Brian Smiga, TEDxAsburyPark Founder and Co-founder of Alpha Venture Partners, interviews Jay Bhatti, partner at Brand Project VC and TEDx speaker on “Innovation Everywhere” spreading outside Silicon Valley, New York City, Boston as a result of COVID-19.
Brian Smiga: This is Brian Smiga with TEDxAsburyPark podcast. I’m here with one of our top 2016 speakers, Jay Bhatti, a partner at Brand Project Venture Capital. Getting together at TEDxAsburyPark with Jay and at Bell Works caused us to engage the New Jersey community in some challenging projects that we call Brand New J, and to collaborate with tech leaders and like-minded VC partners.
You can meet 25 like-minded speakers and 500 open-minded audience members at our all day, sold out event in May, 2022 at Two River Theater, which will focus on the topic of “Joy.” So, today Jay Bhatti is going to share with us about the Joy of Innovation Everywhere, Jay’s next big idea worth sharing.
Jay Bhatti: Thank you for having me, Brian.
Brian Smiga: Great. Great, good to see you, man. So “Innovation Everywhere”. Tell us why this is a big idea and why it’s good for America.
Jay Bhatti: As we’ve seen, when the pandemic hit in March of last year, a lot of people started having to work from home. And then when it became clear it’s going to be happening for a long time, a lot of people moved out of densely populated cities and got a rental place, moved into their parents’ places, or bought something with a little bit more space and often not in the same city or state or country. And after doing this for about five, six months, a lot of companies and individuals realized, “Hey, we can actually be very productive doing this. And it makes a lot of sense from a work and quality of life standpoint.”
Jay Bhatti: So it really took on a life of its own across the country where people are like, “Do I really need to be commuting two hours into New York City or two hours into the Bay or LA. And now it’s impacting the Innovation Economy because a lot of tech companies have said, “You know what? We don’t need to be in the Bay area.” A lot of financial, ecommerce, and other startups have said, “We don’t need to be in New York City.” There’s been a mushrooming effect of these companies moving to places that they feel are better for them and their employees. And that’s had a big impact in the political landscape for a lot of cities and states.
Brian Smiga: So, let’s focus on ideation, innovation, startups. Why can innovation happen in a distributed way rather than in the Bay area or New York city or Austin?
Jay Bhatti: For the Innovation Economy, what’s happened is that lot of people have realized that, capital will go wherever the talent is and talent will go wherever they feel most welcome. If you look at the mayor of Miami, Francis Suarez, he’s been doing a highly active recruiting project of getting tech people to Miami, and it’s worked.
Brian Smiga: Yeah.
Jay Bhatti: Mayor Suarez is convincing people in the Bay area to move to Miami, people in New York to move to Miami. And so the talent is moving. Capital is not confined to the East or West coast anymore. And so capital will follow the talent. And I’ve seen just a dramatic effect when you look at Austin, Texas, where companies like Oracle and IBM have moved big operations there. But a lot of tech companies have said, “Hey, we’re moving out of the Bay area into Austin.” Because the ecosystem there is right for them, it’s a politically safer environment, less regulation, more freedom to do what you want, easier access for employees to get the things and services they want out of the public community. Whether it’s good public schools or lower cost of living, or more open space to raise a family.
Brian Smiga: Yeah. And on top of all this, we can’t ignore taxes. Taxes and the tax burden to entrepreneurs and investors is much lower in Texas and Florida than it is in California, New Jersey, Chicago, New York City.
Jay Bhatti: Right. The one thing I will push back a little bit is that a lot of people make the issue completely about taxes. They say, “It’s all about taxes.” And I say, “No, it’s not,” because for 50 years, people moved to very high tax cities to build great stuff.
Brian Smiga: Right.
Jay Bhatti: Whether it be centers in New York city or the Bay area, they never cared, because they said, tax for a lot of people was like, “Hey, that’s a cost of business. As long as the ecosystem is good. As long as there’s an innovation ecosystem here from public policy, to founders, to regulation, to ease of doing business, that’s good.” The ease of doing business in San Francisco and New York is very challenging now. That’s just the reality. And a lot of people are moving for that reason.
Brian Smiga: Yeah. And I think what’s also happened is we’ve all realized across all industries that we can work remotely successfully, that the tools are there. They were probably there before the pandemic, but now not only have we mastered those tools, but there’s a cultural change. There’s a behavioral change where we’re willing to meet, like we’re meeting right now. So this distributed innovation is good for the environment. Let’s talk about that.
Jay Bhatti: If you imagine a hundred thousand less cars coming into New York city every day, right?
Brian Smiga: Yeah.
Jay Bhatti: Or people having to buy less things in order to come into the office and buy less clothing and buy less accessories and services, because they have to be in the office every single day. I think there is a strong case to be made that the technology we have today from video conferencing to high speed internet makes it possible for us to create a productive workforce that has to only move about 20 feet from their bedroom, right?
