BCR's Daily Fishwrap Report for September 17, 2010
CenterFest annual fall arts festival returns downtown today

New web site profiles downtown Durham's growing start-up scene

When people use adjectives like "burgeoning", "thriving", or "vibrant" to describe the start-up scene of an area, they could be exaggerating -- but in Durham, those words seem increasingly pertinent and accurate. The trouble is that our area’s large and growing start-up scene has largely eluded the public’s awareness. 

That is in part because the start-ups remain partially hidden behind a veil of oak trees and faceless buildings. To shed more light on what's happening with startups and new enterprises, BCR is today launching a new series called The Durham Startup Seen that will take a closer look at the start-ups and entrepreneurs in the Bull City.

Joining BCR with this series is Justin Landwehr, our newest correspondent covering start-ups and entrepreneurship. Justin moved from rural Ohio to Raleigh in 2000, and from Raleigh to Durham in 2007 after graduating from NC State with Bachelor’s degrees in Statistics and Economics. He works as a research associate in RTP and lives in a “cozy” old brick ranch just north of the Park. You can reach Justin at jglandwehr@gmail.com.

~ ~ ~ ~ ~

What conditions are necessary (or, better yet, sufficient) for entrepreneurship to thrive in an area? 

It is a question of great interest to city planners and business school professors everywhere, and while theories abound as to what the right conditions are, it seems apparent that Durham gets many of them right -- including, to name a few, the access to talent that comes with the “brain power” of the area (recently rated the second brainiest city in America), the growing cultural amenities, and the relatively low cost of operating here, especially with regard to office space.

But rather than rehearsing which conditions our city gets right, perhaps a more revealing angle is which conditions we are not getting wrong, and which conditions are steadily becoming less wrong. The answer potentially helps explain the rapid growth of start-ups and resources for start-ups in the area, and provides an especially optimistic view of the future.

For start-ups to thrive in an area, there needs to be a community of start-ups and a community around entrepreneurship. Historically, the community that existed in Durham and the Triangle either was not strong enough or not visible enough to gain much recognition outside of the Triangle or sometimes even within it.

One key element, then, to successfully developing start-ups and entrepreneurship is creating that visibility. And one of Durham's leading voices in that effort himself was late to notice all of the activity happening around town when he started his own tech start-up.

Taylor Mingos, CEO and founder of the Downtown Durham start-up Shoeboxed, notes that his company's siting in Durham was somewhat of a happy accident – a decision having resulted not from anything to do with the start-up scene, but rather from his ties to Duke and its interns. 

Although Mingos spent his college years at Duke, it was not until he brought his company to downtown Durham that he realized the area had such a vibrant entrepreneurial community, complete with venture capitalists and all. 

The problem was not so much a lack of a community or a lack of resources –fortunately the problem was an easier one to solve: it was a lack of visibility. And now Mingos is actively taking steps to combat that problem – more on that soon.

Besides visibility, perhaps an even bigger problem was that, until relatively recently, the Triangle start-up scene was lacking a central geographic area from which to grow. 

"The biggest problem with the area was that it had no center. For a start-up scene to be good, it has to have tight-knit circles, and psychologically there was too big of a separation between the different parts of the Triangle," says Mingos.

Downtown Durham has emerged as that center.

Just this summer, two incubators – LaunchBox Digital and Joystick Labs – along with the Council for Entrepreneurial Development have signed leases in the new American Underground in the Tobacco District, and we can expect that eventually there will be 20 to 30 start-ups located in the American Underground at any given time.

A second major hindrance to local start-ups has been, if not solved, then significantly weakened -- access to the seed funding that gets ventures off the ground. 

"Other than not being geographically tight, another problem with this area has been early-stage funding – early, early companies could not get money," Mingos adds. "LaunchBox Digital is now addressing that, and also a couple of deals recently got done where just guys with an idea got $250,000 [from angel investors]."

DowntownDurhamStartups.com

Having made significant progress on the lack of a geographic center and the lack of early-stage funding, the Triangle and Downtown Durham, in particular, is primed to see high and growing levels of entrepreneurial activity. All we need now is a way to track it and make it visible. Enter DowntownDurhamStartups.com.

Until recently, a Google search for “Durham start-ups” or even “Triangle start-ups” would return little worth mentioning – mostly pieces of news about companies raising capital, some dating back as far as 2007 – and nothing in the way of a directory of companies. 

On July 2, Mingos launched Downtown Durham Startups, offering a range of information about start-ups in downtown and beyond, including a much-needed directory.

The mission of the site is to raise awareness and get people excited about our area’s start-up scene, including potential entrepreneurs, developers, investors, and executive-level recruits from around the country.

Mingos co-founded the site along with Aaron Houghton, chairman and co-founder of iContact and CEO of Preation. Mingos and Houghton had been talking about the idea for over a year before they found time to make it happen. 

