South Bend Entrepreneurs Pursue a Beta City Path

This is not a traditional startup success story that ends with an exit. Instead, it starts with billions of gallons of overflowing sewage. And while an exit is involved, the story isn’t quite over because the entrepreneurial culture in South Bend continues to develop collaborative partnerships for startups as a “beta city.”

Journalists, scholars, municipal leaders and entrepreneurs apply the “beta city”  label to cities that actively stimulate and facilitate the development of highly innovative products and projects. This creative, collaborative approach is very much in line with Elevate Ventures’ work to connect individuals to each other and resources across Indiana.

EmNet, a recipient of a 21st Century Research & Technology Fund award, was one of the first shining examples of South Bend’s beta city approach, followed by many more City-supported projects, with newcomers Hurry Home currently pursuing its own startup dreams. By working hand in hand with unlikely partners, founders and business leaders are nurturing their own entrepreneurial ecosystems and supporting their communities in exciting ways.

But first, there is that waste issue to clean up.

EmNet kicks off city’s public-private approach

The City of South Bend, like more than 700 cities in the United States, is under a mandate from the Environmental Protection Agency to clean up its massive raw sewage overflow issue. Essentially, when rainfall overwhelms sewers that carry both wastewater and stormwater, a so-called combined sewage overflow happens. In South Bend, 2 billion gallons annually was making its way into various waterways and the Saint Joe River.

The cost to fix the problem using traditional, available means could have reached $1 billion, a number that was simply affordable. So city officials started looking for new solutions.

At the same time, Luis Montestruque was finishing up his PhD work at the University of Notre Dame on cyber physical systems- think lots of complex applied math. He was working with the Defense Advanced Research Projects Agency when two Notre Dame professors approached him with the idea to use his expertise in wireless sensor networks to solve a dirty problem in his own city.

Professor Michael Lemmon and Jeff Talley submitted the research proposal to the Indiana 21st Century Research and Technology Fund, which at that time functioned like a grant instead of a venture capital fund as it does today. They enlisted Montestruque to start a new company called EmNet as part of the economic development component of the proposal. The City of South Bend would be the testbed. The proposal was accepted, and Gary Gilot, who at the time was South Bend’s Public Works Director, worked closely with the high-tech Notre Dame team to bring forth a vision on how the system could help the City.

“To my knowledge, this was the first time the University was actively collaborating with the City on a project. As the venture progressed, with a subsequent grant led by EmNet, the team remained focused on making South Bend the most intelligent urban watershed in the country,” says Montestruque, who is EmNet’s president and chief technology officer.

Step one was to build the largest, commercially viable, ad hoc mesh network in the world in South Bend to back up the sewer data collection. Sensors were then deployed at the 36 overflow points. The most compelling initial finding was that just nine points were responsible for 80 percent of the overflow. This knowledge guided the development of a preventive maintenance program to reduce overflow by about 75 percent. The new plan put forth to the Environmental Protective Agency cut the former plan’s cost by $500 million, for a huge savings and total investment of about $10 million.

As a tech startup story goes, EmNet’s is not a typical one. The big differentiator has been the collaborative, adaptable nature of the relationship among the public, private and university entities involved. Notre Dame led research during the first two years of the project. EmNet then took the reins, working more on the practical deployments of the solution, and the City of South Bend guided the group with ideas on how, and if, the technology could solve problems. This partnership is part of what makes South Bend an ideal “beta city”.

“South Bend not only had the leadership that was willing to be bold in using new ideas, but it was also a city that was large enough to be meaningful, yet small enough that our efforts would create visible impact,” Montestruque says.

In February 2018, it was announced that Xylem Inc. had acquired EmNet. Water technology powerhouse Xylem is No. 7 on the Fortune 2018 Change the World List and employs 17,000 people. To date, EmNet has reduced over 6 billion gallons of sewage from reaching waterways, and has saved communities over $4 billion in avoided infrastructure expenses. The company currently serves more than 25 cities across the United States and is rapidly moving into Canada.

Previously an Elevate Ventures Entrepreneur-in-Residence and currently an Elevate Advisor, Tim Braun joined EmNet as Enterprise Architect in 2014. Braun recently returned home from touting EmNet’s watershed solutions to interested parties in Paris; Singaporel; Brisbane, Australia; Auckland, New Zealand; and Milan, Italy. Braun says South Bend’s interest in bridging public and private interests is putting the city on the map.

“South Bend is known to many as a beta city, willing to work with early-stage companies or companies that have an innovative approach to things and give them a shot. For EmNet, South Bend has become our primary reference case. The EPA talks about South Bend’s success. The story continues to be told again and again,” he says.

