How Charlotte Became the South’s Capital of Capital

When BB&T and SunTrust announced earlier this year that they would join forces in the biggest banking merger since the global financial crisis—rebranding themselves as the curiously named Truist—there was really only one logical choice for the combined financial services giant’s new headquarters.

It wasn’t just that Charlotte, N.C., found itself conveniently located between BB&T’s Winston-Salem headquarters to the north and SunTrust’s Atlanta stronghold to the south. Nor was it entirely about Charlotte’s status as the nation’s #2 banking center, one that’s already home to Bank of America’s global headquarters and Wells Fargo’s largest East Coast outpost (a legacy of Wells’ 2008 acquisition of Wachovia, in the midst of the crisis).

If you ask those who live, work, and start businesses in Charlotte, what drew Truist to the fifth-fastest growing city in the U.S. last year, according to the Census Bureau, are the same factors that led Honeywell to relocate its own headquarters there last year and Lowe’s (which is based in nearby Mooresville) to select it last month as the site of a new “global technology center” employing 2,000 tech professionals.

For all the discourse about how the nation’s wealth is concentrated in our great coastal metropolises, the Queen City is in the midst of an economic renaissance that’s both attracting major corporations and sprouting dozens of new startups across a variety of industries.

At a time when millennial professionals from New York to San Francisco find their lives characterized by climbing rents, $ 9 beers, and toiling public transit systems, Charlotte is luring people from across the country with the promise of a better quality of life and a lower cost of living—satirical Onion headlines be damned.

“A lot of millennials are looking for quality of life: ‘Where do I want to live?’,” says Tariq Bokhari, a former Wells Fargo executive and entrepreneur who now serves as a Charlotte city councilman. Bokhari is also executive director of the Carolina Fintech Hub, which promotes new fintech startups in the Charlotte region.

“You look at Charlotte and you see the [warm] seasons and the affordability of the areas,” he notes. “It’s a three-hour drive to the beach and three hours to the mountains. There are 27 different breweries and a burning-hot job market… [Millennials] absolutely want to be here.”

This dynamic has benefitted companies both large and small, and has helped startups that have emerged from the city’s entrepreneurial community grow into major, $ 1 billion businesses. Charlotte now has no fewer than three “unicorns” valued at that magic number, with analytics software firm Tresata joining the ranks of digital marketing firm Red Ventures and payment software company AvidXchange last year.

“When you’re dealing with zero-unemployment, especially in computer engineering and software development, it is a national recruiting game,” says AvidXchange co-founder and CEO Michael Praeger, who started the company in Charlotte in 2000, only a few years after moving to North Carolina from Boston.

When AvidXchange is looking to lure tech workers from places like Silicon Valley or Boston, Praeger adds, “The majority of the time they’ve never actually been to Charlotte and don’t know what to expect. And when we bring them here—wow. Certainly the cost of living and the year-round weather is a big draw.”

Start me up

The Bank of America Corporate Center, which houses the financial institution’s global headquarters, in Charlotte, N.C. Photo: Chris Keane—Bloomberg via Getty Images

Charlotte, once considered a dyed-in-the-wool banking town, has given birth to an exploding startup scene in recent years—led by a fintech sector that has thrived on the support of local financial services heavyweights and accelerator programs, and extending to young, duly hyped software firms like Passport, Stratifyd, and MapAnything (which was acquired by Salesforce in April).

Organizations like the Carolina Fintech Hub and Queen City Fintech, both of which have backing from the likes of Bank of America and Wells Fargo, have helped develop the city’s entrepreneurial community. Queen City Fintech founder Dan Roselli, a former Bank of America executive and Red Ventures founding partner, runs the accelerator out of Packard Place, a coworking space where it incubates startups not only from Charlotte but from around the world—providing them with a mentorship network of 300 established entrepreneurs and access to fintech events and conferences where they can present to, and connect with, venture investors.

