Nearly 300 startups have offices at the Durham campuses of American Underground. The American Underground & Main building, located on West Main Street, has become the central location for the Capitol Broadcasting-owned tech incubator. Harry Lynch File photo
Nearly 300 startups have offices at the Durham campuses of American Underground. The American Underground & Main building, located on West Main Street, has become the central location for the Capitol Broadcasting-owned tech incubator. Harry Lynch File photo

Business

How the American Underground is trying to make life easier for Durham startups

By Zachery Eanes

zeanes@heraldsun.com

July 27, 2017 06:00 AM

UPDATED July 27, 2017 06:00 AM

DURHAM

The American Underground in downtown Durham is a vastly different place compared to when it opened in 2010. The co-working hub is a lot larger, having grown to four campuses — three in Durham and one in Raleigh — and become a lot more diverse.

But it wants to offer more than just rentable space for the 275 companies operating out of its Durham campuses. It wants to be an active part of the growth of the companies based there, which range in size from one-man enterprises to startups with 30-plus employees.

That’s why the co-working space has announced a strategic shift — one that focuses on building new partnerships and networks as well as making it easier for startups to find and train employees.

“I think some of this evolution of our model is about going from from a mid-size city and a mid-tier startup community to a top-tier startup community,” American Underground Chief Strategist Adam Klein said. “In order to go from Double-A or Triple-A to the major leagues, we need a new set of initiatives, we need a broader network of partners and we need the people to do that.”

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To be sure, the company has already been doing that – it partners with Google to host a summit for African-American-led startups and it recently purchased an online platform to connect Durham area job seekers with American Underground-based companies.

So far, two new high-profile partnerships have emerged.

In collaboration with the Massachusetts Institute of Technology and Rice University, 50 startups based in American Underground will be eligible for a six-week “MBA-lite” program.

The program, which comes with a $1,000 stipend, is meant to teach the basics of running a business, while the universities study the impact education has on the success of startups.

And to remedy Durham’s distance from big-money investors in New York, American Underground is now partnering with the New York City-based co-working hub Bond Collective. The partnership gives American Underground-based startups access to any of Bond’s four offices in New York.

“We’ve heard so much about American Underground over the years and we’re thrilled to host teams from (American Underground) ... as they seek funding and partnerships from New York-based investors and companies,” Tim Bailey, director of operations at Bond Collective, said in a statement.

“We look forward to offering our members a workspace in Durham as they look to do the same in the south.”

Below is a brief conversation with Adam Klein, edited for clarity.

Adam Klein is the chief strategist for the downtown Durham tech incubator American Underground.
Courtesy of American Underground

What does this pivot mean for the American Underground?

We’ve had a playbook to move the (American Underground) forward over the past seven years and that has worked well.

I think what we are looking at over the next five years, though, is what is going to be required to take the startup community to the next level. So, we think there is need for a new approach and a new set of programs and partnerships.

What about the old approach wasn’t working?

The community is fundamentally different now — it’s larger. We have 1,000 people coming to the Underground every day, whereas five years ago, or even four years ago, it was more like 100 to 150. With that difference in size comes entrepreneurs who are at different stages of their growth process or different industry types even.

It used to be primarily technology (companies here) and now we are seeing more consumer-product companies. So we are rolling out a set of programs and initiatives to really support entrepreneurs and their employees across different spectrums, different stages and different industry types.

There’s always a danger in any community of feeling satisfied with where you are, and I think that our ambition is to continue to move forward to new levels. I think some of this pivot and evolution of our model is about going from from a mid-size city mid-tier startup community to a top-tier startup community.

Why was it important to partner with the New York co-working space the Bond Collective?

I think where our companies are succeeding, they are linking quickly with national and even international opportunities.

Our goal in this pivot is to see how we can do that at scale for our entrepreneurs, so that they are able to reach to investors in New York more easily or able to connect with a partner opportunity in Austin, Texas, or San Francisco more rapidly because of the network we have built.

What does this mean for the City of Durham?

We are also looking to connect with people in Durham who have ideas and want access to resources to turn the idea into a business, which should yield more entrepreneurship in Durham. I think that’s a great thing. All the economic development literature points to small firms as the number one driver of job growth.

And then two: Durham’s emergence as a city on a national level. I think Durham and American Underground forming this partner relation with a co-working space in New York for instance is part of us putting our city and our entrepreneurial community on a national stage and in conversation with city’s like New York.

What is the current state of accessing talent and capital in Durham?

I think capital we can always continue to do better, but I hear more and more from companies that talent is really where there are gaps. We see a not insignificant number of open positions for mid- to senior-level talent positions, and so some companies are going out of market to find talent or working alumni networks.

If we could help fill that gap with local talent or equip talent through career management and training programs, then that is great for everyone.

Zachery Eanes: 919-419-6684, @zeanes

What is the American Underground?

The American Underground was founded in 2010 out of a basement in American Tobacco Campus.

Since then, the startup hub has grown to four campuses — with three in Durham and one in Raleigh — with around 275 companies supporting more than 1,500 jobs in downtown.

American Underground offers cheap and flexible office space for growing companies, who might not want sign on to a multi-year, traditional office lease. It has also begun to beef up its offerings of networking and partnership opportunities to accelerate the growth of its startups.

The growing number of startups based at AU have brought national attention to Durham in recent years, especially for its efforts to increase diversity. (More than 48 percent of American Underground companies were female and/or minority led in 2016, which represented a 30 percent increase from 2015.)

Companies at American Underground range in size from one-person enterprises to quickly-growing startups such as energy drinker Mati Energy, which now also has production facility in Clayton.

In recent years, some growing companies, like the software company Archive Social, have moved out of the American Underground and signed traditional office-space leases in downtown Durham.