Scaling startups are setting up secondary hubs in these cities

America’s mayors have spent the past nine months tripping over each other to curry favor with Amazon.com in its high-profile search for a second headquarters.

More quietly, however, a similar story has been playing out in startup-land. Many of the most valuable venture-backed companies are venturing outside their high-cost headquarters and setting up secondary hubs in smaller cities.

Where are they going? Nashville is pretty popular. So is Phoenix. Portland and Raleigh also are seeing some jobs. A number of companies also have a high number of remote offerings, seeking candidates with coveted skills who don’t want to relocate.

Those are some of the findings from a Crunchbase News analysis of the geographic hiring practices of U.S. unicorns. Since most of these companies are based in high-cost locations, like the San Francisco Bay Area, Boston and New York, we were looking to see if there is a pattern of setting up offices in smaller, cheaper cities. (For more on survey technique, see Methodology section below.)

Here is a look at some of the hotspots.

Nashville

One surprise finding was the prominence of Nashville among secondary locations for startup offices.

We found at least four unicorns scaling up Nashville offices, plus another three with growing operations in or around other Tennessee cities. Here are some of the Tennessee-loving startups:

When we referred to Nashville’s popularity with unicorns as surprising, that was largely because the city isn’t known as a major hub for tech startups or venture funding. That said, it has a lot of attributes that make for a practical and desirable location for a secondary office.

Nashville’s attractions include high quality of life ratings, a growing population and economy, mild climate and lots of live music. Home prices and overall cost of living are also still far below Silicon Valley and New York, even though the Nashville real estate market has been on a tear for the past several years. An added perk for workers: Tennessee has no income tax on wages.

Phoenix

Phoenix is another popular pick for startup offices, particularly West Coast companies seeking a lower-cost hub for customer service and other operations that require a large staff.

In the chart below, we look at five unicorns with significant staffing in the desert city:

 

Affordability, ease of expansion and a large employable population look like big factors in Phoenix’s appeal. Homes and overall cost of living are a lot cheaper than the big coastal cities. And there’s plenty of room to sprawl.

One article about a new office opening also cited low job turnover rates as an attractive Phoenix-area attribute, which is an interesting notion. Startup hubs like San Francisco and New York see a lot of job-hopping, particularly for people with in-demand skill sets. Scaling companies may be looking for people who measure their job tenure in years rather than months.

Those aren’t the only places

Nashville and Phoenix aren’t the only hotspots for unicorns setting up secondary offices. Many other cities are also seeing some scaling startup activity.

Let’s start with North Carolina. The Research Triangle region is known for having a lot of STEM grads, so it makes sense that deep tech companies headquartered elsewhere might still want a local base. One such company is cybersecurity unicorn Tanium, which has a lot of technical job openings in the area. Another is Docker, developer of software containerization technology, which has open positions in Raleigh.

The Orlando metro area stood out mostly due to Robinhood, the zero-fee stock and crypto trading platform that recently hit the $5 billion valuation mark. The Silicon Valley-based company has a significant number of open positions in Lake Mary, an Orlando suburb, including HR and compliance jobs.

Portland, meanwhile, just drew another crypto-loving unicorn, digital currency transaction platform Coinbase. The San Francisco-based company recently opened an office in the Oregon city and is currently in hiring mode.

Anywhere with a screen

But you don’t have to be anywhere in particular to score jobs at many fast-growing startups. A lot of unicorns have a high number of remote positions, including specialized technical roles that may be hard to fill locally.

GitHub, which makes tools developers can use to collaborate remotely on projects, does a particularly good job of practicing what it codes. A notable number of engineering jobs open at the San Francisco-based company are available to remote workers, and other departments also have some openings for telecommuters.

Others with a smattering of remote openings include Silicon Valley-based cybersecurity provider CrowdStrike, enterprise software developer Apttus and also Docker.

Not everyone is doing it

Of course, not every unicorn is opening large secondary offices. Many prefer to keep staff closer to home base, seeking to lure employees with chic workplaces and lavish perks. Other companies find that when they do expand, it makes strategic sense to go to another high-cost location.

