American Underground grows, clients raise record $79.2M despite changes, more competition

DURHAM – American Underground (AU) is more than holding its own after a year of internal changes and mounting competition from rival co-working spaces, according to figures released in its latest annual report.

The Durham-based startup and entrepreneurial hub reported the largest fundraising year-end haul to date – with companies headquartered there raising around $79.2 million last year alone.

That’s up from $40.9 million from the year before – a 93.6 percent hike.

Membership is also up after the company’s platform opened to include “virtual memberships.” It’s estimated that 1,662 people are employed by AU companies. Compare that to last year’s estimate of 865 members, which recognized members as those who “use the space.”

“Our community of entrepreneurs is larger and more robust than ever,” AU’s general manager Molly Demarest told WRAL TechWire this week.

She added that around 76 percent of AU companies are now classified in the “sell or scale stage,” reflecting growth locally and in other regions.

“When you pair that with the increasing trend towards remote work, 58 percent of AU companies having geographically distributed teams, it’s no surprise that both company and community growth is no longer directly confined to growth in physical space.”

Season of transition

The update comes after a year of change for company, which is owned by WRAL TechWire parent Capitol Broadcasting.

First, it merged with Big Top, a Triangle-based networking platform and events series for startups.

That triggered a transition from being a “workplace solution” to a more elastic platform that included virtual memberships, enhanced programming and coaching, in addition to workspace.

There was also a leadership shakeup with its executive director, Doug Speight, stepping down to launch a new venture, leaving Demarest in charge.

All this at a time when there’s a lot of movement taking place in the co-working sector, with increased competition from rivals like WeWork and HQ Raleigh.

Nevertheless, Demarest says, the hub is thriving.

“So far, the reception has been great and has allowed us to not only better support homegrown teams, but also welcome in companies like Policygenius, which is actively setting up second homes in the Triangle and looking to plug-in,” she explains.

“It is also important to point out that in parallel with the funding, the focus on revenue and traction is stronger than we have ever seen,” she adds, “with 88 percent having earned revenue and 59 percent cash flow positive.”

Looking ahead, Demarest says that, beyond local connectivity, AU is ramping up its focus on our national and global networks.

“[We want] to ensure that as companies continue to scale, the connections are ready for them when they need it.”

Occupancy is stable

AU – one of 11 Google for Startups hubs in North America – launched eight years ago in the basement of an old tobacco warehouse at the American Tobacco Historic District. It now encompasses close to 125,000 square feet of space at three locations in downtown Durham.

In terms of occupancy, Demarest says AU has maintained into the third quarter, and then saw a steady increase in the fourth quarter.

Speight, who stepped down in March and is still in stealth mode with his new venture, says AU remains a key component of the region’s entrepreneurial ecosystem.

“AU continues to show stability, with companies continuing to gain investment, scale and exit,” he said, adding: “Evaluating national trends, you notice that freelancers and remote corporate workers continue to increase dramatically WeWork and others that serve that market don’t require the internal training, coaching and other resources that high-growth startups need.

Thus, AU and other co-working spaces that focus on nurturing founders and early employees will continue to outperform the cool, trendy workspaces.”