Roselli started the organization in the midst of the Great Recession in 2011, when the city was undergoing “an identity crisis” following Wachovia’s downfall and the near-collapse of the financial system. Since then, Queen City Fintech has helped its alumni raise nearly $ 2 billion from 45 different venture capital firms.

“One of the things Charlotte realized at the time was that entrepreneurship is a good thing to embrace,” he says. “When Wachovia went under, it was an ‘Oh no’ moment. We realized we needed to pivot toward fintech and innovation.”

Packard Place’s first tenant was a fintech startup called DealCloud, which develops deal management software for investment banking and private equity firms. Some seven years later, in August 2018, DealCloud was acquired by business software provider Intapp for an undisclosed price.

“I think what happened is that during the downturn a lot of people lost their jobs—but all of a sudden, you had a lot of smart people from financial services backgrounds who were able to go out and start businesses, either in financial services or as providers to financial services companies,” according to DealCloud co-founder Rob Cummings, who is now part of Queen City Fintech’s mentor network.

Roselli described fintech as “the tip of the spear that [Charlotte] used to build our entrepreneurial ecosystem,” which makes sense given that the region employs 82,000 finance and insurance professionals. Like Roselli, many of those professionals have gone on to pursue their own ventures—a critical component driving the city’s startup environment.

“I joke that there are more ex-Bank of America and ex-Wachovia people in Charlotte than there are current Bank of America and Wells Fargo people,” he notes. “That’s a good thing.”

The big banks have also come around to entrepreneurial-driven innovation as something to welcome, rather than be wary of as a potentially disruptive force. “They realized that disruption is going to happen, and keeping it close to you is a big advantage,” Roselli says, citing Bank of America and Wells Fargo among Queen City Fintech’s major sponsors.

In fact, many within the Charlotte startup scene consider this embrace of fintech as imperative to the city’s economic future, given how an impending wave of automation—widely seen as the future of the banking sector—could put thousands of financial services professionals out of work in years to come.

“One of the reasons I’ve been doing this is because for many years now, folks have predicted that within the next decade or so, one-third of all traditional banking jobs are going to be disrupted by fintech,” Bokhari notes. “For a city like Charlotte, that’s Detroit-level ramifications for us. We have a chance ahead of time to create what becomes the alternative for those jobs, like branch workers and call center workers, that are going to be gone.”

Boomtown

Wells Fargo’s trading floor in the Duke Energy Center in Charlotte, N.C. Photo: Davis Turner—Bloomberg via Getty Images

The fintech sector is not alone in driving Charlotte’s startup boom. Ask people active in the city’s entrepreneurial scene, and most will tell you that the majority of the new companies emerging from the local economy aren’t even financial services-oriented.

There’s an energy startup sector that’s growing via support from the likes of Charlotte-based Fortune 500 company Duke Energy, a major backer of the energy-focused Joules Accelerator program. IBM, meanwhile, is looking to boost the city’s healthcare industry, having recently teamed up with Queen City Fintech to launch a new accelerator targeting early-stage healthtech (as well as fintech) companies.

“Fintech is what we’re known for—it was our easiest entry point—but over half of the startups I deal with are not related to fintech at all,” according to Innovate Charlotte executive director Keith Luedeman, whose nonprofit promotes and supports entrepreneurs in the region.

Luedeman is another former entrepreneur-turned-advocate for the city’s startup scene, having pivoted after selling his own fintech startup, GoodMortgage.com, to the PIMCO-owned First Guaranty Mortgage in 2016. He, too, is part of Queen City Fintech’s mentor network; in turn, both Dan Roselli and the Carolina Fintech Hub’s Tariq Bokhari sit on Innovate Charlotte’s board.

The sum effect of all of this collaboration and advocacy has been an environment that—contrary to the cutthroat, dog-eat-dog world of entrepreneurship in other, larger markets—sees business leaders in Charlotte working together, to an almost unusual extent, toward a shared goal of success.