Still, the secondary hub phenomenon may offer a partial antidote to complaints that a few regions are hogging too much of the venture capital pie. While unicorns still overwhelmingly headquarter in a handful of cities, at least they’re spreading their wings and providing more jobs in other places, too.

Methodology

For this analysis, we were looking at U.S. unicorns with secondary offices in other North American cities. We began with a list of 125 U.S.-based companies and looked at open positions advertised on their websites, focusing on job location.

We excluded job offerings related to representing a local market. For instance, a San Francisco company seeking a sales rep in Chicago to sell to Chicago customers doesn’t count. Instead, we looked for openings for team members handling core operations, including engineering, finances and company-wide customer support. We also excluded secondary offices outside of North America.

Additionally, we were looking principally for companies expanding into lower-cost areas. In many cases, we did see companies strategically adding staff in other high-cost locations, such as New York and Silicon Valley.

A final note pertains to Austin, Texas. We did see several unicorns based elsewhere with job openings in Austin. However, we did not include the city in the sections above because Austin, although a lower-cost location than Silicon Valley, may also be characterized as a large, mature technology and startup hub in its own right.

A cyberattack knocked a Tennessee county’s election website offline during voting

After a distributed denial-of-service attack knocked some servers offline during a local election in Tennessee this week, Knox County is working with an outside security contractor to investigate the cause. The attack took the Knox County Election Commission site displaying results of the county mayoral primary offline during Tuesday night voting. The county resorted to distributing printed results during the outage.

“Tonight, Our web servers suffered a successful denial of service attack,” Knox County wrote on Twitter on Tuesday night. “Election results were not affected, as our election machines are never connected to the Internet.”

The day after the incident, Knox County Mayor Tim Burchett reassured voters that the attack did not compromise the vote. Election systems that can go online are far less secure than systems that are not able to connect to the internet.

“Although the crash did not affect the vote tallies or the integrity of the election, this is not something that should happen,” Burchett said in a statement. “I want to know what happened, and I think an independent review will help to determine that so we can move forward and work to prevent similar issues in the future.”

Burchett disputed outside claims that his office had acted “prematurely” in dismissing any risk to the integrity of the Knox County vote, reiterating that the county’s voting system “is never connected to internet, never at risk.”

In a report from Knox County’s IT Department, Director Dick Moran noted “extremely heavy and abnormal network traffic” consistent with a DDoS attack and observed that the IP addresses involved originated from both domestic and international locations. Moran drew a distinction between a DDoS attack that can knock servers offline and a hack intended to infiltrate systems or servers.

Sword & Shield Enterprise Security, a Knoxville-based security firm, has been contracted to conduct an analysis of the attack and “determine the exact nature” of the server’s time offline.

The county site that was affected by the attack only displayed results to the public, it did not receive or tabulate them. Still, DDoS attacks are sometimes used as a diversionary tactic to create chaos. TechCrunch has reached out to Sword & Shield with additional questions about the sophistication and extent of the attack.

Given its enhanced coordination with states as part of recent initiatives to secure national election systems, TechCrunch has also been in touch with Homeland Security about its role in providing support to Knox County and will update this story when we have more information.

VW Atlas Cross Sport concept shows hybrids have an exciting future

If this is the future of hybrids, I’m all in. Volkswagen just took the cover off its Atlas Cross Sport SUV, which features a plug-in hybrid drive powertrain that features two electric motors and a V6 engine. Together, they produce 355 horsepower. And it looks great, too.

The inside and out of this concept is loaded with future-leaning technology including a massive screen, digital cockpit and a seemingly endless amount of LEDs. The center infotainment system can be controlled by touch or gesture though since this example is just a concept, it’s unclear if gesture controls will make it into production.

