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Tar Heel Tatters: LGBT Law Strips the State of Business, Investment

As anti-LGBT ruling continues to make companies withdraw from North Carolina, has the state’s reputation already gone from Tar Heel to tarnished?

As Connecticut makes overtures to lure away Bank of America from its long-established headquarters in Charlotte, has North Carolina’s reputation already gone from Tar Heel to tarnished?

North Carolina’s divisive new LGBT law is leading to massive nationwide fallout, and multi-billion-dollar companies continue to withdraw investment from the state as some residents decamp to “friendlier” locations.

Bipartisan legislators from Connecticut sent a letter to the nation’s second-largest bank this month, inviting Bank of America to “move to a state that shares its social values and supports its LGBT workforce.” Economic developers in the liberal northeastern state are also circling a number of other established businesses in North Carolina.

"Our strategy in reaching out to companies is strategic, but opportunistically strategic," Catherine Smith, commissioner of the state's department of economic and community development, told the Hartford Courant.

The latest major player to pull the plug on North Carolina is Deutsche Bank, which withdrew this week from a facility upgrade that would have brought 250 new software jobs to the tech-heavy state.

But with 55 percent of North Carolina’s jobs filled by small businesses, it’s not just industry giants that have an impact on the economic landscape — and future — of this state.

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Wilmington, North Carolina, was voted the second-best city in America for people looking to start a business last year, according to Forbes magazine. A different poll put Asheville in its top three places for startups, with “making a living exactly how they want to” cited as one of the reasons people choose to live and work there.

But the state's new law, known as House Bill #2 or HB2, could effectively roll up the welcome mat for many an entrepreneur.

Earlier this week, 170 small businesses signed a petition calling for the bill to be repealed.

“North Carolina continues to be on the top lists of best locations for start-ups to grow, but now with the passage of this bill, the opportunity for investment, talent recruitment and general business growth is put at risk,” wrote the petitioners.

“I suspect HB2 will do just as much damage to local companies as Amendment 1 [2012’s ban on gay marriage] did,” said Danvers Fleury, chairman of Verified Studios, an educational technology consultancy based in Durham, North Carolina. “Shortly after that law passed, our best employee and his partner told us they were moving to Minneapolis. Their genuine concern: ‘What civil rights would our state take away next?’”

“My first job after college was at a Boston-based startup where a large number of the team identified as LGBT,” said Fleury. “I can say without a doubt that, after this legislation, they would never come and work with me down here.”

One startup sees the brain drain from within the eye of the storm.

“As CEO of a company that is developing a more efficient way for companies to hire employees, we see the effects HB2 is having,” Phil Garber of LineHire, which connects employers with job candidates,told NBC News.

“North Carolina competes for talent with other tech hubs such as NYC, Silicon Valley, and Boston,” said Garber. “HB2 puts North Carolina employers at a huge disadvantage when trying to lure hard-to-find workers to the state. If it is not soon repealed, HB2 threatens to undo decades of deliberate efforts and investment in bringing high-paying jobs to the state.”

Last month, heads of several tech firms sent a strongly worded letter to McCrory, urging him to repeal the law. Google Ventures, Alphabet’s investment arm, took its disdain one step further, announcing that it will not back any companies from the state until HB2 is repealed.

Related: North Carolina Starts to See Economic Damage from Anti-Bias Law

Even the most unlikely of businesses have a voice on the topic of HB2. Earlier this week, a porn site announced that it would no longer stream videos to anyone registered to a North Carolina IP address.

“We have spent the last 50 years fighting for equality for everyone, and these laws are discriminatory, which does not tolerate,” said Mike Kulich, a spokesman for the site.

Other sex-related and LGBT-oriented businesses are feeling the burn in different ways.

“HB2 has not directly affected our sales — at least, not yet,” said Matt Ferber of Risky Business, an upscale sex boutique in Durham. “If anything, it redoubles our commitment to serve those members of our community who would be marginalized by this law and the prejudice behind it.”

Other companies may have benefited from the law, though maybe not in a way its authors would appreciate.

“We've seen a 20 percent traffic increase in North Carolina,” said Chris Jackson, a spokesman for Pornhub website. “And the top search term for users from that state is ‘lesbian.'”