When Nicolas Perkin was brainstorming his new online trading company last year, he considered launching it in New York or San Francisco.
Instead, he went with an unlikely choice: New Orleans. Using $1 million of their own cash, Perkin and partner Justin Brownhill this summer set up the New Orleans Exchange, a virtual marketplace for companies that buy and sell accounts receivable, invoices and other assets used as collateral for business loans.
Their reasons: comparatively low rents, low salaries and a steady stream of qualified graduates from local universities, such as Tulane and Loyola. The city's rebuilding fervor was also a hook, Perkin, 36, said.
"The whole city is in start-up mode," he said. "You walk to work, and you hear hammers and drills all the way. And you're thinking, 'They're building the city, I'm building the business.' The entire experience lends itself to start-ups."
While more than 4,000 businesses in New Orleans and surrounding parishes scattered or closed after Hurricane Katrina in 2005, firms are now moving in, particularly in the media and Internet-technology fields. Nearly all the 420 member companies of the Louisiana Technology Council fled after the storm, said Mark Lewis, the council's president. But since Katrina, the non-profit group has signed 340 members, a quarter of which are new, he said.
Unlike manufacturing or retail firms that may fear losing assets in future floods, tech companies are highly mobile and could continue operating even in repeat storms, Lewis said. "I'm very encouraged by the activity we're seeing in the technology sector," he said.
Construction and travel still remain the biggest industries in the area, said Loren Scott, a Baton Rouge economist and retired Louisiana State University professor. But post-Katrina incentives, such as tax breaks and research-and-development grants, will likely draw more IT companies, he said.
"They're clean, white-collar, mobile," Scott said. "And certainly if they come here, they're going to get all the incentives they want."
Part of the rebuilding
The area still has its challenges, including troubled schools, crime and high insurance costs, state officials said. But New Orleans is also drawing entrepreneurs willing to rough the bumps to be part of the city's $100 billion rebuilding effort, said Barbara Johnson of Greater New Orleans Inc., a public-private economic development agency. "We're seeing this region re-emerge as the new entrepreneurial frontier," she said. "New market niches are emerging."
Emerging markets are not new to Perkin. Originally from Manhattan, Perkin got his first taste of New Orleans while at Tulane University, where he graduated in 1994 with an English degree. He worked as a trader for Smith Barney in New York but got bored within six months and moved to Hong Kong to work as a freelance writer, he said.
In 1995, he helped start a magazine, Velvet, in Prague, the Czech Republic, just as the former Soviet satellite was entering the free market. When the magazine failed to make money, Perkin moved to New York City and worked through a variety of high-power positions, including investment banking and consulting start-ups.
By 2004, he was helping build up Massive, a pioneer in video game advertising. Perkin helped grow the company from a handful of staffers to 150 employees and a major share of the video game advertising market, he said. Microsoft bought the company last year for more than $200 million, according to published reports. Perkin declined to disclose the sales price.
Perkin got the idea for the New Orleans Exchange while trying to invest his personal earnings. He noticed there wasn't a centralized marketplace for so-called factoring companies, which buy accounts receivable from other businesses at a discount, then collect the bills and keep the difference.
He called Brownhill, 36, who had sold his Lava Trading company to Citigroup and was a top manager at the bank. Brownhill immediately liked the concept, Perkin said. The two agreed on New Orleans. Perkin sold his Santa Monica, Calif., beachfront home and moved to New Orleans last month with his fiancée, a Baton Rouge native. Perkin and Brownhill hope to raise another $4 million by September and to open on Jan. 1.
The company aims to expand into global markets, so New Orleans' widely recognized name made it an attractive choice, Perkin said. "Whether you're in Paris or Tennessee, you mention New Orleans, and people know exactly what you're talking about."
Using the same technology that runs the New York Stock Exchange's bond trading, the New Orleans Exchange will allow companies to sell their receivables to banks, hedge funds and other institutions in an online auction format, Perkin said. The technology allows banks to check credit and trade histories at a stroke of a button and makes it easier and quicker for companies to sell their receivables for cash, he said.
The firm has set up in roomy SoHo-style lofts in New Orleans' Central Business District, space that would cost three times as much in New York City, Perkin said.
The goal of the company is to make New Orleans synonymous with the electronic trading of receivables the way Chicago is known for commodity trading and New York for stocks and bonds.
"This is a new model," said Paul Ellis, the firm's vice president for business development. Ellis graduated with an MBA from Loyola University last summer and was quickly recruited by Perkin. "It's an evolution of asset-based lending."
Perkin said he is still raising money from venture capitalists in New York and California but said he's confident the region will soon begin breeding its own capital institutions, along with a steady influx of IT companies. He's started the New Orleans Entrepreneurs Club, which has scheduled its first meeting this month, and plans to stay.
"I'm personally excited to see what this city will become in the next five years," he said. "I think it's going to be amazing to watch."