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The powertrain is the most exciting part. The Atlas Cross Sport is equipped with the same 3.6L V6 engine found in the standard Atlas. But the Cross Sport features dual electric motors with a 54 hp motor in the front and a rear motor that outputs 114 hp. An 18.0 kWh lithium-ion battery housed in the vehicle’s central tunnel powers the battery. Volkswagen says its configuration allows the output to be 355 HP, up from 310 hp if a conventional hybrid system was used.

The company expects the SUV to hit 60 mph in 6.5 seconds, thus proving it’s worthy of the Sport badging as the regular Atlas runs 60 mph at 7.9 seconds.

The concept features several drive modes though it’s not clear at this time if the production vehicle will have similar abilities. In E-Mode, the vehicle drives on just the rear motor and has a range of around 26 miles. Like the Chevy Volt

Volkswagen says this is headed to production, too, with a 2019 release. The company’s Chattanooga, Tennessee facility will build the vehicle.

This concept is built off the MQB platform that’s responsible for the seven-seat Atlas. In this variation, the vehicle is 7.5 inches shorter than the Atlas though the wheelbase is the same. It shows the flexibility of the platform, which can result in a traditional 7-seat people hauler or a 5-passenger sports SUV with different powertrains and dimensions.

Volkswagen is not alone in adding hybrid powertrains to SUVs. Ford announced two weeks ago it intends to offer five hybrid SUV models in the coming years.

Hybrid systems could see a resurgence in popularity as models such as the Cross Sport show they can be used for more than just increasing fuel economy.

BMW and Lexus look to car subscriptions

More automakers will soon offer vehicles through subscription services. Lexus today announced its upcoming UX crossover would be available through one and Bloomberg published a report today stating BMW is about to announce a subscription pilot.

These automakers join a growing list of makers offering models through new financing vehicles. Currently, Volvo, Cadillac, Ford, and Porsche have a service that ditches traditional financing in favor of a more flexible and innovate way to drive the latest car. Several startups, like Dover and Fair, are also looking at this market as demand increases.

Current subscription services live between short-term rentals and several-year leases. Most of the services give users the ability to swap vehicles or bundle insurance with the cost of the vehicle. The goal is to offer consumers the latest vehicles as efficiently as possible.

The Lexus UX will be the first vehicle Lexus offers through a subscription.

Likewise, BMW is reportedly about to launch a pilot subscription next week in Tennessee. Apparently, it will be called Access by BMW and offered by a local BMW dealership.

Terms of both the Lexus and BMW service have yet to be announced.

Here are the top states and cities for startups in the South

The American South may not be the first region that comes to mind when you hear the phrase “hotbed of tech entrepreneurship,” but, slightly misguided perceptions aside, it’s home to a diverse and growing collection of startups.

Here, we’re going to take a deep dive into the startup funding data for the region.

What is “the South?”

Just like it’s a common pastime for many city dwellers to argue about the precise boundaries of neighborhoods, there’s often some disagreement about the exact contours of the U.S.’s various regions. To quash rabble-rousing from the get-go, we’re using the U.S. Census Bureau’s definition of “the South” on its official map of the United States. Below, we display a map of the states we’re going to look at today.

Much like barbecue, the South is not a monolithic concept. So to incorporate some regional flavor into the following analysis, we’re also going to use the same regional divisions that the U.S. Census Bureau uses.

By doing this, we’ll be able to get a better idea of the relative contribution states from each sub-region make to startup activity in the South overall.

The ebb and flow of deal and dollar volume

As is the case with most of the country, the South appears to be experiencing a shift in startup funding as we move toward the latter half of a bull run in entrepreneurial activity. The chart below shows a divergence in overall deal and dollar volume over time.

Much like in the rest of the U.S., reported deal and dollar volume are heading in different directions. Part of this may be due to reporting delays — it can sometimes take a few years for seed and early-stage rounds to get added to databases like Crunchbase’s . Nonetheless, there is a slow and generally upward creep in round sizes at most stages of funding. And that’s not just a Southern thing; it’s a country-wide trend.

Let’s disaggregate these figures a bit. We’ll start with deal counts and move on to dollar volume from there.

