MISSISSIPPI TECH
Nashlie Sephus sells a vision of the future to her hometown.
FOR NASHLIE SEPHUS, 35, her venture to create a tech hub on 14 acres of vacant lots and derelict buildings in the heart of Jackson, Mississippi, is not a moon shot, but rather a homecoming. For the past four years, Sephus has spent a good part of her time in Atlanta, where she is an applied science manager in artificial intelligence at Amazon. Earlier, she was chief technology officer of a visual recognition company called Partpic, which Amazon bought in 2016. She also founded the Bean Path, a nonprofit technology consultancy and incubator based in Jackson.
Now Sephus plans to create the Jackson Tech District, a 500,000-square-foot downtown hub that will include a maker’s space, an electronics lab, an innovation station, a photography studio, apartments, restaurants, and a grocery store.
Sephus will finance the $25 million project with loans, grants, private investments, and crowdfunding, and will funnel all of the profits into the hub’s upkeep and the Bean Path, now the Tech District’s nonprofit division. She expects to break ground by the end of 2021 and complete the work in three to five years. “My goal is to turn this space into a selfsustaining village where people can live, work, play, and eat,” she says, “and create technology that helps improve the world.”
Her road to real estate development was atypical. She received her undergraduate degree in computer engineering at Mississippi State University, eventually earning a master’s and PhD from Georgia Tech in Atlanta, and she did an internship at Delphi Technologies in Indiana during the 2008 recession. While she was there, eight employees from her team were laid off. She vowed then to build something where she could call the shots.
The idea for the tech hub came to Sephus in 2018, when she was looking for office space for the Bean Path. She focused her search on Jackson, in part to help revitalize it. While the area had long ago served as a bustling hub for Black-owned businesses, it had fallen into disrepair. “There still wasn’t a lot of Black ownership in large parcels of land, especially downtown,” she says. A tech hub resonated with investors and the city itself, which pitched in with a $500,000 grant, along with favorable zoning changes and a spruce-up of the surrounding streets, bringing life to the once-desolate area.
That all this should come from her still seems like a wild idea to Sephus. “Even though I helped sell a company to Amazon and started our own nonprofit,” she says, “it just never occurred to me that I, a young Black female, could buy a building in downtown Jackson, Mississippi.”
Among the local business owners who have invested in Sephus’s idea is Toni Cooley, CEO of Systems Electro Coating, an automotive parts and manufacturing firm. “I’m inspired by the fact that she is from Jackson,” says Cooley. “It’s very easy to leave and not come back. She is not that individual. She’s one who believes in adding value at an early age, and that impressed me.”
Initially, Sephus worried about how her employer would react. “I was so ready to get a little email saying, ‘Hey, you can’t do this.’ But Amazon has actually been very supportive,” she says. “I think a lot happened last year that contributed to that, with the killing of George Floyd and Covid. People are thinking differently.” Amazon will also offer a program to provide scholarships and instruction for teachers looking to improve their tech skills and workshops to help underrepresented communities gain access to tech.
The biggest difficulty Sephus has faced has been financing. She says three area banks initially turned her down. She put up $500,000 of her own savings, spent a year raising an additional $150,000 in a friendsand-family round, and closed on the property last September.
In the end, the appeal of the Tech District for Sephus has been the prospect of bringing investment to an area that had been left out. “People don’t expect anything good to come from Jackson,” she says. “So it’s up to us to build something for our hometown, something for the people coming behind us.”
“MY GOAL IS A SELFSUSTAINING VILLAGE WHERE PEOPLE CAN LIVE AND WORK.”
businesses during the pandemic, including Esoteric Brewing, which was co-founded by Mortar co-founder Brian Jackson.
With the corporate giants, the idea is to create B-to-B companies that can become part of the supply chain or an innovation link. “They understand that there are entrepreneurs on the ground who have ideas and the ability to facilitate the growth,” says Allen Woods, a co-founder and Mortar’s executive director.
Just north of the city, Mason, Ohio, provides more evidence that this corporate hub—German in its history and conservative by nature—is becoming a more dynamic place for startups. Mason is where you’ll find Peeyush Shrivastava and his company, Genetesis, which may revolutionize medical imaging. Genetesis has created an MRI-like machine, called the CardioFlux Magnetocardiograph, that can tell ER doctors in five minutes whether you are having a heart attack or something a lot less lethal, eliminating the need for a ton of intrusive, time-consuming testing. It represents a leap in emergency medicine.
