By Kaitlin Morton & Jacqueline McGraw
Although Nashville is growing its tech scene, it’s not trying to be the next San Francisco. This sizable metropolitan city brings a unique twang to tech that incorporates its rich musical history and provides a roadmap for neighboring cities looking to attract tech talent without losing their southern charm.
Learn more about the tech policy landscapes of San Francisco and Nashville by watching sf.citi’s Mapping the Tech Exodus conversation with Greater Nashville Technology Council President and CEO, Brian Moyer, below.
Nashville is known as the city of country and blues, but it’s quickly gaining a name for tech as well. As Nashville continues to grow, it appears ready to embrace a continued tech boom while preserving its creative legacy and small-town atmosphere. Ranked eighth on the 2020 Milken List of Best-Performing Cities, Nashville boasts a fast-growing tech sector and overall job market. Amazon’s Operations Center for Excellence in downtown Nashville, for example, is expected to add 5,000 jobs to the region in 2021. Facebook also opened up a data center in Nashville, and gas delivery startup Yoshi recently announced that it’s moving its headquarters from San Francisco to Nashville.
I think what it’s going to look like in five or ten years is all sorts of tech talent is going to come here.
—Bryan Frist, CEO of Yoshi (Source: News Channel 5, Nashville)
In a conversation with sf.citi, Brian Moyer, President and CEO of the Greater Nashville Tech Council, explained that “Nashville came into 2020 with a huge amount of momentum.” Although Nashville is home to a much smaller tech ecosystem than, say, San Francisco, Moyer described Nashville as “one of the fastest-growing economies and tech sectors in the country.” He noted that the city has seen a “steady stream of tech companies choosing to either pick up and move to Nashville or expand to Nashville. “
Indeed, between 2014 and 2019, the Nashville metro market experienced a job growth rate of 19.1 percent. Net tech employment, meanwhile, rose by 39.6 percent between 2010 and 2019, adding close to 18,000 jobs. Valued at $17.2 billion, tech now accounts for 5.1 percent of Tennessee’s total economy. And Nashville’s tech expansion shows no sign of slowing in the near future. Between 2019 to 2024, experts predict Nashville’s tech sector will grow by another 16 percent.
San Francisco’s tech future, meanwhile, remains uncertain. On the one hand, venture capital investment in San Francisco companies was higher in 2020 than in 2019. Tech hiring in San Francisco also appears to be on the rise, though it’s not clear whether new jobs will actually be in San Francisco. On the other hand, San Francisco tech employers are announcing permanent remote work policies and downsizing their San Francisco office space at a much faster clip than employers in other cities.
NASHVILLE & SAN FRANCISCO SHARE HALLMARKS OF TECH SUCCESS
It’s not surprising that Nashville has seen a massive bump in its tech talent pool as more companies decide to put roots down in the South. After all, Nashville shares many of San Francisco’s key ingredients that make for a successful tech city.
Robust University System and Tech Talent Pipeline
The importance of universities in building ecosystems of innovation cannot be overstated, now more than ever. The global demand for emerging technologies such as artificial intelligence (AI), machine learning (ML), and the internet of things (IoT) is expected to fall short in filling positions by at least 30 percent through 2022. That means that tech companies are on the hunt for reliable sources of talent.
The Bay Area’s access to two of the top research universities in the country has always set it apart from other regions when it comes to tech hiring. San Francisco is less than an hour away from Stanford University and the University of California, Berkeley, two of the nation’s best engineering schools. These two universities, in fact, played a major role in shaping the Silicon Valley we know today. If you extend the search further across the state, California boasts five of the top ten engineering schools in the United States.
While Nashville may not have the same name-brand schools traditionally associated with tech, it is among the 50 largest college towns in the country. Nashville is home to 125,000 students spread over 20 different universities, including the prestigious Vanderbilt University. Other universities in the area include Middle Tennessee State University—Nashville’s largest—and Belmont University. Like San Francisco, Nashville’s robust university system provides access to a highly-skilled workforce. In fact, the city’s population has a higher-than-average education level with over 40 percent of adults in Nashville possessing a college degree or higher.
