Durham's Innovation Ecosystem

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The research triangle down here in North Carolina is a well-known hub of innovation. With vertices in Raleigh, Durham, and Chapel Hill, the area is packed with world-class universities and the kinds of minds those places attract. It's even got one of those acronymic institutes that seem to do prodigious amounts of research, RTI International. The region has been particularly strong in biotechnology spun out of Duke, the University of North Carolina, and Wake Forest.

Start-Up NationWe came down in search of a different kind of story, though. We heard that there was a nascent startup scene that had taken hold in downtown Durham, formerly one of the most crime-ridden areas in all of North Carolina*. The community and business leaders of the city have put huge resources into revitalizing downtown, particularly around the 1-million square foot complex at the American Tobacco Historic District. Dozens of companies have taken up residence there, including HTC's American R&D unit and scores of small companies in the basement of one of the buildings. The American Underground, as its known, is home to Joystick Labs, a videogame startup incubator, and a half-dozen other companies. The region's angel investors are known to prowl the starkly lit hallway peering through the glass windows.

Durham is a fascinating example of what happens when a community bands together to try to attract entrepreneurs. They've set up all the mechanisms and institutions to foster innovation and now they're waiting to see if startup culture can take root. The city itself has "great bones," as they say, with a dense downtown core filled with beautiful old-timey architecture. They even have some inspiring local business history to draw on. Durham was once known as "The Black Wall Street" because of the preponderance of successful African American-owned businesses on Parrish Street.

The biggest problem entrepreneurs here have is finding money. Very little of the nation's venture money is sloshing around the area, particularly for standard technology, and some firms feel more comfortable having their portfolio companies a little closer to Sand Hill Road.

Judd Bowman is one of the area's big success stories. In 1999, he co-founded a ringtone platform, Motricity, instead of going to Stanford. That company eventually went public. When Bowman was starting up his next venture, Appia, he got early funding from North Carolina backers, but for bigger rounds, he had to reach out to other investors, mostly the big guys in California. One offer his company got stuck a clause into his term sheet that Bowman would have to move to Silicon Valley. He didn't want to move, though, so he turned them down and went with another group of investors including Google's Eric Schmidt. Appia is now the sixth-largest app store out there, with the majority of his business coming from places like India, Mexico, and South Africa.

We met 10 other local entrepreneurs trying to follow in Bowman's footsteps at the shared home of the Durham Stampede, a city program that provides free office space for fledgling companies to get off the ground. As we walked around the room, I was struck by how similar these entrepreneurs were to others I'd met in California and New York.

It occurred to me that there is now a national startup culture that you can tap into, following the latest industry gossip on Techcrunch, soaking in Paul Graham's wisdom, and finding funds on Kickstarter. Entrepreneurs now share a common language and value-system inherited from Silicon Valley, no matter where they're located.

When you talk to them, it's shocking how often the quality of the non-technology scene in the Research Triangle comes up, specifically the food. Bowman summed it up like this. "You've got good music, good restaurants, good bars, top-tier universities," he said. "Those are the ingredients you need to mix together to have the right people in an area to make it work."

I think Durham is one big, Groupon-like success story away from a wave of coverage about how good the area is for tech companies. I'm not sure that we met that company's founder today, but you never know.

* We heard this particular piece of local lore several times, but after receiving an email from a reader, we looked deeper and the lore doesn't hold up to statistical scrutiny. Durham and Raleigh both have higher than average crime rates for North Carolina, but downtown Durham specifically does not have a remarkable statistical profile.

Images: American Underground in Durham. Top: the hallway of startups. Bottom: Jeremy Ellison (left) and Matthew Raimundo of Two Toasters, a mobile software services firm.

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