Graham and numerous other incredible mentors brings in applications from around the world; no matter that the amount of money is relatively small (though good enough for the period of time spent there). Truly exceptional founders want to surround themselves with the absolute best, and Charleston is in short supply when it comes to the caliber of mentorship required to attract potential high-impact startups⁵.

There's no easy way around this - we either have to cultivate these mentors from within through ultra-successful ventures, or recruit them away from other big tech hubs. This would be akin to recruiting a major league pitcher to join our minor league team when he just received the Cy Young Award. Now, maybe if we upgraded our franchise to a lower ranking MLB team, we might have a shot, if we grant him a huge signing bonus. We're not quite there yet, but I believe that we are in the process of creating/recruiting more of these types of mentors.

3. Monetary incentives to relocate (no strings attached)

We've got SCRA funding local businesses with up to $200k in loans - the infusion typically does not occur until there is significant traction or an opportunity to invest in tandem with a seed or series A. Awesome stuff. But what I'm talking about is a little more radical, and a lot riskier. Let's go to San Francisco, New York, Chicago, London, Paris, and the rest of the world, and offer cold hard cash for the relocation of exceptional, promising young entrepreneurs and their companies to Charleston. In order to offset the lack of stellar mentorship to attract promising entrepreneurs, Charleston needs to be prepared to pony up big time. Flagship 3 is a good example of investing in the infrastructure, but we also need to be supporting fledgling companies with convertible debt or equity investments in the range of $100-500k⁶. This can be accomplished through public and private programs. Let's explore the latter with angels.

4. Angels who actually invest in high risk startups

The reluctance of angels in this community to invest in promising startups stems from a chicken and egg scenario. Angels aren't investing in droves because of a lack of solid pipeline; startups aren't relocating to Charleston because of a lack of funding. This is where Silicon Harbor will continue to be hamstrung.

Angels, I don't blame you, and I have no room for judgement. But there has to be a way to get more of the money that you are willing to invest into the startups that matter most to you. For the angels that get together but are not seriously considering investments yet, please find something better to do with your time. If you are conducting due diligence, but just having bad luck, I understand.

Quick example: The Angel Capital Group. ACG participated in the Series B for GreenWizard back in Fall 2013, as did SCRA. But GW was not as high-risk by the time it was raising its series B. They just needed capital to fuel their expansion. A company like this will never be short of capital opportunities as they can find many viable sources of funds. It's the early stage startups who don't stand a chance without assistance.

During the same period, angels were passing on startups left and right because they didn't have strong fundamentals or they were merely "ramen profitable"⁷. But what a fair amount of angels don't understand is that the best entrepreneurs will pivot away from an unsustainable business model; they will create competitive advantages where there were none, and they will carve out a niche once they get a better view of the market. Not supporting these types of entrepreneurs from the very beginning means that they either burn out or move somewhere more supportive.

The flipside is that there is not enough deal-flow in Charleston to create a diversified portfolio of early stage startups; so ultimately, we can't blame angel groups for not jumping in just yet. We have to break this cycle soon, and it has more to do with importing talented individuals than anything⁸.

5. More Accelerators

You may be reading this and wondering, "Well, we already have an accelerator. Why would we need more?" The Harbor Entrepreneur Center has by no means saturated the demand for mentorship; actually, its rapid expansion has proven that there is more demand than we could have possibly anticipated.

There has yet to be a successful for-profit early stage startup accelerator in Charleston. What I propose is that angels and VCs come together to form an accelerator capable of recruiting startups from all over the nation, and even the world. I propose that they raise $10 million a year to fund between 40 and 50 early stage companies (in exchange for equity) that have a wish to stay in Charleston. Within five years, we can create dozens of medium to high impact organizations, who can in turn attract more talent from outside Charleston. The kicker: all these founders have to do is walk in the door with a product and nothing more.

But what about the companies that need mentorship but not funds? For now, there really isn't a great answer to that - perhaps they will just move here to be a part of the community. After all, it's not like we have anything else to offer than our city if they don't want money.

6. A wonderful place to live and thrive

I'm not sure how much I need to elaborate here. Charleston is a beautiful city with a rich culture. We have amazing beaches, beautiful weather, world class restaurants, nightlife, and young people everywhere. It's just a great place to be.

