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In some ways it's natural that NPR's Hard Times series would eventually take us to the city of New Orleans. It's known as one of America's hard luck cities. It's struggled, over the years, with poverty, crime, corruption, and of course, disaster in recent years. And yet, as NPR's Debbie Elliott reports, the city's darkest days have sparked a surprising new entrepreneurial spirit.

DEBBIE ELLIOTT, BYLINE: Billy Bosch and Matt Mouras are trying to launch a nutritional beverage company.

BILLY BOSCH: OK, great. So what do we want to call it?

MATT MOURAS: Alright, so diving in, we're going over names, or rather the naming of the drink.

BOSCH: So we'll do names...

MOURAS: Right.

ELLIOTT: Two more experienced entrepreneurs are jotting their ideas on white-board painted walls in a brainstorming room at the Idea Village in downtown New Orleans. Matt Mouras says the non-profit is giving them a leg up.

MOURAS: We have people that have had experience building businesses, people that have already gone through the process that are coaching us. And they're also extremely connected, locally, which is beneficial to us. They can put us in touch with the resources we need as a startup.

ELLIOTT: Idea Village co-founder and CEO Tim Williamson says the organization has helped some 1100 businesses get off the ground.

TIM WILLIAMSON: It's meant to be a place for you to trust your crazy ideas.

ELLIOTT: And some of those ideas are taking hold. Inc. Magazine has called New Orleans the coolest start-up city in America. Williamson says it's no coincidence the entrepreneurial boom came in the wake of Hurricane Katrina.

WILLIAMSON: Katrina did many, many things, but one is the next day everyone became an entrepreneur. You know, we were all starting over in some way.

ELLIOTT: New Orleans was closed, he says, so there was nothing to lose by trying something new. Allison Plyer, Deputy Director of the Greater New Orleans Community Data Center, says that entrepreneurial spirit was never part of the climate here before.

ALLISON PLYER: New Orleans, historically, has been very much a third world economy. The exploitation of raw materials, in our case - oil, cheap labor - so there wasn't a lot of drive to innovate.

ELLIOTT: Plyer says before 2005, when Katrina struck, New Orleans lagged the nation in start-ups. Now the city exceeds the national average by about 30 percent. The new ventures include software companies, digital media firms, and industries that have developed to handle some of the problems Katrina posed: water management and education reform, for example.

Young people have flocked to the city, most of them with college degrees - reversing a decades-old brain drain problem. People like 25-year old Jessica Shahien, who left for college and had no intention of coming back home.

JESSICA SHAHIEN: I saw New Orleans as kind of corrupt, sort of backwards place. And I wasn't going to inherit a family business. I wasn't going to go into hospitality or oil and gas. And so why would I stay?

ELLIOTT: But she says Katrina rekindled her connection to the city. Now she's running 5-0-4ward, a play on the New Orleans area code. It's a brain gain initiative aimed at keeping young adults.

SHAHIEN: You can be a 20- or 30-something and really make a difference, really quickly. They come, thinking it will be an adventure, and then they have the opportunity to do something that they would have to wait ten years in another city to do.

NOLAN ROLLINS: You know, this is our go west young man. I mean, this is really the opportunity to make a difference from a generational standpoint.

ELLIOTT: Nolan Rollins is president and CEO of the Urban League of Greater New Orleans. He's been working to make sure the city leverages the post-Katrina investment and new business climate, and that minorities aren't left out.

ROLLINS: If we aren't making sure they're a part of the new economy, we're going to destabilize our economy, there's going to be no ability for the city to actually grow.

ELLIOTT: And that's been a challenge with the entrepreneurial boom, says Alison Plyer of the Community Data Center.

PLYER: It is not including a lot of the long-time residents of New Orleans. So it's primarily white folks. There are not a lot of African-Americans who are involved in the eco system as it's getting developed.

ELLIOTT: Thirty-two-year old painter, Myesha Francis, is an exception with her own gallery in the arts district.

MYESHA FRANCIS: Over here, this is the beginning of what I call my sweet NOLA collection. And so you begin to see these magnolia flowers, this intense...

ELLIOTT: Francis doubts she'd own her own business by now, if she hadn't gotten a start two years ago at the Entergy Innovation Center in the 9th Ward, one of several entrepreneurial hubs in the city.

FRANCIS: I don't think that it would have happened this fast, because the Innovation Center, you know, they made it possible for me to have the space and to be able to work because the rent was reasonable.

ELLIOTT: Now she's in a prime location but does struggle to find enough business.

FRANCIS: People, kind of, still spend along color lines, along who they like, who they don't like, who they know, who they don't know.

ELLIOTT: She says some of the city's old ways hang on. Francis has had to turn to non-traditional lenders for example, to borrow money for her business. Venture capital has long been the missing piece in the economy here. But even that's changing, as new angel investors look to fund non-traditional companies. Clayton White is cofounder of the year-old South Coast Angel Fund.

CLAYTON WHITE: You don't have to be connected to the right rich person to get investment. Now you just have to know that we exist.

ELLIOTT: The state has helped with angel tax credits, and other incentives for start-ups. And it's invested nearly $50 million in the New Orleans BioInnovation Center.

AARON MISCENICH: This is what's called a wet lab business incubator.

ELLIOTT: Aaron Miscenich is president of the downtown center, four stories of modern lab suites designed to commercialize technologies coming out of local universities.

MISCENICH: A lot of the research that was being done down here would just remain in the lab or sit in filing cabinets. Or it was being licensed away.

ELLIOTT: Now, young graduates like Lauren Klaskala, are working on scientific breakthroughs right here in New Orleans.

LAUREN KLASKALA: You have to put on gloves.

ELLIOTT: She's testing really old DNA samples.

KLASKALA: The DNA is still on these bugle swabs even though they've been sitting in Dr. Sinha's garage for how long?

DR. SUDHIR SINHA: Four to five years.

ELLIOTT: Sudhir Sinha is the CEO of InnoGenomics, a company trying to develop new DNA marker systems to work even in disaster conditions. The idea came after he was unable to identify victims of Hurricane Katrina.

SINHA: So those kind of highly degraded samples, we don't have ability to do at present.

ELLIOTT: New Orleans' future depends on keeping and growing this kind of intellectual talent, says Michael Hecht of Greater New Orleans Inc., an economic development alliance.

MICHAEL HECHT: It's how do we ensure that this new culture, which is forward leaning, which is optimistic, becomes the permanent new New Orleanian culture and is not just a bit of rebuilding euphoria?

ELLIOTT: He's hoping the city's low cost of living and famed lifestyle will help. For someone under 35, he says, the ability to make a meaningful impact and also have fun, is a pretty unbeatable cocktail. Pun intended, he says.

Debbie Elliott, NPR News.

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INSKEEP: And you can follow our Hard Times series at npr.org. You can also follow it on Twitter @NPRHardTimes where you can follow this program too. We are @MorningEdition and @NPRInskeep. You're listening to MORNING EDITION from NPR News.

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