Diverse Tech Workforce
Nashville’s tech workforce is slightly more diverse than traditional coastal tech hubs like San Francisco. 26 percent of tech workers in Nashville are women compared to 23 percent in San Francisco, and 23 percent of tech workers in Nashville are people of color. In San Francisco, only 8 percent of tech workers are Black or Hispanic.
This is certainly a draw for tech companies, many of which have set diversity requirements across their employee base. Just a few weeks ago, Facebook and Twitter signed the Silicon Valley Leadership Group’s 25×25 pledge, committing to fill at least 25 percent of their executive roles with people from underrepresented groups by 2025.
Musical Legacy and History of Entrepreneurship
In addition to the more well-known factors that fuel a thriving tech economy, Nashville has something extra: its iconic music landscape. Just as San Francisco’s legacy as a refuge for creative thinkers offered a natural segue to its bustling tech scene, Nashville’s musical prowess lends itself to the current tech boom.
What I see as the real ‘X factor’ that sets Nashville apart is its iconic music city brand.
—Brian Moyer, President & CEO, Greater Nashville Tech Council
Moyer pointed out that there are similarities between the requirements to be a successful musician and the requirements to be a successful software developer. He himself transitioned from a career in music to a career in tech. Many of Nashville’s most iconic musicians risked everything for their dream (hello, Dolly Parton)—a phenomenon familiar to almost every one of today’s biggest tech founders and CEOs.
In other words, Nashville, like San Francisco, has entrepreneurship baked into its DNA.
Tech-Friendly Business Climate
The tax landscape is the one area in which Nashville has a clear competitive advantage over San Francisco. Tennessee consistently ranks as one of the lowest-cost states to do business. With no state income tax, Tennessee is an ideal location for business—especially when it comes to creating a welcoming environment for tech companies in Nashville.
Ranked among the top 20 states on the Tax Foundation’s Business Tax Climate Index, Tennessee sets itself apart from California, which comes in second only to New Jersey as the state with the worst business climate.
After listening to what was going on in San Francisco, Seattle, and New York, we walked away wanting to make sure we don’t follow in those footsteps . . . The theory is that we want to keep things affordable. We want to attract business because that’s what’s going to drive the economy.
—Brian Moyer, President & CEO, Greater Nashville Tech Council
Moreover, local leadership in Nashville consistently demonstrates its support for the tech and business communities. While Nashville is a blue dot in a red state, Nashville’s recent mayors have all supported the state trend of keeping the tax burden low on businesses. “And I don’t see that changing,” said Moyer. For Nashville’s local politicians, tech and business are considered significant assets to the local economy, and they want to continue to attract startups through affordable tax structures.
In contrast, San Francisco has passed eight business taxes over the last ten years, translating to at least one new business tax almost every election cycle. In the November 2020 election, local voters passed three business taxes that will further increase the cost of doing business in San Francisco. That said, many companies are willing to eat the cost because San Francisco has proven itself an incredibly effective environment for accelerating tech worker productivity far beyond the national average.
POTENTIAL TECH GROWING PAINS FACING NASHVILLE (AND FAMILIAR TO SAN FRANCISCO)
It’s clear that Nashville’s tech scene is expanding—fast. While generally viewed as a good thing, will a sudden tech boom create unforeseen consequences? Alternatively, are there any obstacles to tech’s continued growth?
The short answer: no place is perfect. Challenges await Nashville, just like they do every other emerging tech hub. We take a look at a few potential barriers that may hinder tech from expanding its footprint in Nashville.
Will Nashville be able to navigate rising tension between Democrats and Republicans, especially when tech as an industry tends to lean left? Nashville may be a blue city, but it is surrounded by a sea of red. After former President Donald Trump was famously banned from social media, Andy Ogles, Mayor of Maury County in middle Tennessee, called on state leaders to “dump big tech.” “If the president of the United States can be sentenced and silenced by these companies without due process, then so can anyone,” Ogles wrote in a formal letter to Governor Bill Lee and members of the 112th General Assembly.
