The founder and CEO of software startup ArchiveSocial is convinced that being an American Underground tenant is good for employee morale and helps the company recruit top talent.
“It’s just a really cool space. It sets you apart,” said Anil Chawla.
He proceeds to tick off key features at the Underground’s West Main Street site in downtown Durham that houses his 12-employee business, including: a banana-yellow slide that connects the first floor and the basement; an outdoor patio on the roof complete with a bar; and a lounge area chock-full of wide-screen TV’s that’s especially popular during March Madness.
And then there are the intangibles that come with being surrounded by other startups.
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“It gives entrepreneurs a home,” said Chawla, whose company enables state and local governments to archive social media for public record requests. “We see companies like us. We see companies two steps ahead, two steps behind. We can share and learn from each other.”
What began in 2010 in the basement of the American Tobacco Campus – hence the name American Underground – has blossomed into two sites in Durham and one in Raleigh that house more than 240 startups ranging in size from solo entrepreneurs to a business with 70 employees. A fourth site in downtown Durham is scheduled to open early next year on West Main Street, across the street from the Underground’s largest site.
“It’s the coolest address in town,” said Joan Siefert Rose, president of CED, a support group for entrepreneurs based in the Underground. “It’s where everybody wants to be.”
But the Underground isn’t the Triangle’s only startup space that has proven to be a hot ticket among entrepreneurs.
HQ Raleigh opened in 2012 on Hillsborough Street, then moved to larger space on Harrington Street in the downtown warehouse District last year. This year it added an additional 5,000 square feet of space across the street and acquired an adjacent site where it plans to build a new 43,000 square feet building – more than tripling its current space. Currently, 128 startups are housed in HQ Raleigh space.
“We’re looking for companies that are looking to scale and grow, ultimately high-impact, high-growth type of companies,” said Jason Widen, HQ Raleigh’s executive director and co-founder.
The Triangle has long been a hotbed for startups. Homegrown companies such as SAS, Cree, Red Hat and Quintiles rank among the area’s largest employers and are major forces within their respective industries.
But the Underground and HQ Raleigh hope to add new horsepower to this economic engine. Providing a welcoming space for these startups is only the start. They also offer an array of free support services and strive to foster an all-for-one-and-one-for all mentality.
“I really think it boils down to community,” said Lewis Sheats, senior lecturer of entrepreneurship at N.C. State University and director of the school’s Entrepreneurship Clinic, which operates out of HQ Raleigh. “American Underground and HQ Raleigh do an outstanding job of building this community where you feel safe and comfortable sharing ideas.”
Certainly there are other spaces in the Triangle that cater to startups. The First Flight Venture Center in Research Triangle Park has offered incubator space to technology startups since 1991. And earlier this year the not-for-profit that manages RTP, the Research Triangle Foundation, reinvented a five-story building to accommodate both startups and more established organizations.
But the Underground and HQ Raleigh are clearly the bold newcomers that have made the biggest impact on the entrepreneurial scene, fostering dense clusters of startups that are unprecedented in the region.
One sign of their success: Raleigh company MDO Holdings recently reopened a 13,125-square-foot building in downtown Raleigh whose target market is startups that have outgrown spaces such as the Underground and HQ Raleigh.
Many entrepreneurs are enthusiastic about being in these startup spaces.
Earlier this month Wes Johnson, the owner and sole employee of Lawson Hammock, was sipping a cup of coffee while working on his laptop in HQ Raleigh’s co-working area. His company’s Blue Ridge Camping Hammock doubles as a one-person camping tent and is sold by retailers such as Bass Pro Shops and Cabela’s.
Johnson initially ran his business out of his home but wanted to be surrounded by like-minded people. “I share an office but I’m out in the co-working space about half the time just for the energy of the place,” he said.
Johnson recently was connected to a buyer for a major retailer through a contact he made at HQ Raleigh. And he’s taken advantage of the ability to commission N.C. State students to work on projects for him – at no cost – through the on-site N.C. State Entrepreneurship Clinic.
“A couple of students created a instructional video (on how to assemble the Blue Ridge hammock) for me ... that would have cost thousands of dollars and is just as good as a professional” video, Johnson said.
Brad McGinity is co-founder and vice president of sales at 70-employee e-commerce technology company Windsor Circle, which is ensconced in the Underground. He noted that Windsor Circle was introduced to an out-of-town venture capital firm that ultimately invested in the business by the CEO of another Underground company. And Windsor Circle’s nine-month search for a vice president of product management ended when David Jones of Bull City Venture Partners – also an Underground tenant – connected the company with a great candidate.
When Windsor Circle first moved into the Underground, McGinity and his colleagues worried that the ambiance might prove to be too distracting, turning what should be a quick trip to the kitchen into a 30-minute time sink “because you end up running into someone.” But that hasn’t proved to be a problem.
