Forget Austin or Toronto, Indianapolis Has What It Takes to Win HQ2

Twenty North American cities have made the final cut in Amazon’s search for the location of its second headquarters, or HQ2, and the Seattle tech giant has the world on pins and needles as it finishes deliberations. With a project so large in scope—HQ2 is expected to create thousands of jobs and generate billions in economic development benefits—it would likely be a gamechanger for whichever city it lands in.

All of the finalists have the tech talent, available space, and government incentives called for in the original request for proposals, and so far, Austin, TX, and Toronto are presumed to be the favorites based on those requirements. But there’s another city on the list that has those qualities and more, and it’s mostly being overlooked by those playing HQ2 guessing games in the media and tech industry.

Indianapolis, the capital of Indiana, has a lot going for it these days, which we’ll get into more detail below. With a metro area that is home to roughly 2 million people, it’s the third-largest city in the Midwest. Covering 368 square miles, Indy is also the United States’ 16th largest city by land mass.

Indianapolis is a blue city in a red state, but everyone we interviewed agreed that the state’s politicians are good at striking bipartisan collaborations when it comes to advancing economic development projects. Indy has a swiftly growing tech scene and is home to a huge Salesforce operation, the company’s largest hub outside of its San Francisco headquarters. The state has a robust healthcare industry, with major players such as Eli Lily, Cook Medical, and Roche Diagnostics calling Indiana home, and an extensive logistics infrastructure. Indy has the space, the well-regarded universities, the right mix of talent, and a central location. We’re just not sure it has the attention of Amazon CEO Jeff Bezos, but it should—especially if he has designs on reshaping the winning city’s footprint.

Location, Location, Location

Nicknamed the “crossroads of America,” Indiana is within a day’s drive of 70 percent of the country’s population. Seems like that would be a pretty important statistic to a company preparing to launch a delivery service that it hopes will rival FedEx. (For its part, FedEx just announced a $1.5 billion expansion of its Indianapolis shipping hub, the second-largest FedEx location in the U.S.)

Frank Dale, CEO of Costello, an Indianapolis software startup, says there is also a “wonderful” vacant airport that is minutes away from the proposed HQ2 site, which he suspects is part of the city’s bid. (The exact contents of the city’s bid have not been disclosed publicly, and entities that were part of creating the pitch, such as TechPoint, are prevented from discussing HQ2 specifics.)

Talent and Expertise

According to a Brookings Institution report, Indianapolis has one of the fastest-growing tech communities in the country. The city added 5,000 tech jobs between 2013 and 2015, a 13.9 percent increase, and is ranked 15th for tech job growth out of America’s 100 largest metropolitan areas. Thanks in part to the huge presence of ExactTarget and Salesforce in the city, there are lots of cloud and marketing software startups that Amazon could mine for talent.

Dale says that the area within a 60-mile radius of Indianapolis contains one of the densest populations of college students in the country, with Indiana University, Purdue, Notre Dame, and Rose-Hulman Institute of Technology contributing to the talent pipeline. The state also has plenty of lower-skilled labor to fill Amazon’s manufacturing, logistics, and warehouse jobs.

Perhaps the defining moment for Indy’s tech scene came in 2013, when Salesforce acquired homegrown marketing software company ExactTarget for $2.5 billion. The acquisition created millionaires overnight and freed up some of the city’s best tech executives to go forth and multiply, creating their own investment firms and startups that begat more new companies. Salesforce recently opened a $40 million tower in Indy, the state’s tallest building, and has continued to add hundreds of jobs.

Dale makes an excellent point about Indiana’s talent: Because of the state’s very robust healthcare, logistics, and tech industries, Amazon would have qualified job candidates and could “poach expertise to scale on day one.”

Stable Government and Business-Friendly Climate

Tim Cook is the CEO of KSM Location Advisors, a firm that helps shepherd companies through the site selection process. He says that while the details of Indy’s HQ2 bid are being kept close to the vest by city leaders, he’d be “stunned if they’re not being super aggressive about incentives. I don’t see a scenario where we don’t win because there are not enough incentives.”

