After a year-long vetting process among 220 cities, technology company Facebook selected Fort Worth as the site to build its first and only Texas data center in 2016.
Investment from the California tech giant on its initial $988-million data center project has now crossed $1.5 billion, according to the company. The data center has more than 150 employees.
The project got many involved in the local tech ecosystem and city administration, like economic development director Robert Sturns, excited.
“You’ll probably continue to see a lot of companies on the East and West Coast that are kind of reassessing space needs where they’re at,” Sturns said. “I do think that presents an opportunity for us if we can get out there and start having some conversations with them.”
However, Fort Worth has not accorded well with the technology sector, historically.
From 2000-20, new technology companies in Fort Worth received $1.9 million from investors, on average, according to PitchBook data analyzed by Sparkyard.
The difference is stark compared with the energy sector of the city. Oil and gas have traditionally been the premier industry for Fort Worth. On average, energy companies were able to raise $22 million in early-stage capital funding.
“We were very heavily concentrated in a number of industries: Oil and gas and aerospace. And we needed to take steps to diversify that,” Sturns said. “Here we are 20 years later, and we’re still having the same conversations.”
The Economic Development Strategic Plan drafted three years ago laid out the high significance of developing the tech industry.
A CompTIA report estimates the $5-trillion tech industry will grow at a 5% compound annual rate through 2024.
“Economic development is a big pie,” said TechFW executive director Hayden Blackburn. “If you have an important segment like technology underrepresented as a whole in your pie, it isn’t very balanced, and you fall behind really, really fast on what’s going on in other areas of the country and globe.”
The city is grappling with the challenge of emerging out of the economy it had relied on – big-box retailers and oil and gas – and into a new tech-heavy economy by attracting new business and trying to retain existing talent and entrepreneurs.
The economic aspirations of the city depend on how successful it gets in becoming a technology hub. And it is making strides, albeit slowly.
Specialization
To lure Facebook to Fort Worth, city officials had to sweeten the deal with a $147-million tax incentive package, one of the biggest abatements the city has ever offered.
Although Fort Worth struggles to balance its tax burden – with 55% of the responsibility of revenue generation falling under homeowners – offering a tax break to new businesses is a cost that economic development planners say they can’t afford to withhold.
“Until such time as to where every city across the United States decides that we’re not going to do incentives anymore, that’s just the space we have to work on,” Sturns said. “From the city standpoint, it’s obvious.”
City Manager David Cooke presented a $1.98 billion operating budget for the fiscal year 2021. About 2% of the budget is allocated for providing business incentives.
“We’re not out just trying to throw money at everyone and write checks,” Sturns said about the incentive offers. “It really is about if it provides a benefit. Is it a taxable benefit? Is it a job benefit? Is it a community benefit?”
In 2017, when Facebook completed the first phase of its project, the city generated a $18.8 million net profit from companies with incentive agreements, according to data from the economic development department.
Fort Worth has historically been a late adopter of technological innovations. However, the city is on the verge of breaking the mold, Blackburn said.
TechFW launched in 1998 as a nonprofit focused on helping entrepreneurs establish and grow in the medical technologies sector.
Since then, Fort Worth has excelled in biotech. With financial backing from Alcon, the City of Fort Worth and UNT Health Science Center, TechFW has worked with hundreds of entrepreneurs.
In the past five years, five Fort Worth-based biotech startups managed to pull multimillion-dollar exits. The biggest out of that was the sale of ZS Pharma, a TechFW client, to AstraZenece in 2015 for $2.7 billion.
Blackburn said the huge return in investment on Fort Worth’s biotech industry was a result of the city’s intentional push to develop the biotech industry.
In the mid-to-late 2000s, TechFW started broadening its goal to incorporate and nurture companies involved in any technologies. Blackburn said it won’t happen overnight, but he anticipates Fort Worth becoming a tech hub soon.
“If you set those intentions today with a vision and dedication of resources and attention to the kind of new economy and trending industries, you’re going to see those rewards,” Blackburn said. “It’s a long-term play.”
Diversification
Large corporations skipping Fort Worth to relocate to other Texas cities in recent years have concerned Sturns. However, he says finding and attracting major corporate relocations is a tough ask for any city.
So, he is more focused on workforce development and working with smaller middle-market tech companies. Earlier this year, a California-based tech company setting up headquarters in Fort Worth was offered a Chapter 380 agreement that hinged on high-wage employment rather than direct investment.
Through the sale of several city-owned properties,, the economic development department also recently established a $7 million fund for community economic development and revitalization projects.