A closer look at southern venture deal and dollar volume

In the chart below, you’ll see venture deal volume broken out by sub-region.

Over the past several years, reported venture deal volume has been on the downswing. From a local maximum in 2014 through the end of 2017, it’s down almost 35 percent overall. But that’s not the whole picture. The relative share of deal volume has changed, as well.

Although it’s not immediately clear just by looking at the chart above, startups in the South Atlantic sub-region have accounted for an increasingly large share of the funding rounds. For example, in 2012, South Atlantic startups attracted 54 percent of the deal volume. In 2017, that grows to 64 percent. Startups in the West South Central sub-region have pretty consistently pulled in between 28 and 30 percent of the deals, so where’s the loss coming from? Startups headquartered in Kentucky, Tennessee, Mississippi and Alabama pulled in just 8 percent of deals in 2017, compared to 18 percent in 2012.

It’s a similar story with dollar volume.

In general, dollar volume follows the same pattern, albeit with a bit more variability. Regardless, startups in the South Atlantic sub-region are hoovering up an ever-larger share of venture dollars, and there’s little to indicate that trend will reverse itself any time soon.

Where are the regional hotspots for deal-making in the south?

Let’s see which states accounted for most of the deal volume. The chart below shows the geographic distribution of deal-making activity by startups in each Southern state from the beginning of 2017 through time of writing. It should come as no surprise that much of the activity is concentrated in states with higher populations.

And here’s the distribution of dollar volume among southern states.

Despite some variation in which states are at the top of the ranks, the share of deal and dollar volume raised by startups in the top three states is remarkably similar, coming in at between 52 and 53 percent for both metrics.

The top startup cities in the south

We started by looking at the South as a whole and then drilled into its sub regions and states. But there’s one layer deeper we can go here, and that’s to rank the top startup cities in the South.

In the interest of keeping our rankings fresh and timely, we’re covering activity from the past 15 months or so, from the start of 2017 through mid-March 2018. But before highlighting some of the more notable hubs, let’s take a look at the numbers.

In the chart below, you’ll find the top 10 metropolitan areas where Southern startups closed the most funding rounds.

The chart below shows reported dollar volume over the same period of time.

Much like we saw at the state level, the top five startup cities — ranked by both deal and dollar volume — are the same, although there’s some variation between where each one ranks. In order, the D.C., Austin and Atlanta metro areas rank in the top three for each metric, while Dallas and Raleigh, NC switch off between fourth and fifth place.

Startups capitalize on the nation’s capital

To be frank, Washington, D.C.’s top-shelf ranking was a bit of a surprise. It may be the fact that Austin, TX plays host to South By Southwest, a somewhat more relaxed culture and/or a preponderance of excellent breakfast taco and barbecue joints, but to many — ourselves included — the city feels like it would have a more active startup scene than the nation’s capital. But that’s not exactly the case. The D.C. metro area had more venture deal and dollar volume than Austin for seven out of the last 10 years, and startups based in the nation’s capital have raised more than twice as much money so far in 2018.

D.C.-area startups have recently raised some notable rounds. Just a couple of weeks prior to the time of writing, Viela Bio raised $250 million in a Series A round (in late February 2018) to continue funding research and testing of its treatments for severe inflammation and autoimmune diseases. And on the later-stage end of things, education technology company Everfi raised $190 million in a Series D round that had participation from Amazon founder and CEO Jeff Bezos, former Alphabet executive Eric Schmidt and Medium CEO Ev Williams. Other D.C. companies, including Mapbox, Upside.com, Afiniti and ThreatQuotient, have all raised late-stage rounds within the past 15 months.

Startup ecosystems in Southern cities may pale in comparison to places like New York and San Francisco, but it wouldn’t be wise to discount the region entirely. A large number of interesting companies call the lower half of the Lower 48 home, and as the cost of living continues to rise on the east and west coasts, don’t be surprised if many current and would-be founders opt to stay down home in the South.