The City of South Bend’s commitment to being a beta city

“In many ways, what we’ve been doing is systemizing the frameworks that happened with EmNet so we can scale it,” says Santiago Garces, Chief Innovation Officer for the City of South Bend’s Department of Innovation and Technology. Garces’ department oversees six teams focused on using technology, data and strategic partnerships-like the one with EmNet- to save South Bend’s taxpayers money, empower an innovative workforce and build a thriving community.

They have guided an estimated 15 collaborations with universities and nonprofits and are in the midst of about 10 projects with different companies at varying degrees of maturity. As a tech veteran, EmNet recently provided technical assistance to students working on designing sensors to test the performance of neighborhood rain gardens to figure out why road drainage grates were clogging. The push for innovation might come partly as a response to the city’s economically turbulent past.

“We want to make sure that South Bend is a leader in the future. In many ways, across the history of the city, we have experienced rough patches,” Garces says. In the mid 20th century, more than half of all employment in South Bend was in the manufacturing sector, but, like in many Midwestern cities, it suffered when manufacturing demands began to plummet. The Singer manufacturing Co. peaked at 3,000 workers in 1914, but closed its doors in 1955. And then the city’s largest employer, the ubiquitous Studebaker automobile plant, closed in 1963, leaving a lasting scar. By 2000, manufacturing was only 16 percent of the local economy.

Without looking back much, Mayor Pete Buttigieg’s administration is working on what the “future of work” looks like and how the City of South Bend can make it both innovative and inclusive for the entire population.

  • Earlier this year, the Drucker Institute announced a new initiative to help turn South bend into “The City of Lifelong Learning,” a project being coordinated with the mayor’s office and seeded with $500,000 in grant funding from and Walmart.
  • Also in the works is the $2.7 million planned Technology Training and Demo Center that will create a space where people from private, public and academic fields can work together to find solutions to city problems, get training and make South Bend more resilient. The facility will house advanced manufacturing and technology companies and an education center with professional-grade 3D printing, modeling and tech programming.
  • And in October, Bloomberg Philanthropies named South Bend one of eight cities that won a nationwide competition that encourages city leaders to uncover bold, inventive ideas that confront the toughest problems cities face. Winnings from the competition totaled $1.1 million in support to hone a proposal centered around the lack of reliable, affordable transportation for workers. The City proposed a data-driven collaboration to give workers consistent transportation access.

Inclusion initiatives tend to take priority for South Bend. As one example, Director of Civic Innovation for the City of South Bend Brian Donoghue leads a project to close digital divides that exist for underserved residents, giving them access to the internet and opportunities to participate in the innovation economy at “CLICK sites” inside libraries, parks and other venues throughout the city.

Startup Hurry Home carries the tourch

The concentration on inclusion extends to financial inclusion as well, which fits the profile of Hurry Home, one of the city’s newest companies benefiting from the beta city model. Hurry Home helps renters become homeowners by offering financing for houses for which banks are unable to originate mortgages. Over 20 percent of residential properties in South Bend and hundreds of cities like it are in a price range that are typically considered “unmortgageable.” Jada Mclean and John Gibbons created Hurry Home while participating in INVANTI, a startup generator based in South Bend.

“We learned about this problem in our first week in INVANTI, and then spent the next three months speaking to hundreds of bankers, city officials, community workers, buyers, sellers, realtors and others. This gave us the opportunity to develop a richer perspective on this crucial housing issue by hearing about it from all sides,” Gibbons says.

Neither Gibbons nor Mclean expected to be staying on in South Bend to work on Hurry Home when they first arrived, but they are thrilled to be doing so. Mclean is a native of Los Angeles and previously worked in New York. Gibbons, a Notre Dame graduate, spend the last three years working in Bangalore, India.

“We both came to South Bend for INVANTI because their methodology is unique in its focus of ensuring product-market fit before starting up,” he says. “It wasn’t until we arrived in the city that we found out what the cofounders of INVANTI [Maria Gibbs and Dustin Mix] had known when choosing to run the accelerator in South Bend: The city itself and the resources it provides are incredible assets for building a business.”

Mclean and Gibbons recently completed the Techstars Chicago program and moved back to South Bend to continue pursuing their goal of building a new way to become a homeowner.

“South Bend has been crucial to our growth so far. Our success is due in large part to everyone being generous with their time and their commitment to South Bend’s resurgence. It’s because of that kindness that we want Hurry Home to continue to be in South Bend and do what we can for the city.”

With Hurry Home and many others, South Bend continues its track record of supporting startups looking for a place to test out ideas and begin to scale, years after EmNet put it on the startup map.