The American Underground (AU) entrepreneurial hubs in Durham and Raleigh have had a substantial economic impact on their respective downtowns, according to its 2013-2014 Annual Report.

The 180 companies headquartered or affiliated with the three AU campuses have spent $674,700 at downtown businesses in the two Triangle cities last year, the report says.

They’ve also created more than 300 jobs and companies headquartered in the Triangle have raised more than $20 million in funding.

Including all clients with local offices, the capital total tops $40 million.

Mayor Bill Bell of Durham said in a statement, “The American Underground’s remarkable growth has contributed hugely to our community. We’ve seen how the energy and creativity of our entrepreneurs have helped spur the renaissance of our downtowns. Now we can say with certainty that, just as importantly, the impact of the American Underground ecosystem has been a major contributor to the region’s economic success.”

Building on their success, the AU hubs are expanding. (American Underground is owned by Capitol Broadcasting, the parent firm of WRAL TechWire.)

“December was our best month by far in terms of the number of companies signing up for AU space and “We see a huge potential for 2015,” said Adam Klein, AU chief strategist, during a conference call Wednesday morning. Fifteen new firms have signed up and “We expect to get to 20 by the end of the year,” he added.

Major expansion at Durham Main

Additionally, the Durham Main Street campus in a former bank building, already the largest of the three with 126 companies, is undergoing a major expansion. It’s adding two more floors and 30,000-square-feet of space with a rooftop patio and bar by February 1.

“It’s 90 percent pre-leased and we anticipate an additional 40 to 50 companies joining,” Klein said.

The Raleigh AU site has 32 companies and the American Tobacco Campus, 32.

Plenty of the local spending goes for business purposes, but Klein added, “We like our pizza.” The report notes that at the weekly AU helpfest events alone, 4,480 slices of pizza were consumed. The cliché of caffeinated startup employees appears to have some basis in reality as well: 21,904 cups of coffee were brewed at the AU sites during the year.

“We double down on having our teams connect with the region and support downtown businesses rather than holing up in the basement,” Klein said. “A lot of our companies are big supporters of the downtowns they’re in.” Personally, we’ve spotted venture capitalists and entrepreneurs from the Durham Main site at various downtown spots, from the coffee shop to the bookstore.

New jobs created

The startup companies have money to spend, too. Of AU companies that sought funding, 76 percent nabbed angel or venture funding rounds. They raised a total of $40,558,000 counting affiliated companies not based in the Triangle, with those headquartered here raising slightly more than half that at $20,748,000.

While numerous startups in the AU hubs begin with solo-entrepreneurs developing an idea, funding generally means adding staff. Of the 323 new jobs created by AU firms, 244 were new full-time positions and 79 new part-time jobs. Additionally, the startups employed 116 contractors.

The top three industries among the AU startups are software, business to consumer firms and business product companies.
Prior to the establishment of the AU startup hubs four years ago with the first at the American Underground at the American Tobacco Campus, the Research Triangle was often viewed as home to large firms such as Cisco, IBM and others, but weak on collaborative space for entrepreneurs.

Klein said, “The question going into the development of the American Underground was essentially: Can a startup hub succeed outside of Silicon Valley? Our report answers with a clear and powerful: YES. We’ve linked with our research universities, our major corporations, funders of all kinds and, of course, smart startup founders to develop a diverse and thriving entrepreneurial ecosystem.”

That diversity includes 23 percent of the AU companies led by women and 32 percent female or minority led, the report says.

The ecosystem also lends itself to synergies: a whopping 90 percent of AU firms say they have collaborated with other companies in the hubs. Also, 68 percent of AU survey respondents said they received three or more strategic introductions through the AU, and 65 percent reported mentoring new entrepreneurs. They rate the AU’s impact on member success at 5.8 on a scale of 7, and the Triangle’s entrepreneurial climate at 5.9 on the same scale.

Klein said AU has just “Rolled out an initiative for people laid off by larger companies” who choose the startup path and “Some have already moved into the space.”