Brian Smiga: Yeah.
Jay Bhatti: And that will have positive impacts for the environment. And there’s a lot of startups already launching out there that are trying to cater to that. I think if you look at one of the biggest industries that grew in 2020 was home decor, but home office decor was a big one as well, too.
Jay Bhatti: So people are saying, “How do I have a better home office?” There’s actually startups right now that are building backyard sheds as home offices. So they’re basically saying, “Hey, we’ll make a nice little 400 square foot home office for you that you’ll feel like you’re the King of your castle,” and you’ll be able to do productive work. You’ll have a lot of natural sunlight. I actually think that’s a really good thing for the environment, for the person working in that environment and then for the ability to be productive.
Brian Smiga: So this trend towards innovation happening everywhere, including in innovation hubs, close to the industries they serve has been going on for 20 years, but a big acceleration today. So tell us about innovation hubs that are adjacent and close to the industries that they might develop for.
Jay Bhatti: Well, think about life sciences hubs. New Jersey used to be the leader in life sciences investing capital. And I think Jersey has a chance to make that happen again with the Evergreen fund, with Horizon being able to now invest in startups and innovation companies in New Jersey. I think a lot of the work that Governor Phil Murphy’s done to really focus on Innovation Economy is going to help New Jersey with all its pharma companies to be able to expand and accelerate the number of tech companies that are built to serve that pharma industry. And that gives us a leg up on places like Boston and San Diego that have leapfrogged us in the past several years.
Jay Bhatti: Austin is a great innovation hub where Austin has a lot of CPG, consumer packaged goods startups. Whole foods is headquartered there. Whole foods has built a whole ecosystem of innovation around Austin. Startups are moving there that are like, “Hey, why am I in New York city as a consumer packaged goods company when I should be in Austin because that’s where my universe is.” So a lot of consumer companies have moved from New York and San Francisco to Austin. Instead of the tech universe just being one innovation hub in the San Francisco Bay area, there’ll be probably 10 or 25 innovation hubs across the country that will be serving different industries. And that’s a really good thing.
Brian Smiga: Agreed. And so, let’s explore New Jersey specifically. Clearly pharma and life sciences. New Jersey was also once the hub for telecom innovation. As you pointed out in your TED talk at TEDxAsburyPark, in that exodus of great minds to Silicon Valley, were some of the seeds that created Fairchild Semiconductor, venture, and eventually Silicon Valley. New Jersey still has telecom and it’s adjacent to New York, a financial center of the world. What are the other attributes that New Jersey has that could foster innovation hubs here?
Jay Bhatti: Well, Governor Murphy, a couple of weeks ago, was mentioning how there’s a big influx of residents moving in from New York City and also in Southern Jersey from Philadelphia. Because of the way the world is going, they want more open space, they want a home and a bigger opportunity. And I think a lot of that talent coming to New Jersey allows for us to create very interesting startups and companies here. One of the most amazing things is, Brian, when you and I hang out at Bell Labs, imagine 40 years ago, there were 6,000 of the smartest minds on the planet working there, right? They could do anything. And yet that thing went to zero employees working there, right?
Jay Bhatti: It was dead for 10 years. Think about all the talent and innovation that left New Jersey because of that one incident, Bell Labs going under. And now we have the ability to say, “People, look, New Jersey has a fighting shot to become a strong innovation hub for the north-east. What do we offer that’s great?” It’s that you have the best school systems for your kid. You can live in a home that is more affordable than other places and has big land and stuff like that. You can actually build cool startups and financial services. You can build cool startups in life sciences. You could build cool startups in deep tech.
Jay Bhatti: New Jersey will have a lot of supply chain, robotics, and manufacturing tech opportunities, especially when you think about all the manufacturing hubs because New Jersey is a natural manufacturing region and logistics port. So there’ll be interesting companies involved in more complex B2B software, which I think is very exciting. If you’re a resident of New Jersey, you have to have a positive view about what the tech economy looks like in the next 20 years.
Brian Smiga: Yeah, I agree. But I think that New Jersey still has a way to go on branding, telling its story, and particularly branding around its heroes. Then there’s also the economic, tax, and structural incentives, New Jersey is starting to put in place, but what more can we do?
Jay Bhatti: There’s a lot of perceptional challenges of New Jersey, but there is… the number one thing that matters is talent. New Jersey has an incredible school system between Princeton, Rutgers, NJIT, Stephens, Rowan, and that we can pull from New York, Philadelphia, Boston universities. There’s so many great universities in and near New Jersey, so much talent that gets built here, but today that talent leaves New Jersey. I think if we just do a better job of telling and incentivizing those talented graduates, “Hey, stay in Jersey, let’s build something here.” That will allow those individuals who are very talented to want to build something in New Jersey. That’s a starting point. That’s just a seed though. That’s a long-term thing, right? That doesn’t happen overnight. New Jersey is, in a lot of ways, not the easiest state in the world from a regulatory standpoint, but I think we can do things to make that easier, right?