They decided that the site would focus on technology start-ups as opposed to biotechnology or life sciences start-ups whose needs are significantly different and already well-represented in the area. They are working in partnership with Jason Murtha, a web developer and a Durham resident since last June, who does the blogging for the site.

And despite the name, the site itself lists early-stage ventures well beyond the Bull City's urban core. The site’s directory of technology start-ups currently lists 14 start-ups in downtown Durham, 10 in greater Durham, and 21 in the surrounding Raleigh/RTP/Morrisville/Chapel Hill/Carborro area. It allows any founder to add a profile of their start-up, or, if their start-up is not already included in the directory, to request that it be listed. 

Already about 15 new start-ups have submitted their names for directory inclusion but Mingos and Houghton, busy operating their own companies, have thus far been unable to process all of them.

They are also trying to find time to add content under the resources section of the web site, presenting information that can help entrepreneurs filter through the available resources in the area. 

"We want the things on there to be really practical and the type of things you would hear about in small, intimate networking events – things like who’s really a good lawyer for start-ups or how much people are paying for rent," Mingos says.

"We hope it’s a good tool to show people what’s going on inside the area and over time becomes a good resource for entrepreneurs." Mingos added that while he and Houghton are adding as much content as quickly as they can, help would be appreciated. (Those interested can find contact information on the website.)

The solutions we are now seeing to the geographic center, early-stage funding, and visibility problems means that if you live in Durham and want to start a company, there's more resources available than ever before.

But before you get started, Taylor Mingos has just one suggestion: Go work for a start-up. "Lots of entrepreneurs don’t like to work for other people, but you really have to. You learn a lot and you get the connections you need."

Comments

eah919

I think someone should tell Taylor Mingos that "visibility" should not mean defacing other people's property with stickers. Every time I see a one of those Shoeboxed stickers i remind myself never to use that service.

Jason

Great article. Thanks for the mention, Justin. I'm looking forward to the rest of the series.

That seems like quite the libelous statement, eah. I can't imagine Taylor himself has the time to run around Durham with a handful of Shoeboxed stickers like some kind of mustachioed villain.

Shoeboxed employs quite a few of our fellow Durhamites and I'm glad they're here.

cdragin

I'm looking forward to reading the series and also keeping an eye on goings on at downtowndurhamstartups.com. I've been a CED member for a while; I've spoken to a couple of people who don't think their move out of the park is a good one. I'm hoping they will actually be more of a valuable resource being in a more vibrant place. With the new hackerspace that opened this week, downtown Durham is becoming an exciting place for reasons other than just food and beer (which is not to disparage food and beer). This summer I refocused my company efforts on services for startups...it's always exciting to work with brilliant people who are passionate about what they do.

Will

" who don't think their move out of the park is a good one. " For whom? For RTP no, it isn't good. It's another sign that RTP is a product of yesterday. A product just now realizing it needs a new identity. Let's hope the new master plan amounts to more than simply putting a bow tie on a pig's neck. (Not to disparage pork).

For CED the move is an absolute must for relevancy and survival. The writing on the PostIt note was there but I give them great credit for practicing the entrepreneurial spirit they preach.

cdragin

The people I spoke to were concerned that the move was putting CED too far from the center of the Triangle (e.g., becoming less geographically desirable for Raleigh and Cary and Morrisville.). Another said that CED was struggling for relevancy and views the move as a symptom rather than a correction.

While RTP campus may have advantages for companies who conduct R&D in well-appointed campuses, there are few natural gathering places for people to meet outside their walls. It's designed for people to walk from the office to the parking lot, get in the car and go home someplace far away. It's not conducive to the kind of spontaneous community you find in places like the South Park area of San Francisco, or even some corners of the sprawl in the San Jose area.

Downtown Durham already has a strong community spirit that embraces business, art, science, and community development. One concern I have is the physical and mental disconnection between downtown and ATC. Most people I know who spend time downtown don't set foot in ATC if they don't work there. I don't know if people who work in ATC and live out of town ever cross the tracks. I'm hoping to get more involved with CED once they're here in town, which will also give me reason to go to ATC other than for fine waterfront dining. ;-)

art

Great article. Anyone know why it's limited to technology start-ups? Why not include all the new downtown businesses coming in, run by often first-time entrepreneurs? Would the list be too long... and too much work? I'm thinking Beyu Caffe (a photo of which is featured on the downtowndurhamstartups website, but no mention of it having opened this year), Fullsteam Brewery, Casbah, MotorCo, King's, and many retail stores and other businesses downtown. It seems I notice a new business opening every time I drive through.

Is my definition of "start-up" wrong? I'm taking it as an entrepreneurial business venture that sets itself up for continued growth (which many of the above new businesses likely have long-term expansion plans). I'd love to see non-tech start ups on a website, and would especially love "coming soon" section (for investment purposes).