Shrivastava is 25 and got the idea while he was in high school, most likely before the words venture and capital entered his vocabulary. He dropped out of Ohio State to start the company, as did another co-founder, Manny Setegn; a third, Vineet Erasala, left Case Western to join them. Despite his relative youth, even Shrivastava can savor the change in the Cincy startup community. “One thing that wasn’t available here a couple of years ago is risk capital,” he says. “The availability of risk capital means the availability of entrepreneurs to take risks.” One of his capital suppliers is Shark Tank titan and Dallas Mavericks owner Mark Cuban.
Corporate restructurings being what they are, Cincinnati is rich in science talent—people who can create innovative products and companies—which Mason’s civic leadership turned into an asset in economic development. “These big companies spit out smart people who become entrepreneurs,” says Michele Blair, Mason’s economic development boss. “A lot of the time, big companies just don’t know how to do it.”
In 2012, the town handed over some space in its community center to a health care startup to see what would happen. The result was Assurex Health, which uses genetic analysis to predict what medications will work best for patients under treatment for mental health disorders such as depression. That company grew from four to 400 employees and was sold in 2016 to Myriad Genetics for $225 million. Part of the operation still resides in the Mason municipal campus.
Mason eventually replicated the action in downtown Cincinnati, where CincyTech, the city’s technology incubator, has been the focal point of startup life. Mason, a CincyTech partner, built its own Tech Elevator on the town’s municipal campus. The idea, in fact, is to keep the line moving by creating a tech corridor running along Interstate 71 from Cincinnati to Columbus. The city of Mason has helped start or build 18 companies, attracting roughly $150 million in VC funding and creating 450 jobs and two exits. “We’ve learned to speak this language,” says Blair.
Or relearned it. In some respects, Midwestern cities and Rise of the Rest are trying to reinvent the past. In places such as Cleveland or Pittsburgh, the historic industries have left behind enormous institutional resources that haven’t been fully exploited. “The reality is, when you get on the ground, most of these tier-two or -three markets have a lot of the core ingredients—the university that is bringing kids in, big corporations that are sustaining the economy, and a deep industrial legacy,” says Hall. “And yet they have this problem.”
The essence of that problem has been the lack of a sustainable startup economy. In the past, there were company towns; today, towns full of companies is more like it. Cities such as Indianapolis, Denver, and Cincinnati, as well as a number of state governments, including Ohio’s, are now benefitting by focusing their attention on entrepreneurs. “There is more collaboration, which has been a problem in these cities,” says Case. Silicon Valley benefits from network density—that swirl of startup society in which entrepreneurs are constantly interacting and competing with one another. Plus, the culture tends toward caution away from the coasts, says Case. In Boston, the bias is toward yes—hearing a pitch and imagining how it might work. Elsewhere, it’s the opposite: What could go wrong?
Indianapolis is a good example of how evolution can happen and how a connected web of entrepreneurs can spawn company after company. The city has become a SaaS hub over the past 10 years. This phenomenon used to be known as a cluster: One company starts up and thrives, attracting others. Nike made Portland, Oregon, a sports center, for instance. In Indianapolis, that company was ExactTarget, which was co-founded in 2000 by one of High Alpha’s co-founders, Scott Dorsey, and became a power in hyperlocal digital marketing, eventually growing to 2,000 employees after Salesforce
“A lot of the time, big companies just don’t know how to do it. We’ve learned to speak this language.”
bought it for $2.5 billion in 2013.
ExactTarget was born in Indianapolis not because of any geographic advantage the city offered, but because its founders had moved there for various reasons. Dorsey was looking for an opportunity to put his MBA to work when his brother-in-law suggested they collaborate on a startup. They had a strong belief that digital marketing was the next wave. Kristian Andersen had gone to college in Indianapolis and then opened a design business. One of his clients was Dorsey. In 2015, the pair hatched High Alpha with two Salesforce executives who had moved to Indianapolis after Salesforce bought ExactTarget.
Their concept for High Alpha was an idea factory that could print high-value, high-growth startups on a regular basis: “We knew we wanted to do something with entrepreneurs and startups that was design-led with a capital D,” says Andersen. “And we wanted to do something for Indy,” which was to build a big, valuable business and draw a flood of capital and talent. And then, he adds, “the restaurants miraculously will get better.” (You think you’re a community booster? Andersen named his son Indy.) High Alpha now has a staff of 40 that operates a skunk works for entrepreneurs.
With the office closed by Covid-19, High Alpha had to reinvent itself on the fly. Several times a year, the company holds a “sprint,” a weeklong series of meetings designed to convert the best ideas into startups. Unable to meet in person, the founders assigned an entrepreneur-in-residence to create a tool for better remote collaboration. That tool became a startup called Filo.com, which helps users make better use of meeting apps such as BlueJeans or Zoom—for instance, by letting them create a whiteboard.
