Longstanding stereotypes of Appalachia conjure images of a backwater region blighted by poverty. Now the state of Ohio is working to change that perception by promoting the region as an emerging hotbed for startups in industries such as high tech and alternative energy.
Entrepreneurs like Craig Newbold, a software developer who grew up locally in the town of East Liverpool along the Ohio River between Youngstown and Pittsburgh, are betting on the area's future. Newbold returned home after retiring from an information technology career in Seattle to found software development firm Newbold Technologies in 2003, with the aim of creating local opportunities.
"To me, areas like this have a lot of diamonds in the rough," said Newbold, whose father made his living running a local filling station in the area once known as the ‘pottery capital of the world.' "People that want to live here have the aptitude and the ability, but need to be developed."
His 30-man operation, which specializes in enterprise applications for corporate clients, hires workers from rural areas and trains them alongside seasoned professionals. Newbold also founded a small technical school — NewLife Technical Institute — to provide certificate programs such as software development and medical transcription.
"We've created a domestic option to the Indian market," said Newbold. "What we're doing is creating an opportunity, at least in the technical field, for people to stay here."
Ohio has begun a new promotional push to bring entrepreneurs and investors to the historically industrial but blighted Ohio Appalachian region, which encompasses 32 central and southern counties that border Kentucky, West Virginia and Pennsylvania.
Home to old-line automotive and food-processing industries, the area was hit hard by the recession. The average income in East Liverpool's Columbiana County is $36,610, well below the Ohio state average of $48,098, according to recent government data cited in the Columbus Dispatch.
Among the region's positive features are abundant natural resources, major transportation routes such as the Ohio River and easy access to cities like Columbus and Pittsburgh. Perhaps most appealing to cash-strapped entrepreneurs are the comparatively low costs for rent and skilled labor.
"The region will stand up very well," said Ed Burghard, executive director of the Ohio Business Development Coalition, a nonprofit group charged with promoting the state's economy. "Here you can reach 70 percent of the North American population."
In addition, federal stimulus dollars are helping to finish a highway bypass for Route 33 around Nelsonville in Athens County, a multimillion-dollar project aimed at bringing more economic development. Tax laws are also favorable. Ohio charges no levy on a company's first $1 million in sales and no tax on goods sold to customers outside the state, two of several benefits resulting from sweeping tax reform in 2005.
Burghard said area residents, including many skilled laborers, have long demonstrated ingenuity in the face of limited resources and capital, from Prohibition-era whiskey stills to quilting, pottery and homemade canned goods. "If you look at the history of the region, it's marked by entrepreneurism — the concept of working for yourself," said Burghard, whose organization has been coordinating with local institutions such as Ohio University and the Foundation for Appalachian Ohio to help foster entrepreneurship.
Youngstown, often associated with the depressed U.S. automotive industry, has been recognized as one of the top-10 cities for entrepreneurs by Entrepreneur magazine.
The state recently launched an Enterprise Appalachia Web site here to help create broader awareness of the area, which during the downturn suffered a decline in manufacturing jobs and state budget cuts that resulted in layoffs.
"It's going to take some time," added Burghard, who expects the transformation of the area into a seedbed for new ventures "will be a 15-year process."
Those involved in bringing capital to this rural and often impoverished portion of the state said support for small and mid-sized businesses has been getting stronger over the past decade.
"Deals have gotten done; companies have grown and been successful," said Lynn Gellermann, an investor and president of Athens-based Adena Ventures, a $35-million early stage venture capital fund focused on Appalachian tech startups. "There's just a whole lot going on here now versus 10 years ago."
Adena has run point on a variety of local deals, creating syndicates that have brought in non-Ohio investors such as SJF Ventures of Durham, N.C., OCA Ventures of Chicago, and Mountaineer Capital of Charleston, W.Va., to name a few. Its portfolio includes ventures like Ed Map Inc., a provider of software that manages and distributes educational resources, and Game Plan Technologies, which offers coaches software to analyze game-related video and statistics.
The area has also attracted large corporations such as Boeing, TaTa, General Electric and Dow Chemical, which have invested in facilities in the area.
"I believe the region is poised at this point for the creation of many more startups, technology or otherwise," said Gellermann, who also serves as executive director of TechGrowth Ohio, a $15-million initiative that provides operational assistance to fledgling tech ventures.
In part, he points to the development of incubation centers such as Ohio University's Innovation Center and the Muskingum County Business Incubator among several regional catalysts for new technologies.
In Athens, a cultural oasis that likens itself to the "Berkeley of the Back Woods," the Ohio University Innovation Center now boasts some 13 resident companies, including several ventures seeded from university research. In 2008, the program generated 378 jobs and $15.9 million in labor income.
"Our community acts almost as a laboratory," said Jennifer Simon, the center's director. "We have companies run by faculty, companies that have university-based technology, and also individuals who were working out of their garage … and wanted a place with a professional presence to grow."
One recent success story occurred in January when Diagnostic Hybrids, a maker of medical diagnostic tests to detect flu and respiratory viruses that resided at the center for 20 years, was purchased for $130 million by Quidel Corp.
Despite such bright spots, significant hurdles remain. According to a recent Columbus Dispatch report, some counties in the area suffered double-digit percentage income losses during the recession, following a sustained period of improvement. Big job losses occurred in 2007 and 2008, when local auto-parts factories eliminated more than 600 jobs, the newspaper reported.
Innovators like Simon are undaunted by those trends.
"We still have pockets of poverty, pockets of unemployment," she said. "We're really changing that. We're really on a par and growing."