Chattanooga: The Tech Center for Logistics?

by Mallorie Ingram and Lucy Morris


Dynamo is capitalizing on the opportunity to make our city a world leader in the logistics technology industry.

Logistics.Graph1With unprecedented fusion of location, history, infrastructure, and contagious entrepreneurial spirit, Chattanooga is on the leading edge for growth in the logistics industry, supported by an ever-increasing demand for improved technology.  While technology continually supports the way business is conducted around the world, new innovations are dramatically changing how the logistics industry operates.

Like Silicon Valley became synonymous with the explosion of the tech industry, Hollywood the film industry, and Houston the oil industry, so Chattanooga is building on its history of warehousing and distribution to become a center for new companies and startups focused on innovative technologies that will drive greater, more efficient service around
the world.

How will that happen? Dynamo and the leadership of local entrepreneurs. What will it mean to Chattanooga? New jobs and potentially significant gains in economic growth.

A Global Perspective
Looking globally for a moment, consider other cities that have experienced massive industry-related economic growth.

Paris, France became the capital of fashion, a global industry now worth an estimated $1.2 trillion. Designers, fashion houses, and consumers all gravitate to the area known for its offerings. The city itself committed in 2015 to investing €57 million into the industry over the course of five years. Funds will support local fashion schools in hopes of teaching and retaining top talent, which will ultimately benefit the city as a whole. Already, more than 70,000 jobs in Paris are directly or indirectly related to fashion.

Closer to home, the draw of Silicon Valley is real for those seeking success and prestige in the tech world. Entrepreneurs flock to the area known for its venture capitalists, IPOs, and startup culture. Patent registrations in the area are at an all-time high. Investors and entrepreneurs alike see massive potential in this California-based collection of cities. Companies like Facebook, Apple, Netflix, and Google employ thousands of individuals each. The entrepreneurs behind them – many now household names (think: Facebook’s Mark Zuckerberg or Tesla’s Elon Musk) – continue to funnel money back into the city that made them household names.

Now, one local startup is ready to take on the responsibility of putting Chattanooga on the map as the capital for logistics technology. After all, the technology needed to store and move raw materials, or work-in-process inventory, or finished goods from one point of origin to another faster, better, and at much lower costs is in higher demand than ever before. In its second year, Dynamo is set to train and mentor worldwide logistics technology startups in hopes that they will stay here – in a city with a rich history of storing and moving goods by rail, road, water, and air across the U.S. and around the world. “Our ecosystem is among the most substantial in the US for a logistics hub,” said Weston Wamp, a principal at Dynamo. “Chattanooga has a real depth of knowledge and specialization in this industry which is uncommon in this size city.”


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Location, Location, Location
Given its current position in the industry and the level of investment being made behind logistics technology, Chattanooga is uniquely positioned to be a hub for the sector.

Per a report from Cambridge Systematics, the total volume of freight in Chattanooga is expected to grow from approximately 25 million tons in 2007 to 33 million in 2035.  The study, which was requested by the Chattanooga-Hamilton County Transportation Planning Commission, also notes that Chattanooga ranks first among all metropolitan cities for the movement of freight with roughly 80% of the nation’s freight passing through the city en route to its final destination. Considering our city’s location – the centrality puts 80% of the U.S. population within a two-day transit time – it’s not hard to see the opportunity for growth in logistics tech. As it stands now, 40% of the region’s economic output and 42% of employment come from logistics-dependent companies.

In 2016, according to CB Insight Research, $5 billion dollars was invested nationwide, largely by venture capitalists, in logistics technology. More than 10 times the 2013 level, these investments helped launch more logistics startups than ever before.

A History of Entrepreneurs Creating New Companies
For decades, Chattanooga has seen its own creation of transportation and logistics-related companies as a result of the favorable location and risk-taking entrepreneurs. The late Clyde Fuller started Southwest Motor Freight more than 50 years ago after he was unable to sell a tractor trailer, and instead used it as a hauling device. He sold the company in 1984, but not before planting a spark with his son, Max Fuller, and stepson, David Parker.

Fuller and Parker branched out separately and created two of the largest trucking and third-party logistics (3PL) companies and in the nation – U.S. Xpress and Covenant Transport, respectively. Today the two local enterprises account for more than $2.2 billion in combined revenues and employ thousands.

And those two companies are not alone. Kenco was founded by Jim Kennedy, Jr. and Sam Smartt in 1950. What started with a single warehouse in the early days, grew to what is presently a fully integrated logistics provider. Today, it employs more than 5,000 individuals and expects annual revenues to exceed $600 million.


 


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Founded by Bruce and Byron Trantham, Tranco hit the scene in 1995 and now houses more than one million square feet of warehouse space. The company recently announced its plans to go global with ocean and air shipping, along with import and export services. They will have the opportunity to work with over 180 countries.

And of course, one of the city’s greatest successes was Access America Transport – a company started in 2002 by Ted Alling, Barry Large, and Allan Davis. Their company was sold to Coyote in 2014, which was then bought by UPS a year later for $1.8 billion.

The focus of Access America was technology. With no actual trucks of their own, the owners concentrated on a better scheduling system for freight shipments. That focus doubled the company’s profits year after year, growing them to $490 million in annual sales before the company merged with Coyote.

