AU Raleigh Outside

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Most entrepreneurs would say that the only constant in the startup world is change.

And that's proving true with the startup campuses that house those entrepreneurs too. A month after American Underground (ExitEvent's parent company) announced its third expansion in downtown Durham, today, it reveals a plan to transition its Raleigh campus from a hub for 25 local startup teams to classrooms and offices for fast-growing The Iron Yard code school.

The change, says American Underground Chief Strategist Adam Klein, "is really a chance to have a long term talent pipeline for the Raleigh and Triangle ecosystem, and with a trusted partner." 

The good news is access to a full-time coding program in the heart of downtown Raleigh. Since opening in Durham in June 2014, The Iron Yard has become a popular and respected way to learn coding skills and get a job as a junior developer at a local technology or startup company. 108 students have been trained in Ruby on Rails, Front End or Python Engineering at the school, according to Director of Global Campus Operations Jessica Mitsch, and though she won't reveal job placement figures, she said the number is significant. 

Recruiting and hiring continue to be huge challenges for local companies, and this is one organization serving that need.

But the bad news is that 25 teams have to find new homes starting November 1. And for a startup—venture-backed or still trying to prove itself to investors—every hour spent focusing on anything other than product, sales, team building or fundraising matters. The point of campuses like American Underground, HQ Raleigh and The Frontier are to make real estate the least of a startup founder's concerns. Today, it became one for the companies with offices at American Underground in Raleigh.

"You don't want to lose momentum," says Rob Burns, CEO of PredictifyMe, an AU@Raleigh company with seven employees. He got the news this morning and immediately headed out to inquire about space in Raleigh's warehouse district.

"Anyone who has flexible space should be stopping by here this afternoon and marketing it to everybody," he says. 

AU Raleigh Offices Upstairs
Credit: American Underground

Timing good and bad for AU change 

American Underground's move is interesting timing for the Raleigh startup community. HQ Raleigh is spilling over to an annex building across the street while it begins the 18-month construction of a 43,000-square-foot building behind its existing space. Designbox provides creative space for maker and art entrepreneurs. Chicago-based Industrious has announced plans to open in the new Charter Square building. According to its website, space is available in mid-October.

Work is also underway to open Loading Dock Raleigh, a co-working and workspace in an old Winn-Dixie warehouse in Raleigh's Five Points neighborhood. And the city of Raleigh recently put out an RFP for a company to reopen the beleaguered Raleigh Business and Technology Center.

There are clearly a lot more options for coworking/startup workspace than when American Underground opened its Raleigh campus early in 2014. And according to Klein, the repositioning of the space on Fayetteville Street doesn't mean AU won't consider a larger startup workspace in Raleigh down the road. In fact, AU will keep the street-level lobby area and a conference room available to Durham teams and coworkers meeting in Raleigh.

AU Raleigh Downstairs
Credit: American Underground

But only time will tell if the other spaces are a good fit for the American Underground teams. Burns is concerned that the lead time for some of the projects is too long for his team, and other office space in downtown has unrealistic lease terms for a startup. Burns could have five employees or 50 within the typical five-year minimum term.

Jason Bradicich, founder of design agency Adena Studios and startup Joosy, has a similar concern after learning he'll have to move. "There is a huge, huge underserved market here—office space that serves not the fresh startup and not so much the company with 100 people but the in between company that wants something more professional than coworking with really new startups."

American Underground has offered the teams 50 percent rent in October, free co-working in Durham through the end of the year, as well as free Triangle Transit Go Passes to ride the bus. There are also offices open in Durham if they'd like to rent one of those. Both men said they're grateful for the offer, and Bradicich expects he'll keep an AU coworking membership even after the change. 

But Durham won't work for their permanent offices. Of Burns's seven employees, two walk to work and don't have cars. One drops his kids off at school in downtown Raleigh. Bankers and other service providers are also in walking distance.

"A lot of our infrastructure is here and we have a good rhythm," he says. 

According to Bradicich, "We're a Raleigh company. We have our roots in Raleigh. It's more our vibe."

The rise of the code school

While the Raleigh tenants make arrangements to move, The Iron Yard is busy planning its new campus. Mitsch says the second floor of AU@Raleigh will be converted to two classrooms, and two three-month, full-time classes will start in February. Instructors are being hired now.

American Underground will continue to operate the space—it's also The Iron Yard's landlord in Durham. 

Mitsch isn't yet sure if an advisory board will be recruited to oversee the Raleigh campus, or if an existing board of 22 employer representatives will also oversee curriculum in Raleigh.

This is the first Iron Yard campus to open in such close proximity to an existing one. Since receiving an investment from Apollo Education Group earlier this year, campus openings around the nation have accelerated. The Greenville, S.C.-based company now operates 14, with four opening this fall including a campus in London. There are new course offerings like design and iOS or mobile development (which Mitsch hopes to bring to Durham or Raleigh) Prices have also risen since the start—from $10,000 to $12,000 (though there's a $1,000 diversity scholarship).

Iron Yard Demo Day Cohort 4
Credit: The Iron Yard

The Iron Yard has been a boon to Durham companies. Spoonflower and Validic have both put employees through the program, in addition to hiring its graduates.  

Justin Thomas, CEO of CrossComm, has hired two of his eight employees out of The Iron Yard. He appreciates that candidates have "demonstrated with their wallet that this is a serious profession" and that they graduate and are ready to be mentored.

"The last thing you want is to hire a developer who thinks they know everything and doesn't want to learn from anyone else," he says. "Individuals we've interviewed and hired really have a desire for mentorship and that's a positive for us."

Though change is hard, Klein and team are dedicated to helping the displaced teams land smoothly. In coming days, they'll help to connect the teams with other real estate options in Raleigh.

They're also excited to help The Iron Yard expand its impact locally.

"There are companies moving to new locations and that will diminish the number of startups in AU initially," Klein says. "But over the next three to five years, by adding hundreds of new software developers into the Raleigh tech community, the lasting impact will be a lot greater."