The American Tobacco Historic District celebrated its 10th anniversary on Sunday with a “block party” at Blackwell Street and Diamond View Park.
No doubt, a key to the redevelopment project’s success is the American Underground, a shared office space complex for entrepreneurs that opened in 2010. In fact, the Underground has spread to three locations now, including one in Raleigh and two in Durham. Underground at Main in Durham is even expanding.
What has made the Underground such a key part of the American Tobacco success story? Adam Klein, who joined the Underground in 2012, explains why. AU, for short, is eying 500 startups by 2019, up from the current 160 and the 35 to start just four years ago.
Capitol Broadcasting, the parent firm of the Underground and American Tobacco, also operates WRAL.TechWire. The AU and the historic district are overseen by Michael Goodmon of the owning Goodmon family.
Our exclusive Q&A follows:
- What was the original spark for the idea of the Underground?
As the American Tobacco Campus gained prominence locally and nationally, startups began coming to campus to find space. The problem was that while they fit the vision culturally, there wasn’t a fit in the business model. Startups, by nature, can’t sign a long term lease or pay standard rents. This drove Michael and Jim Goodmon to begin thinking about a real estate solution for companies like Adzerk, Boost Suite and others. That was the spark of the American Underground. The Goodmon family took an underutilized piece of property–the basement of the Crowe and Strickland building–and created an address for entrepreneurs and a real estate model that supported, rather than undermined, startup growth.
The original tenant commitments from CED, Idea Fund/NC IDEA, others – how crucial were they to making the project a reality? Were they on board before the decision was made to begin construction?
We would not be where we are today without CED, IDEA Fund/NC IDEA, Groundwork Labs and The Startup Factory. Those five groups are our partners and visionaries. They caught the vision of the American Underground and have improved upon it over the past four years. By clustering great resources together, entrepreneurs not only have strong support from other entrepreneurs inside the American Underground but a deep bench of mentors, capital, and introductions to propel them forward–and all of that within a hallway! When groups travel to the AU from out of town, the clustering of such partners is one of the most noteworthy things they come away with.
- The Triangle startup scene was experiencing some growth at the time but the AU seems to have helped galvanize it to another level. Isn’t that a fair assumption? How did AU help turn up the flame?
We think the most important thing we can provide an entrepreneur is another entrepreneur. I learned that while working with Aaron Houghton to launch the Bull City Startup Stampede. Entrepreneurs need to be around their peers who are up late working on code, finding a new business partner or figuring out their first hire.
The launch of the American Underground demonstrated the power of our region as these entrepreneurs and others gathered together to work, to learn, and to build great companies. We started in 2010 with 35 companies and remained at that level until 2013 when AU @Main launched. Now, the American Underground encompass 160 companies and we hope to house 200 companies with nearly 850 employees by January. It’s been an incredible ride!
- With the forthcoming expansion in Durham, is there a chance that startup spaces could be overbuilt or do you see a continuing, growing demand for more space?
We aren’t seeing a slow down. Fortunately, entrepreneurship isn’t a zero-sum game. We benefit from being a stone’s throw from some of our country’s best universities–and almost all of the data show that college graduates are increasingly interested in building a company at some point in their life. We anticipate the growth of the startup community will build exponentially in fact and are targeting to house 500 startups by 2019.
- What factors are driving AU’s success other than nice space?
We spend a lot of time working with our partners to round out an ecosystem for startups. For instance, we were targeting a code academy in 2014 as we saw there was a gap in talent for our companies when it came time to find software developers. CED provided an excellent introduction to Peter Barth of the Iron Yard Academy who was interested in launching an academy in Durham. Eight months later, the Iron Yard just graduated its first class and is the only accredited code school in North Carolina.
Further, our teams cite access to larger companies like Google as an important reason they are in our space. We’re able to provide unique opportunities through that partnership, including significant software credits on Google platforms and important introductions. In October, we’re hosting two members of the Google Ventures team who are product designers. They’ll spend an entire day with our companies helping them think through product goals, web design, and more. At no cost. That’s a special opportunity!
- What’s coming next for AU – other programs and services beyond just adding more space?
We think 2015 could be a big year for the American Underground, outside of adding physical space. We see an opportunity to use the real estate platform that’s been built to create some initiatives we hope will propel our companies forward and gain national attention. Right away though, we are working with partners to see how we can connect local youth with opportunities in the American Underground. This year alone, our teams have created 200 new jobs and raised $13 million in venture funding. We want to figure out how we can build an effective pipeline of young, eager talent in the Triangle to land some of those jobs.
- What factors led you to decide to go to work for Michael and join the Underground movement?
When I travel around to other cities, I am reminded of how remarkable it is to work for a family like Capitol Broadcasting Company. It’s rare for a region to have a family that is willing to make long-term investments in their community and do so in creative ways. Many people are building co-working spaces and things like the American Underground but they are doing it mostly for financial gain. I’m not saying that’s wrong but I do think the motivations (and consequently the strategy) are different. In our case, the Goodmons are looking at this as a long-term play that spurs opportunity in our region, not a chance to make a quick buck. I’d say that long view was one of the things that drew me to the opportunity as well as the opportunity to lead an organization. I’m very thankful to get to do this every day.