Little did the fraternity brothers from Samford University in Birmingham, Alabama know, the business model they were putting together for Access America would lay the groundwork for their newest enterprise, Dynamo.

Clearly Chattanooga has a long history of entrepreneurs who have developed and led companies in the trucking and logistics industry. Now add the establishment of companies ready to introduce time and money saving logistics technologies for these businesses, and the city could be on its way to becoming the Silicon Valley of logistics technology.


 


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Infrastructure and Innovation
With the spirit of entrepreneurship at an all-time high, innovation in the Chattanooga area has never been greater. Of course, a major component of the city’s innovative culture is the hyper-fast internet. The world took notice when Chattanooga became the first in the western hemisphere to offer 10-gigabit-per-second fiber internet service to all residents and businesses. More importantly, tech innovators took notice and started relocating to the Scenic City.

In addition to the speedy internet service that drew new businesses to the area, state and city officials continued to lead initiatives focused on bringing entrepreneurs and creative thinkers to the Chattanooga area. Launch Tennessee, a state-sponsored, public and private partnership launched CO.LAB to provide resources and support for high-growth potential startups. Mayor Andy Berke established the Innovation District, a concentrated 140-acre mix of start-up businesses, business incubators, and accelerators, located in the center of downtown. The Enterprise Center, anchoring the district, works to attract and develop new businesses. On the NorthShore, the INCubator, run by the Chattanooga Area Chamber of Commerce, is one of the largest and most successful business incubators in the U.S.

Access America founders and entrepreneurs Alling, Large, and Davis started the Lamp Post Group, a business incubator that, from 2010 to 2016, invested $30 million into 22 different up-and-coming companies, ranging from advertising agencies to moving services, and everything in between.


 


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The Dynamo Team // L to R – Santosh Sankar, Katlyn Whittenburg, Weston Wamp, and Rachel Hanson // Photo by Rich Smith


 

 


Developing Dynamo
Born out of the offices of the Lamp Post Group is Dynamo, an $18M early stage fund laser-focused on partnering and investing in companies worldwide in the logistics technology industry. Alling, one of the founders, credits Jon Bradford, formerly of Techstars London, with inspiring them to move things forward, “Barry, Allan, and I discussed for a while doing an accelerator or raising a fund in Chattanooga, but the idea really took off after I met Jon Bradford in London while I was living there. Jon pointed out our strengths in the logistics industry with our investments in Access America, Steam Logistics, Bellhops, AAT Carriers, Reliance and Ambition. With Jon’s guidance, our ambitious founding team of five has set out to transform the logistics industry, worth over $4 trillion, globally.” Bradford now serves as Dynamo’s executive advisor.

The company is comprised of two major components – an accelerator program and an $18 million venture capital fund that invests in logistics technology startups that come to the program, as well as other opportunities around the globe.

The accelerator serves as a mentorship program for vision-driven company founders looking to better position themselves in the logistics industry. Dynamo has partnered with GE Ventures, Kenco, and Ryder, in addition to more than 100 mentors from across the industry to offer expert advice on topics like sales, marketing, design, engineering, and more.

As part of the accelerator program, each business must complete a 12-week session that is broken into three four-week-long phases. The first phase, Shape, is considered a high-level review where mentors are assigned and discussions are had surrounding the makeup of the company. Businesses identify risks, define their customers, and develop plans for key parts of their business, such as engineering, go-to-market sales, and marketing. The second phase, Build, forces founders to build on the feedback of the first phase and focus on further developing plans to drive sales and revenues. During the third phase, Sell, business owners finalize pilot plans and projected sales and profits, and are introduced to potential investors.


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Gaining Traction

Among Dynamo’s participating companies, many have already demonstrated some success in the marketplace, are established, and even profitable before beginning the program. According to Wamp, “We are always looking to recruit the best companies from all over the world, year-round.”

The inaugural Dynamo Accelerator program launched last July, featuring 10 carefully-selected teams chosen from a pool of more than 120 applicants. Of those participants, two companies, WorkHound of Des Moines, Iowa, and Locatible from Dublin, Ireland, elected to open offices in the Scenic City following the course.

WorkHound is a software platform designed to improve job retention by improving truck driver experience. Drivers share feedback – both positive and negative – anonymously with the carrier. In an industry that sees frequent employee turnover, the data collected can show valuable insights. Locatible offers real-time tracking for warehousing and health care.

A second iteration of the accelerator program is set to begin May 1. Santosh Sankar, director of the

Dynamo Accelerator said of the new participants, “The 2017 batch has companies from as far east as India to Germany and even companies from our own backyard in Atlanta. We believe that they each possess strong founding teams that are contrarian in thought, complementary in skill set, tenacious in approach, audacious with goals, and execution focused. We expect to see a variety of business models and solutions ranging from telematics, marketplaces, to predictive analytics and sales-centric software.”

With any luck, many of these new participants will also see the draw of Chattanooga. “We have a saying around here,” says Alling. “‘We stand on the shoulders of giants.’ Chattanooga has already established itself as a leader in traditional logistics and manufacturing. Now we are combining that industry expertise with advanced technologies and innovative business models in order to continue that leadership into the tech age. We want to lead the charge on LogisticsTech, and by doing that we will continue to lift the city to even greater heights.”