A newer and rapidly growing component to our Triangle Startup Ecosystem is accelerators, incubators and workspaces. In this post, we look at what these have to offer startups and then detail what’s available here in the Triangle.
What are Accelerators, Incubators and Workspaces?
What is an incubator?
Back in the go-go days of the late 90s out West a new type of system for creating startups called an incubator. Bill Gross’s Idealab in Los Angeles is the classic example of an incubator. Also, many universities and large companies have incubators.
Here’s how an incubator works:
For all the out-of-pocket investment and nurturing, the incubator takes an equity stake of 10-30%+ in the incubated company.
- There’s an idea generated—If it’s a University program, the idea comes from some kind of research. If it’s not University-affiliated, the incubator management team or an entrepreneur-in-residence generates the idea. Ideas are vetted against some process and if they make it through, they are incubated.
- A management team is recruited—The incubator usually has a recruiting function and helps build a team for the idea. The incubator includes office space, usually ‘for free’.
- The idea is nurtured—Over the course of 6-12+ months, the team builds the product, tests it with customers and iterates.
- The idea leaves the nest or is pivoted or killed—After a period of incubation, the idea either leaves the nest, is retooled and re-incubated or possibly killed.
What is an Accelerator?
Since the 90s innovations in cloud computing and the surge in new platforms like mobile, costs to build a software company have decreased substantially. Also, new developer tools and technologies have increased the speed of development and execution. Because of these trends, accelerators were born like Y Combinator (Bay area) and Techstars (started in Colorado, has expanded to 20+ areas/affiliations) and they have replaced the incubator model. Think of the accelerator as an Agile Incubator.
Here’s how an accelerator works:
- You apply—Accelerators generally have 1-2 ‘cycles’ or cohorts/classes/vintages per year. You have to apply to the accelerator and usually competition is fierce.
- Investment and 2-3 month acceleration period—If accepted, the accelerator invests in your company for $25-150,000K and generally gets sub 10% equity. In addition to the investment, the company receives hands-on mentorship, access to a network of alumni and more.
- Demo day—Another benefit of accelerators is they nurture strong connections with investors. To bring their portfolio companies together with investors, they host a demo day where each company in the cohort pitches and hopefully receives investment so they can leave the accelerator and move onto a Series A round and bigger and better things.
What is a Workspace?
When you are starting a company, one of the hardest challenges (and trust me I’ve had to navigate this about 20 times now) is office space. Landlords want tenants that lease entire buildings or floors of buildings for 10+ years. When you are starting a company, you may need two desks to start, but then quickly you could flex up to need 5,000 square feet or maybe 10,000 square feet in the course of three to five years. It doesn’t take long to realize these models don’t really add up.
Startup shared workspaces were born to solve this problem. The way it works is the workspace operator takes the risk with a landlord and signs the big 10-year lease and then rents out space to startups in smaller chunks. Usually workspaces offer a couple of options:
These configurations help you scale from 1 to ~20 people and then usually you outgrow the startup workspace and it’s time to get a full on lease. But at 20 people, now you are a Tweener and better able to take on a multi-year office space type deal, so it is a great way to crack the lease chicken-and-egg problem.
- Co-working space—Think of this as a Starbucks on steroids but much quieter and minus a barista. You have large open spaces with desks and tables spread around and for a fee you can have access to this on a FCFS basis.
- Office—For slightly more than access to a coworking space, you have access to a small 1-2 person dedicated office.
- Larger team rooms—Larger and larger rooms are available and you can also rent conference rooms.
Where can I learn more?
If you want to learn more about incubators and accelerators generally (not specific to the Triangle, here are some links. This is a great article on Techcrunch about what’s going on.
The Triangle’s Incubators, Accelerators and Workspaces
The Triangle’s Incubators
As mentioned, incubators are out of fashion outside of universities. All three universities in the Triangle operate at least one incubator and some have several. These incubators are ‘internal’ so they tend to be student, faculty or staff led, but as some of those companies do leave the nest, there are opportunities for folks to join one of the university-incubated companies as employees as they transition out of University.
Because of their deep affiliation with the University’s entrepreneurial efforts and tech transfer, we cover these in detail in the Universities (coming soon) section of the guide.
There is a life-science focused incubator in RTP called First Flight Ventures. It is perfect for life-science companies because it has labs and biotechy stuff like that. Back in the 90s, some non-life science companies had space at FF, but today it is very unusual. The defunct angel group called TIG used to meet at FF and I always worried I would catch Ebola or some other experimental virus out of one of the labs when meeting there.
