And they want to continue attracting customers.
So do cities, counties and states.
That’s why Rob McGowan, Sunrise Rotarian, sponsored Brett Steen to speak to the Sunrise Rotary at a recent breakfast session.
Steen is a medical device engineer with 15 years of experience in the field who holds four medical-design patents. He’s been working as a consultant centered out of Silicon Valley, Calif., but he was born in Cleveland and has officially called Signal Mountain home for the past 16 years.
“I’m now working out of the Tennessee Valley, not Silicon Valley,” Steen said. One reason that he’s concentrating many of his efforts in this region is because it mimics the Silicon Valley’s attributes in many ways, making it as much or more attractive to potential businesses, he explained.
But his purpose at the Sunrise Rotary was not to speak about medical research per se, but why his company, and others, are considering moving — either relocating or establishing entirely new facilities — largely from the famous Silicon Valley area to the Tennessee Valley and Southeast Tennessee.
People miss the point, he said. Money is the main factor when it comes to a company deciding where to locate or expand.
“It all goes back to money,” he said. And Silicon Valley offers a lot of venture capital funding and equity funding. “Fifty percent to 60 percent of VC funding in the U.S. comes from Silicon Valley.”
The rest comes from universities and local governments.
Another reason Silicon Valley is the center for research venture capital funding is because it has noncompete clauses as part of its state law. A noncompete clause is part of contract law which prevents one person, usually an employee, from pursuing work in a similar job or position that competes with someone else, usually their current employer.
“It all comes down to money,” he reiterated. “... This is why they’re the center of technology and development.”
But Silicon Valley isn’t perfect.
One big drawback with Silicon Valley is that manufacturing costs are 35 to 45 percent higher in California than in Southeastern Tennessee, he said. Property taxes are two to three times higher, as are the costs of utilities and the general higher cost of living — about 50 percent higher. In addition, California also has what Steen described as excessive environmental restrictions.
“Do the math,” he suggested.
Then add the greater traffic congestion, lack of parking and the smaller home lot size, on average.
“There’s a lot Southeast Tennessee can do to foster technology and development,” Steen said. For example, California is difficult for manufacturers. Companies are looking for alternative places. “This is where our area can step in ... but there has to be some greater incentive.”
Tennessee needs to get government and higher education to become active participants in the creation of new businesses, to create a positive cash flow, especially money for start-up companies, through venture capital partnerships and start-up funding, he said. Government expertise would also be beneficial to help with obtaining grants, and also to manage business development activities as profit centers, not just cost centers. Legislation to limit noncompete, invention and secrecy clauses in employee contracts would set a business-friendly, cultural precedent, Steen said.
“But it’s got to be tangible things,” he added.
Contrary to popular belief, certain reasons touted as attractions to businesses to move or do business in a certain area just aren’t reason enough, Steen said. They usually include a specific geographical location, infrastructure, workforce, the quality of school systems, having higher education facilities, the quality of lifestyle such as the arts, culture and parks and recreation offerings, and the entrepreneurial culture of the area.
“These seven are not a consideration to firms ... these don’t really do anything to bring businesses here. They don’t get businesses in the door,” he enlightened the listeners. “Providing venture capital does.”
“I’ve always strongly supported innovation capital,” said Doug Berry, vice president of economic development from the Cleveland/Bradley Chamber of Commerce and also a Sunrise Rotarian.
In other business:
- It was reported that the clean water project in Honduras sponsored by the Sunrise Rotary is progressing well. The club donated $5,000 toward making this project a reality. The building to house the clean water apparatus is now 66 percent finished and the people — currently from Nashville — who will install the actual water purification device have been selected. A ceremony will be held when the water purification project is completed. The Sunrise Rotary is committed to these clean water projects as part of the future. Currently, three people from the club are taking classes to become certified to work on the projects.