“I find the entrepreneurial community here extremely collaborative; I feel like we’re all in this together,” says Meggie Williams, the founder and CEO of dog-walking startup Skipper—a somewhat unique example of a consumer-facing enterprise that has made waves in the city’s startup scene. “There are advantages to being in a city with fewer degrees of separation between the people who are starting out and the people who already made it.”

Williams moved to Charlotte from New York City in 2014. Having left her job at IBM’s New York office in search of a more fulfilling lifestyle, the University of North Carolina graduate and her husband, Sebastian, found it two-and-a-half hours from where she went to college.

The couple founded Skipper in 2016, and so far have been able to find the funding they need to grow their business; the company raised $ 900,000 in a seed round last year, and is on the verge of closing a new $ 2.5 million funding round this summer, according to Williams. It’s also benefited from the city’s collaborative business ecosystem, counting the likes of DealCloud’s Cummings among its board members.

That’s not to say things are perfect for Charlotte entrepreneurs in search of capital. While expressing her belief that “there’s a ton of capital and opportunity” for startups in the city, Williams notes that “a lot of the funding here is risk-averse” compared to other markets—a sentiment that some attribute to the more cautious, banking-related capital that constitutes much of the city’s wealth.

In turn, most Charlotte startups have had to look to investors from outside the city for the money they need to expand their operations. Queen City Fintech’s Roselli, who also runs early-stage venture capital firm Carolinas Fintech Ventures, notes a gap in venture funding based in Charlotte—pointing to how few of the 45 venture firms that have invested in Queen City Fintech’s accelerator startups are actually located in the city. “There is no general venture fund in Charlotte; we have angel funds and growth funds, but we’re still missing that venture-tier in between,” Roselli says.

Still, he described Charlotte’s funding environment as being on “a journey, and we’re certainly on the right path.”

“Ten years ago, venture firms were investing only in New York and San Francisco, and they wanted you to move [your company] to New York and San Francisco,” Roselli adds. “That’s no longer true; they’re recognizing that there are great companies and entrepreneurs [elsewhere], and there’s value to be had.”

It’s a trend that’s undoubtedly caught on within the world of venture capital and private equity at large. As Mithril Capital’s Ajay Royan told Fortune earlier this year, “You can’t do a garage startup in Silicon Valley, because the garage is [worth] $ 4 million”—a factor that led Royan to move his venture capital firm’s offices from San Francisco to Austin, Tex., last year.

“More than three-quarters of our TMT [technology, media, and telecommunications] investments sit outside of the Bay Area,” according to Warburg Pincus managing director Mark Colodny, who runs the private equity giant’s TMT business.

Colodny notes that North Carolina has long been a point of interest for the Warburg Pincus, which has previously invested in Cary, N.C.-based software companies MercuryGate International and Dude Solutions (both of which are located in the Raleigh-Durham-Chapel Hill area known as the Research Triangle). Having exited those investments, the private equity firm still is “actively looking at Charlotte and Raleigh-based companies now.”

“The state for a long time has been moving jobs away from traditional industries, like agriculture and textiles, into tech—which, coupled with a strong university system, has created a very interesting community of talented software and fintech entrepreneurs,” Colodny says.

Tar Heel troubles

Rendering of the Camp North End office and retail redevelopment in Charlotte, N.C. Photo: Camp North End

For all that Charlotte has going for it, it wasn’t enough to draw Amazon, which didn’t even include the city in its final 20 markets under consideration for its hotly-debated “HQ2” sweepstakes. Bokhari was among the city stakeholders “leading the charge” to draw Amazon, and recalls building a consortium of business leaders for a pitch centered more around private-sector collaboration than public-sector incentives.

“I went around and said, ‘Hey, let’s get involved in this and send a message that all the banks are willing to open our doors and partner [with Amazon],” according to Bokhari. “It’s not about the government incentive package; here’s what the private sector will do for you.”