But to thrive, Charleston's tech scene needs a sturdier back. We need more people who are willing to roll up their sleeves and do the dirty work, those who can follow in the footsteps of great resources like Startup Weekend, SPARC's Hackathon, or the Corridor's CODEcamp. The more we can internally foster growth in tandem with external recruitment, the more diverse and robust our knowledge community can be.

Charleston can cash in on that in a big way and continue to attract more talent; we can build great companies that can in turn hire great people who subsequently inspire larger companies to open offices in Charleston due to a burgeoning pool of available talent.

Just as initial user acquisition in a startup is an arduous, manual process that evolves into a scalable system, we too must put in the hard work up front to reap future rewards. Once we lay a solid foundation, then we will be able to sustain rapid growth in our tech industry.

In conclusion: what are we waiting for? Let's go do this.

Notes

[1] A couple of weeks ago, the Post & Courier ran this article citing the 2014 Milken Institute Best-Performing Cities Index as evidence that our "local tech industry surged in 2014." However, if you look at the list, you will notice that we were ranked #4 for 5-yr relative HT GDP growth; but we were ranked #34 for 1-yr relative HT GDP growth. So our 5-year relative HT GDP growth was 26.79% above the national average, and the 1-year relative HT GDP growth was only 3.74% above the national average. Clearly a number of cities traded places with each other (for instance, Baton Rouge, LA jumped from #99 to #6), but since these numbers are relative to other cities, what exactly does that mean for year-over-year growth? Those stats were not revealed, but they did say that our HT location quotient was 0.96 which ranks us at #70 in the nation. This survey does not clearly suggest our high tech industry was surging in 2014; in fact, it's pretty ambiguous as it never labels the national average for high tech GDP growth. I would also like to add that neither in the article nor the Milken Index was high tech defined. Does it include high tech manufacturing (Boeing and its suppliers)? I even downloaded the 51 page report provided here, and I still could not find an answer. I would really like to hear some feedback from the community on this topic.

[2] Kudos to Charleston Digital Corridor for incubating this company.

[3] At first, what we are going to see is that a large number of these startups will fail; by their nature, these ventures are very unpredictable and will meet their demise for various reasons. But, if we are offering the kind of ecosystem that Silicon Valley or Austin have, we may be able to save a fair number of these failing yet promising companies.

[4] I realize this is easier said than done; all of it requires either more funding or higher tuition rates. I'd also like to add that students need to become lifelong learners and leaders in order to make an impact in the Charleston knowledge community. They need to break things and put them back together in new and meaningful ways. They need to fail... hard. And eventually those who haven't become disenchanted with entrepreneurship will have achieved long term success.

[5] The mentors we do have, save for a few, are not jumping in to lend a hand. Are they too busy? Are the entrepreneurs not a good match? Or is there just a lack of interest there? Most likely, it has more to do with the fact that they have very little skin in the game. Most mentors need to be invested and have a stake in a startup in order to put a significant amount of effort into someone else's enterprise.

[6] Why the big range? Startups come in all shapes and sizes. Some require more capital, some less, and, of course, some are further along than others. Just like you can't set a one size fits all valuation, you can't apply the same amount of funding to every startup, otherwise, some will be underfunded and others will be overfunded.

[7] http://www.paulgraham.com/ramenprofitable.html

[8] I would like to point out one shining example of a relocated startup: Echovate. Matthew Gough decided to move to the area from New York last year in order to grow his predictive hiring platform. Gough is a serial entrepreneur with deep connections in his space; we need more talent like him.

Thanks to Paul Swiergosz, Tim Wolf, and Graham Seymour for reading drafts of this.

Rivers Evans is a Sales Engineer with Toptal, connecting the world's top 1-3% of software developers with startups, businesses, and other organizations. Based out of San Francisco, CA, and with a network spanning the globe, Toptal is backed by a16z, Ryan Rockefeller, Adam D'Angelo, Lucas Nealan, and Dave Hersh. Rivers is a former co-founder of InciComm, a public safety software company in Charleston, SC. He received his BA in English from Hampden-Sydney College. He can be reached at riversevans@gmail.com and followed on Twitter at www.twitter.com/riversevans.

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