Jay Bhatti: Make it easier for someone to start a business here, right? Make it easy for them to do the paperwork, just do it online, click a button, you’re done, right? I think when I look at companies that are being formed in Florida, they talk about how amazingly easy it is for them to call the Department of Florida Revenue and get someone to answer the phone within three minutes or five minutes. They’re like, “That never happens in California.” I’ve had people who said like, “It’s amazing how easy it is to get in touch with someone, but then also get in touch with the right person who will answer your question very easily.” So there’s a lot of stuff we have to do to lower the friction here.
Brian Smiga: Yeah. I agree. Most people don’t realize that, NJIT is always in the top three, and this year it’s in the #1 leader in upward mobility of undergraduates and graduate engineering students in the country. They lift more folks out of low-income and poverty by giving them an engineering education. It’s quite a large engineering institute. Most people don’t realize what a great asset NJIT is.
Jay Bhatti: And there’s a lot of hidden gems like that in Jersey. When people go to Bell Works for the first time, their eyes pop. They think they are on a campus in Silicon Valley.
Brian Smiga: Yeah. I still think New Jersey immediately needs a “Brand Czar”, and it needs an “Talent Czar to attract startups and growth companies through economics”, but we’ll get there. Let’s zoom back out for one last question. What about the globe? What’s the global ramification for workers and for the United States, as innovation could now happen everywhere? I mean, innovators might go to Costa Rica or folks from less advantaged nations, like the largest democracy in the world, India, might just stay in India. What are the ramifications there?
Jay Bhatti: I think some of that was happening already, but now I think it will be accelerated, especially when you think about some countries in Eastern Europe, right? I think Eastern Europe has done a really good job. A lot of our companies use software companies in Eastern Europe because their quality is better.
Brian Smiga: Right.
Jay Bhatti: And so, I think that the one challenge that America will have is that now that everything’s distributed, you will have to compete even harder because a company in the U.S will say, “Do I have my 10 engineers be in Texas or Florida? Or do I have them be in Estonia or India or the Philippines?” Where the cost base is lower and the quality is the same. So it is going to get even more competitive, especially on the knowledge worker side. And I think that all companies will optimize for their production efficiency and we’ll have to compete for that.
Jay Bhatti: Here is a great example, you’re at Facebook HQ in 2019, you’re working there, there’s 10,000 people on campus working with you. All of a sudden 2020 there’s zero people on campus. Everyone is distributed.
Jay Bhatti: You can decide, “Hey, I’m going to move myself to Utah.” And Facebook says, “Fine, we’ll make you a Utah employee.” So you’re not paying California taxes. You could buy a nice home with two acres, but now Facebook is like, “Wait a minute. That same worker that’s in Utah, that I’m paying $150,000 to, I could get them in India or China or Eastern Europe for $50,000. And they’re doing the same quality of work. And they’re doing the tempo that I need them to do.” That’s one of the choices. So, that is going to happen. But that is what our governments have built, a distributed environment with open border economies. Unfortunately, that may have some challenges for the American information worker.
Brian Smiga: Yeah. It’s going to be an interesting decade ahead. So quick prediction, 2030. Is America still the dominant innovation nation in the country and is it because we allowed innovation to happen across the country and leverage global innovators, or will we sort of fall behind in leadership?
Jay Bhatti: I have a hard time seeing any country leapfrogging the United States, simply for the fact that people still want to come to the U.S more than any other country in the world to innovate. If you ask an American, “Hey, where would you like to innovate?” Their answers are one of the 50 States. They’re not saying I want to go to Mexico, Canada, Europe, anywhere else, right? So, I think the talent, the people are going to be the drivers… where the 500 great companies that are going to be built in the next 10 years.Great new companies are going to be built in America because people still want to come here to build great companies. And people want to stay here to build great companies.
Brian Smiga: Agreed. And that is an immigration story. And your parents and grandparents, and my grandparents, they all were talented folks who immigrated here. And 55% of billion dollar tech companies are run by immigrants. I think this is such a pillar of strength in the United States that we need to keep the light on the Statue of Liberty shining.
Jay Bhatti: Right.
Brian Smiga: Which brings us back to our roots since you and I both grew up in Jersey City. So on that note, Jay, thank you so much.
Jay Bhatti: Thank you Brian.
Brian Smiga: This has been Brian Smiga and Jay Bhatti with the TEDxAsburyPark podcast. We’ve enjoyed a talk on innovation everywhere, and you can hear talks like this from 25 speakers with 500 like-minded audience members at our annual sold-out conference at the Two River Theater in May, 2022. Check it out at our website, TEDxAsburyPark.
Also check out the following:
Phil Murphy’s 2015 TED Talk (before he became Governor of NJ in 2018)