Startups key at tobacco campus

May 23rd, 2017

By Sherry Slater | The Journal Gazette

Transforming 1 million square feet of crumbling brick buildings into ­in-demand office, residential and retail space is one thing. But building a robust entrepreneur support system is another.

Durham, North Carolina, seems to have found the secret to success for both challenges.

And those experts are willing to share the formula that led Durham business incubator American Underground to more than quadruple its space – and expand from one to five locations – in only five years.

Supporting entrepreneurship is a major priority in Fort Wayne's plans to redevelop the abandoned former General Electric campus, which straddles Broadway near Taylor Street.

Economic development experts nationwide have found that creating a robust regional economy requires supporting existing employers who want to expand, attracting new companies that want to relocate and nurturing local entrepreneurs who want to stay put while growing businesses.

The latter effort can slow the brain drain that results when talented high school graduates leave for college and never return. It also can produce business owners who are fiercely loyal to the community that cheered on their early efforts.

One of lead developer Joshua Parker's priorities for the 31-acre GE campus project is creating places that help the Summit City retain and recruit talent.

But to make the formula work, Durham leaders said, Fort Wayne needs to find out what characteristics make the community unique and embrace them. 

Planting the seed

After Durham's American Tobacco campus opened in 2004, leaders realized a significant segment of the business community was priced out of the development.

Casey Steinbacher, who led the Greater Durham Chamber of Commerce from 2007 to 2015, searched for creative ways to build an entrepreneurial infrastructure.

So a few folks cleaned up a basement on the American Tobacco campus, outfitted it with cast-off couches and chairs from Goodwill and dubbed it American Underground, a space where startups could grow while paying what Steinbacher described as “very reduced rates.”

To ignite interest, the chamber launched the Bull City Startup Stampede. The prize was free work space for 60 days, printer access, internet connections and weekly access to experienced entrepreneurs willing to give advice.

The plan was to choose 12 applicants to become the first class of entrepreneurs. But when the contest launched, organizers didn't know whether they'd even receive 12 applications.

Steinbacher and staff apparently stumbled upon a gaping need. They received 325 submissions.

The chamber ultimately ran the Startup Stampede three times, helping 36 companies get a foothold.

Of those, 26 are still in Durham.

Steinbacher devoted about $5,000 of the chamber's budget to the effort that first year, with most of the money going toward beer and pizza. She threw a party any time a venture closed, celebrating the entrepreneur's attempt.

By removing the stigma of failure, Steinbacher hoped to fold the washouts into Durham's workforce, beefing it up with talented risk-takers.

Afraid of getting stale, the chamber stopped the stampede and created a new gimmick. The contest marketed “The Smoffice,” or the world's smallest office, which was 50 square feet of a downtown Durham coffee shop. 

The prize included a laptop computer, free high-speed internet access, upstairs living space and access to an almost endless supply of potential customers – or collaborators – for six months.

The contest was later recognized as an outstanding economic development effort by publications including the New York Times, the Wall Street Journal and Forbes.

Recruiting talent

Simply setting up ­couches and tables doesn't ensure startup space success, however. Fostering entrepreneurship requires a certain atmosphere.

Steinbacher believes innovation occurs when diverse individuals come together and challenge assumptions.

“What we like to say is: We specialize in colliding people,” she said.

This month's Moogfest is a great example.

The city hosts the multiday, multivenue music, art and technology festival that attracts artists, futurist thinkers, inventors, entrepreneurs, designers, engineers, scientists and musicians.

It's the kind of funky annual gathering that bolsters a city's reputation. 

Durham has made a concerted effort to attract the young, creative class to settle there.

“All of the stuff that we're doing is really talent recruitment,” and that's economic development, Steinbacher said.

“It's a talent war out there,” she added. “Once we have the talent, companies find us.”

Durham is succeeding in creating well-paying jobs, according to a study released last week by WalletHub, a personal finance website. The North Carolina city was No. 1 in highest monthly average starting salary (adjusted for cost of living) at $3,909. Fort Wayne was 92nd at $2,576.

Durham also ranked 15th nationwide in best city to start a career, based on professional opportunities and quality of life. Also based on the most recently available government data, Fort Wayne ranked 109th.

Build on expertise

Adam Klein, American Underground's chief strategist and first employee, worked for Steinbacher when the chamber's primary goal was to link Durham and entrepreneurship in people's minds.

That box was checked some time ago. 

In 2013, Google recognized Durham has one of seven key tech hubs in the U.S.

Now in its sixth year, American Underground has expanded to four buildings in Durham and one in nearby Raleigh.

The business incubator devotes 130,000 square feet to startups, more than four times the 29,000 square feet it occupied when it launched in 2012.

Klein measures success in more than square feet, however. He noted that the 257 companies headquartered in American Underground raised $26.7 million in investment in the 12 months ended Sept. 30.

Another point of pride for American Underground leaders is the diversity among entrepreneurs. More than 48 percent of resident companies were led by women or racial minorities during the last fiscal year.

The diversity extends to the types of businesses; 34 industries were represented last year.

That's important, Klein said.

“I think a problem for some (cities) is that they try to focus on building a tech economy,” he said.

Instead, communities actually need to encourage entrepreneurs to build on the expertise that exists, Klein said.

The best way to build the infrastructure that startups need, he said, is to ask existing entrepreneurs which resources they rely on and where the gaps are.

At a glance

Among the key statistics from American Underground's last fiscal year, which ended Sept. 30:

  • 257 companies were housed within AU locations
  • $26.7 million was raised by AU-headquartered companies
  • 88 percent of survey respondents who sought funding received it
  • 1,527 people are employed by AU companies, more than half full time
  • 1,166 new full- and part-time jobs were created by AU companies
  • 874 people use the AU space on a daily basis
  • 28 percent of AU companies were led by racial minorities
  • 29 percent of AU companies were led by women
  • 34 industries were represented by AU companies
  • 38 languages are spoken by AU members
Categories Quality of Life