With tech companies increasingly taking stands on social and political issues, Tennessee’s divided political landscape may prove problematic for tech companies and their ideological workers. At the same time, some could argue that Nashville offers more political diversity than coastal cities like San Francisco, whose city and state leaders are overwhelmingly Democrat.
San Francisco and the Bay Area are all too familiar with the dilemma of tremendous job growth without adequate infrastructure. Although housing affordability was a problem long before tech arrived, there is no denying that the tech-fueled demand strained San Francisco’s pre-existing housing shortage. As it stands, 82 percent of San Francisco households cannot afford to buy a home in San Francisco.
If Nashville does not want to go the way of San Francisco, the question remains: will Nashville be able to grow its tech population while keeping housing prices low?
According to Zillow’s Home Value Index (ZHVI), home values in Nashville are expected to rise by 10.3 percent over the next year and have grown 50 percent over the last five years. Furthermore, a Redfin study revealed that the home buying budget of out-of-towners moving to Nashville is 48 percent higher than that of average local buyers. It should also be noted that Nashville increased its property tax by 34 percent in 2020.
Even after this increase, Moyer believes Nashville is right in line with other major cities and counties in the state in terms of overall affordability and tax burden. However, Nashville was ranked among the top five cities most likely to experience a housing crisis. Financial news company 24/7 Wall St. argues that Nashville’s housing prices are rising so rapidly that it could prove “disastrously unsustainable.”
According to Moyer, Nashville has attempted to mitigate the impact of increased housing demand by streamlining its building permit process. He also highlighted the fact that Amazon committed $2 billion to build affordable housing in Nashville along with its two other headquarter communities, Seattle and Arlington.
The challenge of developing transportation infrastructure to accommodate greater population density is another issue with which San Francisco has first-hand experience. Like its housing supply, San Francisco’s transit systems have struggled to keep up with the job boon of the last decade. Talking to sf.citi, San Francisco Chief Economist Ted Egan noted that car commute times in San Francisco increased by 22 percent and bus commute times increased by 10 percent between 2009 and 2019—the same time period during which tech jobs in the City more than tripled.
As Nashville increases the number of tech jobs, can the city’s public transportation and highway systems support the corresponding uptick in population?
If recent history is any indication, Nashville may not have the political will to adapt its transit infrastructure. In 2018, a $5.4 billion transit infrastructure plan to raise Nashville’s sales tax, hotel-motel tax, business and excise tax, and car rental tax to fund significant mass transit projects headed to the ballot. In the end, however, Nashville voters overwhelmingly struck it down.
WILL FUTURE TECH WORKERS CHOOSE NASHVILLE OVER SAN FRANCISCO?
Nashville offers a case study not only in how to build a tech ecosystem, but how to do so in a way that honors its cultural legacy. Equally important, Nashville leaders view tech as a natural and welcome extension of its history—a sentiment sometimes lost in cities like San Francisco and Seattle. Moyer noted that tech workers moving to Nashville are relocating because they embrace Nashville’s culture and want to be a part of it.
We don’t want Nashville to be the next San Francisco or Silicon Valley. We want Nashville to be the best Nashville it can be.
—Brian Moyer, President & CEO, Greater Nashville Tech Council
Longtime San Francisco residents will do all they can to convince you of the qualities that make San Francisco so special. The San Francisco and California “vibe” is, in fact, among the factors most cited by its leaders as a guarantor of the region’s success after COVID-19. For tech workers that capitalize on remote work to broaden their horizons beyond the City by the Bay, cultural richness could very well be something they seek. And while Nashville is ready to compete on that front, there’s no denying the centuries-old, enduring allure of the California Dream.
Kaitlin Morton is a graduate from the Pennsylvania State University and 2021 CORO Northern California Fellow. As part of her fellowship, Katilin completed a six-week placement at sf.citi during which she supported sf.citi’s marketing, programming, and advocacy work with prominent tech companies in San Francisco.
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