“We’re surrounded by a bunch of folks who are just as focused on building their business as we are,” McGinity said. “When we do stop and have those conversations, they tend to be incredibly productive conversations. So we learned about trade show strategies and prospecting strategies and product design strategies from these conversations.”
Both the Underground and HQ Raleigh offer affordable space that includes co-working spaces – that is, shared common space — and small private offices.
Co-working space at HQ Raleigh starts at $125 for 25 hours of access per month, with office space starting at $400 monthly. The co-working space at Underground starts at $215 per month for around-the-clock access, with a one-person office going for $329 per month. Students and recent graduates get a special rate of $79 per month.
A key feature for entrepreneurs who recognize that that the future growth they’ve mapped out in their business plans may not go according to plan is that both spaces offer the flexibility of month-to-month leases.
It makes starting a company “a low-risk move,” said Emily Bahna, CEO of UX-Shop, a design studio that focuses on user experience that is based in the Underground. “You can come in here for a single month and test it out.”
The spaces also make it easy for entrepreneurs to focus their full attention on growing their businesses by creating an all-inclusive package that includes furniture, Internet access and shared conference rooms and kitchen facilities.
Support services range far and wide.
For example, HQ provides access to free, basic advice in several areas, including legal and human resources, provided by local firms. Widen said the space will soon offer a strategist in residence who will “help companies with strategic thinking and working through different problems they have.”
“You can’t think of this as a traditional real estate space, because it’s just not,” Widen said. “The value (startups) get out of being a part of this community is a lot more than four walls.”
The Underground’s amenities includes providing easy access to free mentoring and “office hours” – including a program aimed at female entrepreneurs – provided by organizations such as CED, Groundwork Labs and The Startup Factory. Then there’s HelpFest, a weekly presentation aimed at helping startups up their game.
“There’s a lot underneath the hood,” said Adam Klein, chief strategist of the Underground.
A highlight of the Underground’s HelpFest programs is free pizza. For the 12 months that ended in October, 4,480 slices of pizza were consumed.
“One of the things we have seen is, events don’t always build community,” Klein said. But, he added, combining a meal and “a little bit of structure” is an effective way to encourage people to come together and share experiences and ideas.
The Underground also has the distinction of being one of 10 “tech hubs” across North America selected by technology behemoth Google to be part of its entrepreneurial support program. Google provides undisclosed funding to the Underground.
For each company in the Underground, the affiliation means receiving a “startup pack” that includes $1,000 worth of credit for Google products, such as storing and accessing data on the Google Cloud Platform. The Underground startups also are eligible to be selected to make presentations to venture capitalists and angel investors from the Silicon Valley and around the country at the annual Google for Entrepreneurs Demo Day.
The first two Demo Day competitions were won by American Underground companies: Windsor Circle and energy drink company Mati Energy. They each snared a $100,000 investment from AOL co-founder Steve Case, one of the judges for the event, as a result.
The wins by Windsor and Mati are a testament to both the “great talent” locally as well as the “quality support” that the Underground provides, said Mary Grove, director of Google for Entrepreneurship.
Some entrepreneurs who rent offices at HQ Raleigh and Underground tenants say they could find cheaper office space elsewhere but nonetheless see the spaces as a good value when you consider the entire package.
Windsor Circle’s McGinity said that the company’s director of finance ran the numbers and found that the company’s space in the Underground is quite cost-competitive when you account for the square-footage they don’t directly pay for – such as the shared conference rooms, kitchen space and bathrooms.
“Is there cheaper space in existence? Sure,” said Michael Goodmon, vice president of real estate at Capitol Broadcasting, the Raleigh company that owns the Underground as well as the American Tobacco Campus and TV station WRAL. “I will say affordability is really important to us. We could charge more than we do and we historically just have not done that.”
“For us, this is community development. This is economic development,” Goodmon continued. “If it can pay for itself, we are really happy with that kind of outcome. ... And we are really excited about the jobs produced and the companies produced and the growth produced.”
According to the American Underground’s annual report, the 180 companies based in its space for the 12 months that ended in October created 244 new full-time positions and another 79 part-time jobs.
Both HQ Raleigh and the Underground see expansion in their future.
“We aspire to be a bigger player in the Southeast,” said HQ Raleigh’s Widen. “We think that we’ve proven a system of building these inclusive entrepreneurial communities.”
“We are ready and poised to keep growing,” Goodmon said. “We have always said we have a goal of getting to 500 startups in the Underground.”
Startup spaces at-a-glance
Current: Two sites in Durham and one in Raleigh encompassing 95,000 square feet.
Expansion plans: 17,000 square feet of new space on West Main Street, across the street from the current Main Street site.
Current: Two sites in downtown Raleigh, both on South Harrington Street, encompassing 20,000 square feet. HQ Raleigh also teamed up with a Greensboro developer to create HQ Greensboro, a startup space that opened this month in that city’s Railyard district.
Expansion plans: A new 43,000-square-foot building, also on Harrington Street.