Justin Landwehr

Art, not to speak for Taylor and Aaron, but I think there is good reason to have a directory focusing on high-potential tech start-ups because their needs and aspirations are very different from other types of businesses. That said, we at BCR will cover all kinds of businesses and entrepreneurs, including locally-owned restaurants and coffee shops. (And I like the idea of having a directory for those kinds of local businesses as well...)

tm

This is Taylor, and Justin hit the nail right on the head.

"Entrepreneurship" is a huge umbrella that encompasses many types of businesses. One type is no better than the other, and each has very different needs. Even within the high-growth tech venture space, you have many types of companies (bootstrapped, lean, VC-backed) that require different sets of resources to get off the ground and running. While I'm going to generalize in the following response, I can't speak for all high-growth tech ventures because we also have somewhat different needs and there are some differing opinions.

In general, I'm a big fanboy of everything in Downtown Durham and am so excited about Fullsteam, Motorco, King's, and everything else going on in this area. (There's just too much to list here…)

But for the sake of the directory, we are trying to focus on high growth, technology-oriented startups. We feel that in order to make the directory useful for entrepreneurs it has to be focused and targeted. As mentioned earlier, these companies have a unique set of needs that require specific resources and solutions. Expanding the scope of our site would limit our ability to provide this niche with relevant, helpful resources. Additionally, the expertise, resources and help that we are qualified and able to provide on the site would not be helpful to companies outside of the technology startup realm. We have chatted with a few people and if anyone would like to make a partner site for biotech companies or other types of entrepreneurial ventures, we would be happy to give them the template and help get it off the ground.

Here are a few examples of the different needs and why we feel that we need to keep the directory narrowly focused:

1) Regarding the market scope of tech startups, roughly 95% of Shoeboxed's revenue and the vast majority of investment come from outside of this area. Over 75% of our customers live in California, and we also bring in revenue from our office in downtown Sydney, Australia. The marketing resources a company like Shoeboxed needs differ from those needed by companies that service Durham and the surrounding community. In this case, it would be more helpful for someone interested in starting a local company to talk to the operators of Fullsteam or Motorco about how to get the word out and run a successful company in a local market.

2) Fundraising is one of the biggest obstacles for any startup, and growth technology ventures go after a common type of investor. The fundraising process for tech startups is 100% different from more traditional businesses because of the risk/return profile. For tech startups, getting assistance from a bank is something that we can only dream of. Unlike companies with traditional business models, we need resources and help from other entrepreneurs who have gone through an equity angel, super angel, or venture process. Also, many entrepreneurs in this area invest in other startups (it's all rather incestuous).

3) On real estate searches, we classify a lease of more than 1 year as "long term" because our goal is to expand rapidly in a short amount of time. It is nearly impossible to predict where a tech startup will be even three months down the road, but this is not the case for companies with more traditional business models. This creates a host of challenges in finding space and dealing with landlords that traditional companies simply do not face.

4) In addition to operational and marketing differences, there are a lot of legal concerns and approaches that are unique to high-growth tech startups. We want to make it easy for entrepreneurs to find solid legal advice that is tailored to the unique needs of technology startups and to connect with attorneys who have the needed skills and experience.

Obviously the definition of a "high-growth, technology-oriented startup" is subjective in nature, but here are some common characteristics of the type of company that we are focusing on and currently include in the directory:

    - A venture, not what is traditionally (MBA-speak) referred to as a "lifestyle business"
    - Technology or e-commerce focused
    - National/international scope/distribution (or ambitions to soon reach it)
    - Often development of intellectual property ("IP") known to us as some sort of "secret sauce" ;)

Cheers,
Taylor Mingos
taylor@team.shoeboxed.com

Scott Harmon

Taylor and his cohorts are lighting the fire to the kindling of Durham's economic engine. The independent, creative, small and locally rooted spirit of these companies is playing exactly into Durham's strengths.

I disagree with the comment about ATC. I see ATC employees in Five Points all the time, and vice versa. I wish the crossing had tidier design for pedestrians, or better yet, a cool engineering marvel to bridge from Five Points to the North Deck, but in general I think the connection across the tracks has not been as onerous as we feared.

More importantly...ATC has a certain personality that works for many, but not for all. The historic City Center of Durham is going to be the less-managed and more interesting, authentic, and organic heart of Durham...it really already is.

Jeremy

Bricks & Mortar businesses like Motorco do have entirely different needs than do technology and especially infotech type businesses. As Taylor mentions, drawing from an almost exclusively local market for suppliers and customers and having a huge portion of the investment in realestate are key differences. We've received quite a lot of help and support from DDI and I imagine that most other B&M start ups could also use them as a resource.

BTW, I'm willing to answer questions about Motorco, but please wait until after we've opened ;)

The comments to this entry are closed.