“The focus on this is really community vitality,” assistant department director Brenda Hicks-Sorensen said. “(The fund) supports incremental and in-fill development in targeted revitalization areas, neighborhood improvement areas, and urban villages to support localized community investment and development.”
Unlike Austin, which has the technology and engineering-focused University of Texas, Fort Worth does not have a similar tech talent pipeline, Sturns said.
“Education and talent workforce pieces is really more of a long-term systemic thing that we have to address,” he said. “Office space is a market-driven decision. You can’t convince a developer, ‘Hey, go out and build a spec office space in the hopes that something’s going to come.'”
Fort Worth has only four business incubators while Dallas has at least 10. TechFW has the only incubator program in Fort Worth that specializes in tech, and there is no accelerator program in Fort Worth. Blackburn said the stats are embarrassing for Fort Worth, but the city is making progress.
The Cowtown Angels, the leading angel investment platform in Fort Worth also run by TechFW, has collectively invested over $22.5 million in 248 companies since 2012.
“It’s all under the radar. You’ve got some of the fastest-growing companies in the state here in Fort Worth, but we just haven’t been paying attention to them as a collective,” Blackburn said. “So it’s important to build an awareness of what we already have and get excited about that.”
Blackburn disclosed plans to establish an accelerator program, enabling the city and the people in the tech sector to soon partner in developing a tech district, he said. Generally, incubator programs help entrepreneurs flesh out and develop business ideas. An accelerator provides networking and mentorship to startups that have proven business ideas.
In 2019, Fort Worth announced the Medical Innovation District, which is taking shape in Near Southside to boost the biotech space. The AllianceTexas development in Far North Fort Worth boasts the one-of-a-kind Mobility Innovation Zone, a testbed for technologies such as unmanned aerial systems, air taxis and autonomous trucking.
“We’re at a disadvantage because the level of resources allocated to this space of economic development has been lacking when you look at other cities,” Blackburn said. “And so to play catch up, we’ve just got to get more resources available to create, to ramp up programs and events and resources that are succeeding today.”
Economies of scale
According to tech experts in the city, the future of Fort Worth could be in the niche sector of electrification.
Fort Worth company Linear Labs is building a 500,000-square-foot manufacturing plant in the Mobility Innovation Zone. The company, which produces electric motors, received an economic incentive package worth $69 million from the city last year.
Linear Labs creates electric motors that provide almost twice the torque in half the size of other motors in the present market.
Similarly, on the electric front, Sinclair Hotel is opening doors to new possibilities and inviting companies from around the world to use its technology.
The hotel opened last year as the world’s first all-digital hotel. The building uses low-voltage DC current to power over 7,000 lights in the 164-room hotel.
The Sinclair Hotel is the largest commercial building in the world to use ethernet cables to transport power, which saves almost 30% in energy consumption. The building is also the first-ever to use a lithium-ion energy storage system, similar to what’s found inside a Tesla car.
Hotel owner Farukh Aslam, who also is an engineer by profession, learned about the technology in the early 2000s and has worked ever since to find a different way to implement it. He said Fort Worth was more welcoming for his idea, which made him stay in the city as an innovator.
“When you tell somebody, I’m from Fort Worth, the first thing that comes to mind is oil and gas,” Aslam said. “I am a big proponent in, we, as a city, need to change that image. The future is all in technology.”
The hotel has over 100 full-time workers. Recently, Aslam spun his hotel venture to create a separate company, Sinclair Digital, to entirely focus on the tech aspect.
Sinclair Digital is now working with other hoteliers and businesses to administer the technologies Sinclair Hotel adopted.
Sinclair Digital employs seven high-skill tech workers. And it’s seeking to double its employee footprint this year. Work on its “smart” features and technology involves partnerships with global companies like Cisco Systems, Intel and LG.
“So they have senior executives, including C-level staff, visit Fort Worth for the first time,” Aslam said about the partnering companies. “And, they all get very pleasantly surprised at how beautiful the city is and how nice it is to do business here. We hope to continue to do that over the next few years.”
Sinclair Hotel had received a $3.4 million cash grant from the downtown tax increment finance district, overseen by the Economic Development Department.
“Fort Worth, we’re an easy sale,” Sturns said. “We’ve got some great attributes, communities, great people, great land that’s affordable. So, all the positive things are there. We just have to be able to find those opportunities that make sense for us.”
Neetish Basnet is an enterprise journalist for the Fort Worth Report. Contact him at neetish.basnet@fortworthreport.org or via Twitter.
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