Along those lines, one of Andersen’s partners had the misfortune to buy a nightclub just before the onset of the pandemic. When live music shut down, music venues and music acts lost touch with their audiences. High Alpha’s solution is called Mandolin. It’s a company that connects bands and venues with their fans through paid livestreams but also through virtual meet-and-greets during which you can say hello to your favorite drummer. “It’s a down market for music, but there are huge opportunities if you can give arts managers and venues tools to produce revenue,” says Andersen.
Mandolin now has more than 65 employees. It’s led by co-founder Mary Kay Huse, another former Salesforce
“For me, the headline is ‘The business got better when they moved home.’ ”
executive. The company has signed deals with the City Winery chain and with Nashville’s Ryman Auditorium to stage livestream concerts. Music fans pay $10 to $25 for concerts and up to $130 for VIP meetups. Mandolin has also announced a $5 million seed round whose investors include Marc Benioff—founder of Salesforce.
The same of-the-moment inspiration begat Luma, the A.I. interviewing platform that High Alpha launched in February. Hiring has become particularly difficult in the era of remote work. Luma coaches interviewers through Zoom meetings with job candidates, and then helps the user edit and annotate the call and move the pertinent parts to other team members who are part of the hiring process.
High Alpha says it can launch a new company every four to five weeks, but it’s only one part of the Indianapolis startup flywheel. The city’s most eminent accelerator, TechPoint, counts legacy companies Lilly and Cummins among its partners. And its newest, Next Studios, is a venture shop designed to distribute startup know-how throughout Indiana.
The reach of the city’s ecosystem came into play in the creation of 120Water. The impetus for it came when Glover—who had previously worked for Angie’s List, health care company Hc1, and Compendium, a digital marketing firm—got worried about the water her kids were drinking and couldn’t find anything useful to measure the quality of the water in her home. “There was not a solution on the market,” she says. “I could get my DNA tested, but not my water.” In classic bootstrap fashion, she raised $130,000 from other entrepreneurs—including her cofounder, Chris Baggott, who also co-founded ExactTarget and Compendium—and was soon producing a water-testing kit for consumers, packing boxes on her dining-room table, which she had moved to her parents’ garage.
Glover soon realized that her biggest customers were not consumers but municipalities such as Pittsburgh—a city with an old infrastructure looking for new ways to manage it. To raise funds, she pushed Case’s Midwestern value proposition: “I know this capital will last longer; it is more efficient here,” she says. “That was actually an interesting selling point.”
And a successful one. Sales grew 250 percent last year, to more than $8 million, as the company added features such as testing for contaminants like arsenic in drinking water and for coronavirus in wastewater. 120Water nearly doubled its workforce and announced plans to hire 157 more workers by the end of 2022. And it will be easier to find them now that California and New York have lost some of their magnetism. “We don’t have mountains or the ocean or the coast of California,” Glover says, “but there’s been investment in public transit, in parks, and in culture.”
These are the kinds of opportunities Case has been envisioning for years. And they are luring talent back home. Take Understory, another ROTR investment. The company, which generates microforecasting models to insure businesses against severe weather risk (hail, for instance, is a big one for car dealers), was founded in Madison, Wisconsin, in 2012 but moved to Boston a year later to join an accelerator. The founders decided to move back to Madison in 2016, where the company thrived and became the rallying point of an increasingly robust startup hub. Says ROTR’s Hall: “For me, the headline is ‘The business got better when they moved home.’ ”
Is it realistic to think that Madison can become Boston? Or Indianapolis a new San Francisco? Absolutely, says High Alpha’s Andersen: “Markets like Madison, Nashville, Salt Lake City are just beginning to percolate. They have loyal citizenry who want to be there. It’s not where the wagon broke down.” High Alpha Innovation, a spin-off designed to export High Alpha’s magic, just signed a deal to expand to Madison.
Not all of the hinterland will benefit. Sorry, Topeka, says Andersen, but the scope of opportunity is defined by the presence of universities, talent, and legacy companies, which are thin on the ground in some places. But a lot of cities will be able to chase Case’s vision. It’s clearly happening in Miami and Atlanta and Denver.
Diehards remain. Some people still want to live in a vibrant tech hub on the Eastern Seaboard, close to beach and mountain getaways. And as 120Water’s Glover points out, even though the pandemic has made Indianapolis more desirable, today’s new work-from-wherever attitude means she also has employees in Boston.
But should they ever grow weary of paying $25 for a pizza, or engaging in a death match for a parking spot in the clogged streets of Back Bay, they are welcome to return to the wideopen spaces of the Midwest, where the startup culture is growing like corn in July.