But it wasn’t to be, and Bokhari says he was “absolutely flabbergasted” when Charlotte didn’t make the shortlist. “The tiny blurb of feedback we got was, ‘Well, you guys don’t have the existing number of tech jobs that we’re looking for.’ What I pushed back with—and nobody [at Amazon] answered me—was, ‘What’s your strategy? You’re going to go in and poach people from other companies?’” In the end, Bokhari says he “lost faith that the [HQ2] process was even real.”

Meanwhile, the city’s business community continues to deal with the fallout from the Public Facilities Privacy & Security Act—the 2016 state law known as HB2, which sparked a national outcry for forcing transgender people to use the gendered public restrooms that correspond with their sex at birth. The measure drew myriad boycotts; PayPal abandoned a planned expansion in Charlotte, and the NBA relocated its 2017 All-Star Game from the city, to name only two.

Despite a subsequent partial repeal that removed the bill’s provisions around bathroom use, the law lingers as a reminder of the socio-political schism between North Carolina’s booming urban centers and more conservative rural areas, which in many cases have not felt the benefits of the state’s millennial-driven economic and cultural trends.

“People say that North Carolina is a purple state, and that’s not accurate; it’s bright blue cities surrounded by bright red rural areas,” says Roselli, who describes himself as “very progressive” in his social views. “HB2 was one of the greatest disasters in the last 50 years of North Carolina’s political history. There’s no question that it was a devastatingly bad bill.”

Roselli adds that as a result of the legislation, GV—Google’s venture capital investment arm—“wouldn’t come to [Queen City Fintech’s] Fintech Generations conference” in Charlotte, with the tech behemoth continuing to limit its dealings in North Carolina. While a GV spokesperson declined to comment for this story, Google also bypassed the state earlier this year for its planned $ 13 billion expansion of data centers and offices in 14 states (including neighboring South Carolina) across the U.S.

Yet that doesn’t change the fact that investors from around the country are considering Charlotte to an unprecedented extent. Few businesspeople need to be as attuned to the socio-economic dynamics of a given place as real estate developers, and those who build the spaces where people live and work are increasingly viewing the Queen City as an opportunity.

“We saw a city with a low cost of living, a very high quality of life, a progressive attitude toward urban infrastructure and planning, and a place where young people are moving for jobs,” says Damon Hemmerdinger, co-president of ATCO Properties & Management. “We saw trends in the economy, and the chance to create a product that we think is meeting a need.”

Though the Manhattan-based real estate firm has traditionally been focused on the New York City office market, ATCO saw Charlotte as primed for the sort of trendy, creative office space that startups have flocked to in markets like Brooklyn and Atlanta. That motivated it to acquire a 76-acre industrial site, located only a mile from Charlotte’s central business district, where Ford Motor Company once built Model T cars and the U.S. Army later built missiles.

Today, ATCO and partner Shorenstein Properties are at work redeveloping the sprawling property into a mixed-use, office and retail campus known as Camp North End. The site will eventually house roughly than 1.5 million square feet of commercial space, and could eventually include up to 1,500 apartments and a hotel.

Hemmerdinger describes the project as a “large-scale, adaptive reuse project that, in other places, is where companies from the tech and fintech world want to put their offices in.” Thus far, that appears to ring true; in addition to coworking spaces, design firms and galleries, Camp North End already counts among its tenants TM Studio, Ally Financial’s “innovation studio” where product engineers and developers design and prototype “new consumer banking concepts,” according to Ally.

Projects like Camp North End are necessary if the Charlotte’s infrastructure is going to keep up with prolific rate of growth it’s now witnessing. But it’s definitely growing—a city fueled by a perfect storm of economic and generational tailwinds that are now bearing fruit.

“Charlotte is, to me, an adolescent city,” as Innovate Charlotte’s Keith Luedeman put it. “Some days we’re very proud and boisterous, and some days we’re insecure and we don’t think we’re deserving of any of the recognition we get. We’ve got to show that this is a great place to found and grow your business.”

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