Cook also praised both state and city leaders for working together across party lines. “Not only is there cooperation between political parties, it’s been a regional effort, where the suburbs partner with the city,” he adds. “It’s a unified front, and I think sometimes people underestimate how important that is. With a project of this complexity, if different groups didn’t cooperate” it would be almost impossible to win HQ2, he says.

Dale agrees with Cook’s assessment. “Our business community cooperates with government,” he says, and points to organizations like the Central Indiana Corporate Partnership as an example of this kind of collaboration. “We have a local and state government that can go across party lines to do what’s best for the city and state, and that’s pretty rare.” He also points out that the state is fiscally sound, with a state constitution that prevents it from going into debt.

Quality of Life

National rankings of Indy’s quality of life are mixed, with some entities ranking the Circle City near the bottom, and others ranking the city closer to the top. Indianapolis has been recognized for a relatively low cost of living, cleanliness, low unemployment, a walkable downtown, a plethora of college and professional sports teams to root for, miles of recreational trails, and unique tourist destinations such as the children’s museum (one of the world’s largest) and Indianapolis Motor Speedway, home of the Indy 500, the best-attended sporting event in the nation. More than 35 percent of Indianapolis residents are younger than 25, according to U.S. News and World Reports, and the city is teeming with Millennials.

A 2016 CNBC report found that Indiana ranks first in the country in cost of doing business and infrastructure, meaning it was cheaper to do business in Indiana than any other state. The same report ranked Indiana 8th nationally for cost of living, 13th for business friendliness, 18th for access to capital, and 20th for economy. But CNBC also ranked Indiana as 26th in terms of technology and innovation, 29th in education, and 45th in quality of life. (Keep in mind, though, that these rankings factor in the entire state, not just Indianapolis.)

Downsides, Challenges, and Final Takeaways

Tim Cook, the site selection expert, feels that for a guy like Bezos, culture and politics are important, perhaps to the exclusion of the other things Indy has going for it. “We’re not a very diverse city,” he admits. “Amazon is probably desiring [diversity] and it may be a key component to their decision, so that’s probably a check mark against our chances.” He imagines there are possible downsides to winning the HQ2 project, but because the project is likely to be transformative in many positive ways, it’s not something he worries about.

“It would bring a concentration of bright, innovative thinkers to the city,” Cook says. “Some people won’t stay at Amazon forever, and they’ll start their own companies,” which would further fuel the local tech community’s growth.

Michael Burton, senior vice president at Levementum, an Indianapolis IT company, says that an Indy HQ2 would no doubt lead to more congestion on the roadways and probably make it more expensive for small companies to do business, but that’s a small price to pay. “It will reshape Indy, but the benefits far outweigh the challenges,” he adds.

Costello’s Frank Dale believes that the opportunity for Bezos to reshape a city, to bend it toward his sensibilities, might be very compelling. Indianapolis offers more of an opportunity for world-building than denser, more populous metro areas on the list of finalists, such as Boston, Chicago, or Dallas, Dale says.

Dale has spent a lot of time studying Bezos. He recalls an anecdote from five years ago, when Bezos was speaking at an Amazon Web Services conference. Someone in the audience asked him how things will change in the next 10 years.

“He said, ‘The thing people never ask but should is, what’s not going to change?’” Dale notes. If a company can identify what won’t change, they can build a big business, Bezos told the crowd. Nobody will ever say they don’t want low prices, wide variety, or quick delivery.

“Bezos is a guy who makes long-term, unconventional bets. It will come down to core competencies, because I can’t imagine he’ll want a duplicate of the Seattle headquarters,” Dale predicts. “If logistics is the focal point, we are extremely competitive.”

Amazon is expected to name the winner of its HQ2 project sometime in 2018.

Sarah Schmid Stevenson is the Custom Content Editor for Xconomy Insight. You can reach her at sschmid@xconomy.com. Follow @Xconomy

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