Charleston Positioning Itself As An Alternative to Crowded, Expensive Tech HubsSep 21, 2022 05:30PM ● By David Caraviello
The Silicon Valley of Northern California is the world capital of tech innovation, and home to many of the industry’s biggest companies. Austin, Texas, has emerged as a hub for startups and venture capitalists.
Calvin Lee has lived and worked in both places. And when the time came to choose the location of a new office for his current employer, the University of South Carolina graduate turned his eyes back to the Palmetto State.
Specifically Charleston, which has cultivated its own reputation as a buzzy tech locale dating back to when Blackbaud and Benefitfocus first arrived in the city. That effort has been aided by the establishment of the nonprofit Charleston Digital Corridor that focuses on high-wage, tech-oriented economic development, as well as the construction of the Charleston Tech Center, a building that opened in 2021 on the upper peninsula and has already reached 100 percent occupancy.
For Kontakt.io, the tech company for which Lee was tasked with establishing a national sales office, something else mattered, too — Charleston’s quality of life, and the allure it holds for potential employees.
“To retain talent, it’s really a priority to be in a great city that people want to live in,” said Lee, sales director at Kontakt.io. “When people are weighing the pros and cons of living here and breaking into tech, that gives you another opportunity to keep them.”
Lee said Kontakt.io — which provides smart building solutions particularly applicable to the healthcare and corporate sectors — wanted a location on the East Coast to facilitate collaboration with its European team, and also considered Savannah, Ga., and Charlotte. In the Kontakt.io release announcing the new Charleston office, chief revenue officer Rom Eizenberg raved about the food and nightlife scene downtown.
“We decided to avoid the tech centers in California and New York, instead looking for a location allowing a balanced lifestyle for our employees,” he added. “In Charleston we found a hub for young, college graduated talent (and) a growing tech scene.”
Ernest Andrade, founder and executive director of the Charleston Digital Corridor, has heard that plenty of times before. Charleston’s quality of life and relatively low cost of living — at least when compared to that of the San Francisco Bay area, Boston and New York — has helped the corridor expand from 18 companies to over 700, 51 of which are housed in the 92,000-square-foot Charleston Tech Center building.
“We recognize that a lot of these companies are headquartered in some of the major cities, and a lot of them are looking at developing outposts in second- and third-tier cities that are very attractive from a livability standpoint for their employees,” Andrade said. “The pandemic accelerated that trend of people moving to less-populated and more lifestyle-oriented environments.”
‘We celebrate the small’
Founded in 2013 with operations in New York; San Francisco; Berlin; and Krakow, Poland, Kontakt.io develops technology such as sensors and smart badges for use in indoor office environments. Its Charleston office — now listed right below the company’s New York headquarters on the Kontakt.io website — is located in Venture X, a co-working space in North Charleston. The office currently has four employees with plans to expand to 20 within a year, Lee said.
An organization of that size is consistent with most of the tech companies settling in Charleston, some of which are startups with just a few employees. The 51 companies based in the Charleston Tech Center building have 425 employees among them, Andrade said — which averages out to a little over eight employees per company.
“I tell people, we celebrate small all day long,” Andrade said. “There are organizations in town that want to celebrate the large blessings of the Googles of this world. We’re happy to celebrate the small, because I believe you hit a home run through a collection of singles. We’re happy to hit singles all day long, and have these smaller companies, and have that diversity of the economic base so we’re not dependent on one elephant.”
Andrade said he had no direct contract with Kontakt.io before the company decided to place an office in Charleston. “The reality is you don’t choose them — they choose you,” he added.
Lee, a Chapin native, said he had always been aware of the more established tech companies in Charleston such as Blackbaud. But tech outfits tend to gravitate to common geographic areas because they thrive on the culture of collaboration and innovation that a base of like-minded companies can provide.
Does he see that kind of culture in Charleston? “I do. I see it growing,” he said.
“I wanted to understand that there would be other management teams and tech teams coming in here, and that it would be an environment that is fostered to grow, because I do think that rising tide lifts all boats,” he added. “You want to be in a hub that provides you with opportunities, but provides a culture of tech where peers are discussing projects and everything. And so that was a huge part of it. I wanted to make sure we wouldn’t be the only show in town, and that there were others exposed to the startup, technical life here, and that that was part of the culture.”
That’s not by accident. Andrade recalls being in Bangalore, India, and picking a cousin up from work at a tech park that housed 300,000 employees from various companies.
“Everybody had on different badges, and it was SAP next to Microsoft, and it was just fantastic,” he said. “It becomes the ability to interact with like-minded professionals, and maybe to collaborate with them. Maybe they’re not competing on a product-to-product basis, but they are competing in the tech space for employees. So I think it’s a healthier attitude.”
Aiming for 100 tech companies
Andrade, who had previously worked for the city of Charleston for 28 years, lobbied for decades to bring a self-contained tech hub to the city. The Charleston Digital Corridor was formed in 2001 as an independent nonprofit within the city government. The breakthrough came in 2013, when the city bought a parking lot on Morrison Drive for $1.8 million, and leased it to the Corridor for 99 years at a rental rate of $1 a year. The facility receives tax credits because it’s in a federally designated Opportunity Zone, receives incentives from the county, and also collected infrastructure funding from the state.
Built in a public-private partnership with Iron Bridge Capital Partners — whose office is now in the Tech Center, along with that of the Charleston Digital Corridor — the $54 million facility was 70 percent leased even 18 months before it officially opened. Workiva (which provides cloud platforms), Cloud on Tap (Salesforce implementation), Zeriscope (telemedicine), Annata and Atlatl (both e-commerce platforms), QuicksortRX (hospital pharmacy purchasing), PlanSource (pharmaceutical benefits), and Conrex (automation of home rentals) were among the first tenants.
By this past July, barely a year after officially opening, the building was at 100 percent capacity. Why has it worked? The location near the intersection of I-26 and U.S. Highway 17 is critical, Andrade said, and don’t discount the allure of a downtown facility with convenient, adjacent parking.
And understanding the unstable nature of some tech businesses, the Charleston Tech Center also offers month-to-month leases. “We give (tenants) all the flexibility,” Andrade added.
There are also plans for a second building on the Tech Center footprint that will be taller than the six-story original structure. “We are committed to having something that would be absolutely unique, and would set us up for well into the future, and that is having 100 tech companies on this campus,” Andrade said.
When might a second building become a reality? “We’re doing engineering on it, but the numbers that are coming in right now, as you can imagine, are silly,” Andrade said, citing supply chain hiccups that have driven up construction prices. “I have a fully approved project ready to build, but the math doesn’t work. And I am not willing to bring a product to market that is not in keeping with what I would want to lease it for.”
Kontakt.io wound up at Venture X, Lee said, because it offered a space of the size that the office could grow into over the course of its first year in Charleston. But the presence of the Charleston Digital Corridor, and the community and culture it provides, remains evident to Kontakt.io even in their current accommodations in North Charleston.
“I’m meeting people and asking, ‘Oh, do you work at a startup?’ Those are conversations that have existed for a long time in Silicon Valley and Austin, and are happening here more and more,” Lee said. “Growing up here, and living in South Carolina in general, that wasn’t happening before. But that space and those conversations are definitely different now.”