Editor’s note: Continuing a multi-part series exploring the state of the startup economy across North Carolina, Shannon Cuthrell takes a look at what’s happening in Raleigh. And the trend she finds: No signs of any slowdown. Today’s report is broken into several parts – the growth of programs to nourish new firms, the continuing expansion of HQ Raleigh, and the arrival of a new startup space while American Underground reboots downtown. The package also includes a blog post about why the CEO of fast-growing startup Pendo chose Raleigh as its headquarters. Future stories in this series will focus on Durham-Chapel Hill, Asheville, Wilmington and smaller towns within the Triangle region. Existing installments can be found in our archive.
Raleigh skyline, sunset, Sept. 2017
RALEIGH – The state of startups in the Capital City is solid, with major expansions underway and increasing national interest in the local startup ecosystem.
When you consider the Triangle as a burgeoning startup hub on a broad level, it’s easy to compartmentalize cities by their dominance. But this WRAL TechWire series is focusing instead of what’s happening at a macro level across the state and region, not just what community is landing the most deals.
Startups continue to be drawn to Raleigh for a variety of reasons, including several cited recently by Michael Haley, executive director of Wake County Economic Development. “Talent; Innovation & Collaboration; Business Environment; and Quality of Place” are the big draws, he wrote in a blog for WRAL TechWire.
Though some Triangle communities tend to have a higher concentration of startup headcount within them, all cities are thriving nonetheless. And this momentum is gaining speed year-over-year.
That’s the consensus of an comprehensive review by WRAL TechWire of what’s happening among entrepreneurs, from the newest startups to emerging firms drawing international attention.
Zooming in on Raleigh in particular, the main pattern for 2017 can be seen in several expansions taking place in the city. This year’s growth extends to companies, deals and coworking/incubator spaces.
The city’s footprint in the larger Triangle startup community is increasing fast, and projections indicate it is poised to continue. The reasons why are unpacked below.
Raleigh grabs national attention, newcomers and deals
Confirming the upward trend of startup activity in Raleigh is City of Raleigh Innovation and Entrepreneurship Manager Derrick Minor, who serves as a sort of liaison between local startups and their government. In being embedded in the community, Minor says he has observed that 2017 has made a positive mark on the startup ecosystem in Raleigh.
Several factors contribute to this. Minor cites, “The launch and expansion of startup work spaces, [the] creation of programs to help early stage entrepreneurs, solid traction and fundraising activities with several high-growth companies, and numerous expansions of out of market startups to Raleigh.”
One tool to help track the growing number of startups is an interactive map that Minor oversees.
Mapping startups in Raleigh
“It’s a service to entrepreneurs by providing a free online resource to get additional exposure for their companies,” Minor explained recently to WRAL TechWire Editor Rick Smith. “This is also helpful for venture capitalists, as they can get a bird’s eye view of the Raleigh startup community and get a sense of the variety of industries and types of companies we have located here. The main goal [is] to provide additional exposure for our companies and create one more pathway for us to help tell a bigger story of the growth of entrepreneurship.”
The Chamber also is teaming up with Innovate Raleigh to provide more resources for startups and to further promote the city as an entrepreneurial hot spot. Bridget Harrington, an entrepreneur and a former employee in financial services for KPMG, recently was named executive director of Innovate Raleigh. Harrington assumes the job today.
The expansion continues
Some key examples cast a light on this growth.
There’s Raleigh’s four-year-old star software startup Pendo, which raised a whopping $45 million in two rounds over the last year, each including prolific Silicon Valley venture funds such as Spark Capital. According to Wake County Economic Development data, as of July 2017 Pendo hit a headcount of over 100 this year. This is up from 2016, when the company went from 13 employees to 71, reported last December. The startup recently announced it will soon move its headquarters to a 43,000-square-foot space in a downtown Raleigh tower.
In a blog post, CEO Todd Olson cited three “top reasons” for being in Raleigh and the Triangle:
- Education/talent
- Solid and growing technology community
- Affordability
Residential IoT startup K4Connect is also making waves, raising a $8 million Series A round in late 2016 led by Intel Capital, which prompted a move to a 15,000 square foot office space to accommodate for tripled employee headcount. It has also signed a series of contracts this year to bring its home automation technology to even more senior living communities. Just last month, the company landed its biggest deal to date with Kisco Living Center, expanding its reach even further to more U.S. states.
Additionally, Raleigh-based FilterEasy, an air filter subscription startup, raised nearly $7 million in capital this year and moved to a larger downtown space to hire more employees.
Raleigh is also serving as a recruit for outside startups and entrepreneurs as well. London fintech startup Kurtosys brought its headquarters here. SendHub co-founder-turned-attorney John Fallone moved from San Francisco to the Triangle to open up a law firm in HQ Raleigh, Fallone SV, exclusively to serve startups and small businesses.
Council for Entrepreneurial Development data for the first and second quarters of 2017 records eight major exits for North Carolina startups. One is Raleigh’s KnowledgeTree Inc., acquired by Chicago-based SAVO Group in June.
CED also reports that Raleigh startups raked up a total of 20 deals in the first half of this year, the runner up to Durham which had 36.
Raleigh as a launchpad for new startups
Raleigh has established itself as a solid contender among other hubs in terms of initiating the launch of new startups with cutting edge technologies. Many accelerators and business development programs contribute to that status.
There’s the Innovators Program, a four-year-old accelerator that sprouted from a partnership between HQ Raleigh, Citrix and RedHat. The three-month program just graduated its fourth cohort in October which included eight startups with technology for team management, Internet of Things, healthcare and advocacy groups.
North Carolina State University also lends a strong hand in launching new startups in Raleigh. Though this article focuses specifically on the state of non-university startup growth in Raleigh as a whole, it is worth attributing a portion of the city’s startup momentum to the wealth of resources NC State offers students, staff/faculty and alumni.
As part of its Entrepreneurship Initiative, NC State holds many opportunities for startups to showcase their work, such as the popular innovation festival Entrepalooza or the annual Lulu eGames competition, which offers more than $100,000 in prizes to startups every year.
RIOT event in Raleigh
Raleigh is also home to industry-specific launch programs for startups. One such program launched out of NC RIoT this year to extend entrepreneurial support to startups in the Internet of Things field. RIoT Labs is a space complete with hardware and prototyping materials for IoT products. There are circuit boards, data visualization programs, wireless network connectivity tools, and more.
In addition to the physical lab, the RIoT Labs program provides business development resources and educational programming to the IoT demographic of local entrepreneurs.
