Midtown Raleigh News

Two Triangle startup incubators to expand this fall

Two startup incubators announced Wednesday their plans to expand this fall, an indication of the Triangle’s growing appeal to entrepreneurs and technologists.

American Underground, a network of startups with two locations in Durham, will soon open a space at 213 Fayetteville St. in Raleigh. HQ Raleigh, a business incubator on Hillsborough Street, plans to relocate to 310 Harrington St., a much larger space in Raleigh’s Warehouse District.

The expansions are the latest in a series of efforts to promote entrepreneurship in the Triangle. “Our vision is to make the Triangle one of the top five regions for entrepreneurship,” said Jason Widen, co-founder and executive director of HQ Raleigh. “We spend every day trying to connect people. We have a lot of valuable sponsors and partners. We have a very collaborative nature within the Triangle.”

American Underground, owned by Capitol Broadcasting, nurtures startups by providing collaborative workspaces and access to investors and resources.

Its goal is to bolster the Triangle’s network of startups and eventually elevate it to the level of Silicon Valley or New York City.

“We want to develop a strong hub within Raleigh,” said Adam Klein, chief strategist for American Underground. “The Triangle is on par with other innovation hotbeds across the country, and we think that linking them under one umbrella will further help that along.”

At 5,300 square feet, the new location will be American Underground’s smallest, but Klein said the space has the potential to house more than 25 startups. Bandwidth Labs, an experimental branch of Bandwidth, a Raleigh-based telecommunications company, has already signed on to rent part of the space.

The cost of renting office space in one of American Underground’s locations depends on how much space a particular startup needs, but the company keeps rent low with help from its contributors, including NC IDEA and Durham’s Council for Economic Development. Klein said American Underground will likely release rent rates for its new location later this month.

“Our business model is funded by rent, and we can continue to grow with that model,” Klein said. “But a big part of a startup is affordability, and they don’t want to be spending a ton of money on rent.”

‘Bursting at the seams’

American Underground opened its first location on the American Tobacco Campus in 2010 and opened another on Main Street in Durham this summer. The hubs support 35 and 55 startups, respectively, and several past tenants grew enough to fly the coop.

The Fayetteville Street location will feature a “regional co-working desk” that will allow startups in Durham to take their work to Raleigh for the day, if necessary, and vice versa.

“Silicon Valley is a handful of towns, and we want that same feeling in the Triangle,” Klein said. “We’re trying to provide regional connections.”

Sustainable Industrial Solutions, a startup that helps businesses become more environmentally sustainable, moved into the American Underground’s space on the American Tobacco Campus when it first opened. Its employees have since grown from three to eight, and it’s looking to expand into a larger space.

“We’re busting at the seams in our little office now,” said Jason Massey, CEO and co-founder of Sustainable Industrial Solutions. “You know you’re starting to become successful when you can grow out of that underground space and afford higher rent.”

Massey, who worked for nearly eight years in Silicon Valley, said the organic collaboration American Underground fosters is reminiscent of that which occurs in Google and Apple’s stomping grounds.

But the Triangle isn’t there yet.

“It’s still night and day in terms of ecosystems,” he said.

Cheap and flexible

HQ Raleigh is expanding out of necessity. Since opening late last year, its location on Hillsborough Street has become home to 45 startups, and the waitlist is growing.

“I don’t think we expected it to grow this quickly,” Widen said. “Originally we thought we would have 15 companies, and when we first announced the opening, I had 547 communications with companies within 45 days. We’re at full capacity, and there are days we can’t fit everybody.”

Similar to American Underground, HQ Raleigh offers low-cost office suites with flexible leases. By fall, HQ Raleigh will relocate to a 15,000-square-foot space in the warehouse district west of Fayetteville Street, near where Citrix Systems is building its new headquarters.

The new space will house about 30 office suites, a large co-working space, five conference rooms and an event area. Widen said about half of the spaces are already filled.

HQ Raleigh will be just minutes from American Underground’s new location, and Widen said he has spoken with Klein about opportunities for collaboration between their companies.

“There is healthy competition, but there is definitely a collaborative nature within what we’re trying to do,” he said. “I say bring it on. There is room for it.”