There is one other brand spankin’ new incubator, Audacity Factory:
Coordinates: NCSU Centennial Campus
Pitch: Joe Schmidt founded AF as a non-profit. It is an incubator/accelerator that focuses on companies that are dealing with social issues. This doesn’t seem like a tech incubator and I initially wasn’t sure it would make the list. But when I dug in, what I found is the best way to solve social issues tends to be technology-oriented. For example, the first output from AF is ENDcrowd.com—a crowdfunding platform that raises funds to combat modern-day slavery.
Other interesting info of note: AF allows 5-7 companies into the program and there is an application process. It’s not clear how long the program lasts, but you work aside Joe and a great team he has put together called the Brain Trust.
Leader(s): Joe Schmidt, founder of CanvasOnDemand and an investor with Tom & Joe Inc.
The Triangle’s Accelerators
The Triangle is home to five active accelerators (six if you count ThinkHouse Raleigh+Durham as two)
Coordinates: American Tobacco Campus, Durham (334 Blackwell, #005)
Pitch: A DC-based accelerator called Launchbox came to the Triangle in 2010 with big plans to have a national ‘franchised’ accelerator. That entity folded in Chris Heivly’s fledgling Triangle Startup Factory and made him director. That lasted about two years and then seemed to unwind. Chris pulled in Dave Neal (learn more about them in our coming soon startup mentor and angel guide) and resurrected The Startup Factory (TSF).
Today TSF bills itself as the most highly-capitalized accelerator in the Southeast. Companies apply, and if admitted to the program receive $50,000 in seed capital and all the mentoring they can handle over a 12-week program in Durham. If they complete the program successfully, they receive a convertible note for $2,000-$150,000 to keep them going post-TSF.
Other interesting info of note: TSF is the only accelerator on this list that actually invests $$ into your idea. Chris and Dave run a tight ship and TSF is a huge asset to the Triangle Startup Ecosystem. Chris’s blog at heivly.com is a must-read for anyone in the ecosystem and the events that TSF puts on (Big Top Job Fair for recruiting and TSF pitch day) are great to attend. TSF is also expanding by running bootcamps a bit outside the Triangle in places like Asheville, Wilmington, Greensboro and Winston Salem. The real key here is you have two world-class high-tech entrepreneurs running this accelerator which makes it a killer opportunity and asset to the Triangle Startup Ecosystem.
Leader(s): Chris Heivly (a MapQuest co-founder) and Dave Neal
Coordinates: American Underground, Durham (ATC basement)
Pitch: NC IDEA (see Investors) funds Groundwork to get companies to the phase where they can get an NC IDEA grant or funding. Therefore, this program is ‘free’. In other words, you don’t give up any equity, but you also don’t get an investment. Like an accelerator, you have to apply to GL and there’s a cohort type system. You also get mentoring and free office space for three to six months.
Other interesting info of note: GL has operated since 2012 and has had 80 companies run through the program.
Leader(s): John Austin (previously ran Joystick Labs) – for more info on John, check out our Angels and Mentors section.
Coordinates: Raleigh: 410 Cutler St., Raleigh NC 27603
Pitch: What happens when you put 10 people in a house with cameras rolling? Ooops, wrong pitch, that’s Big Brother. What if you took an accelerator and you had people spend not most waking moments, but EVERY waking moment living and working together. That’s ThinkHouse. Over nine months, 5-10 recent college graduates stay in a seven-bedroom house. Participants pay a monthly fee to cover the living space costs and in exchange receive room and board, working space and a ton of mentorship through the program. Note, the ThinkHouse does not provide capital outside of the free living and workspace and also does not take equity.
Other interesting info of note: ThinkHouse is still new and just starting its third class. That being said, it is expanding rapidly with a Durham TeachHouse (for young public school teachers) and Greensboro ThinkHouse U (for entrepreneurship students).
Leader(s): Jesse Lipson (founder of Sharefile, executive at Citrix), Brooks Bell (founder of Brooks Bell Interactive), Jason Widen and Chris Gergen—the folks behind HQ Raleigh (more on that below)
Coordinates: Citrix Sharefile HQ/ HQ Raleigh
Pitch: In 2014, Jesse brought the Citrix Innovators program to Raleigh from Silicon Valley. Citrix partnered with Red Hat and HQ Raleigh as well as Cherokee-McDonough (Clean tech focused outfit) to expand things in 2015. Companies that complete the program receive a $25,000 grant. It’s not clear if that is in exchange for equity or not. Like the other accelerators, there is an application process and if you make it, there is a 12-week program designed to educate you, help you build your software and launch.
Other interesting info of note: This is for internal corporate teams at Citrix, Red Hat and other companies as well as outside startup teams. It has a B2B focus.
Leader(s): Jesse Lipson (Citrix), Delisa Alexander (RH side), Tom Darden (Cherokee).
Coordinates: HQ Raleigh
Pitch: A vendor, bigPixel, is sponsoring this accelerator-esque contest. One startup that is accepted into the Big Idea Project will receive $100,000 of free legal, branding and marketing, development and design services (and coworking space). This is the first time this contest has been held and only one company gets in, so we'll have to see how it plays out. If you are interested, applications are open through September 30, 2015.
Leaders: David Baxter (bigPixel), Maari Casey (Uncompany) and Steen Kanter (Kanter International)
Coordinates: 321 Rosemary St., Chapel Hill, NC
Pitch: LCH is affiliated with UNC, but takes outside companies via an application process and puts them through a 22-week program. Many of the companies are not high-tech, but many are, so we have included it here.
Other interesting info of note: LCH occupies a 3500 sq-ft facility in the heart of Chapel Hill. The program costs $1,495 and is paid monthly (~$300/m). LCH does not take an equity position in the company and does not invest. It just accepted a 4th cohort.
Leader(s): Dina Rousset and Aaron Scarboro
Coordinates: American Underground
Pitch: There used to be a TSF-like accelerator for video games called Joystick Labs
Leaders: John Austin and Glen Caplan
Coordinates: American Underground
Pitch: This used to be a Groundwork-like 60-day accelerator for startups.
Leader(s): Adam Klein (runs American Underground), Durham Chamber of Commerce and Downtown Durham Inc.
The Triangle’s Workspaces
The Triangle is a hotbed of startup workspaces. By my count we now have 10 options if you are looking for a great place to flexibly build your next great idea.
Coordinates: 310 S. Harrington St., Raleigh, NC 27603
Pitch: Jesse and Brooks started this as HUB Raleigh in 2012 in a building on Hillsborough St. HUB filled up fast and also had a naming conflict so they renamed it HQ Raleigh, bought an old warehouse in downtown Raleigh’s emerging warehouse district and up-fitted it to be an awesome startup workspace. When I talk to local entrepreneurs, HQ Raleigh is the premier and most desired of the workspaces on the Raleigh side of the Triangle.
Other interesting info of note: Visit the site and look at the layout—it is awesome. Plus, HQ Raleigh has a variety of plans ranging from $125/month to $1400/month, so you can start small and ramp up nicely here. HQ also has great amenities like free beverages and a lot of social and mentoring events.
Leader(s): Jesse Lipson, Brooks Bell, Jason Widen, Chris Gergen (Yes the same folks behind ThinkHouse and Citrix Accelerators)
Coordinates: Three locations (another coming soon):
Pitch: This started in the basement of the American Tobacco Campus, then was so popular it gradually took over four floors of a building on Main Street in Durham and also opened up a facility in Raleigh. American Underground is expanding again across the street from the Main campus in January 2016.
- American Tobacco Campus Durham—318 Blackwell St., Durham, NC 27701
- Main St. Durham—201 W Main St., Durham, NC 27701
- Raleigh—213 Fayetteville St., Raleigh, NC 27601
- Market Street Durham— 212 W. Main St., Durham NC 27701
Other interesting info of note: The American Underground has an affiliation with Google which has tagged it among 10 elite entrepreneurial tech hubs around the globe. AU has 240 companies occupying its three existing locations—25 offices will be available in the newest one. Coworking prices range from $79/month for students to $215/month for a full-time coworking pass. Offices top out at $999/month. One big plus is AU has a life-size C-3PO in the Durham Main St. location. While all the AU locations rely on city decks/spots for parking, I've heard folks complain about the parking for the Raleigh location, where parking doesn't seem as plentiful/inexpensive.
Leader(s): Adam Klein
Coordinates: 800 Park Offices Dr., RTP, NC 27709
Pitch: FREE—do I have your attention? The Frontier is an old abandoned building (after a big corporate downsizing) out in RTP that they have retooled to be a startup workspace. What’s cool is there is a big open area that is free. Then if you want a free more permanent office it’s simply $300/month.
Other interesting info of note: The only downside is the space isn’t as nice as a HQ or ATU and RTP is pretty sparce when it comes to hip eateries. There are some foodtrucks that swing by which is cool and helps mitigate the food challenge.
Leader(s): Anna Rhyne and Jacob Newbauer
Coordinates: 201 W. Chatham St., Cary, NC 27511
Pitch: Many of the municipalities have felt a bit left out by the success of HQ Raleigh and AU so they've started their own initiatives. These are usually in concert with the Chamber of Commerce or the local government. So they have good space, but since there aren’t as many entrepreneurs involved, you are really getting office space here. Also the office space tends to be more ‘traditional’.
Other interesting info of note: Space at the CIC starts at $100/month and goes up as high as $405/month and is restricted by days of week and size of the space. Right now most of the tenants are not high-tech in nature.