Is a Different Kind of Silicon Valley Possible?

DURHAM, N.C.—Downtown, sprawling factories are constant reminders of this city’s past life. A few decades ago these massive buildings were owned by tobacco companies and bustling with blue-collar workers. After the tobacco business contracted in the second half of the 20th century, and factory jobs disappeared or were relocated, the buildings—and much of Durham’s downtown—were abandoned.

Now, the city is in the midst of an ongoing, carefully orchestrated plan to boost the economy. These vast spaces are once again teeming with with jobs and workers, but of a completely different variety: white-collar entrepreneurs hoping to make Durham a major destination for start-up ventures.

This did not happen by chance. After the decline of Durham’s manufacturing, the city found itself in need of a revamped economy. Luckily, it had the tools to build one: massive amounts of open, unused office space thanks to the abandoned tobacco manufacturing plants, low (at the time) property prices, and proximity to illustrious academic institutions. So the local government started courting start-ups. In 2011 the city’s Chamber of Commerce launched programs providing free office space, wi-fi, and start-up advice to new companies. That same year the governor of North Carolina implemented a tax credit for developing businesses in the city, geared toward interactive digital media. The Chamber of Commerce has also offered monetary compensation for opening up businesses in the downtown district, and for creating jobs.

In many ways the city’s push has been successful so far. It’s hard to keep count of the incubators, coworking spaces, networking groups, and facilities meant to cater to entrepreneurs. In turn, the city’s start-up community is producing highly-touted, award-winning companies; Durham-based start-ups won Google’s Demo Day pitch competition in both 2014 and 2015. American Underground (AU), one of the larger start-up incubators in the city and one of nine Google Tech Hubs throughout North America, has seen significant growth. The organization started by hosting 25 startups in 2012, and now has 10 times that number on its current roster. Its businesses have brought in over $29 million in funding and added more than 400 jobs to the local economy, according to the group’s most recent annual report.

Start-up fever has also trickled into universities, with Duke creating an entrepreneurship certificate track through the university’s Innovation and Entrepreneurship Initiative. The program has taken up residence in one of those old tobacco facilities downtown, creating the Durham Bullpen, a space for entrepreneurs to collaborate that also includes classrooms for Duke students, whose main campus is about two miles away.

But talk to anyone in Durham’s start-up sector and they’ll say that they have no desire to create a duplicate of the Bay Area, or even New York’s bustling tech-start-up sector. “We want to build the counter narrative to Silicon Valley,” Adam Klein, the chief strategist at American Underground and a former member of Durham’s Chamber of Commerce, tells me. Because Durham is a new entrant, part of a second wave of the start-up boom, some say that the city has both advantages and additional responsibilities when it comes to molding the local economy.

“Silicon Valley is thriving in terms of venture capital, but when you dig under the hood you see big companies aren’t able to move the needle on diversity,” Klein says. “We have the opportunity to build that right out of the gate, an inclusive technology hub for female and minority founders.” Toward that goal, AU has reached out to students from nearby North Carolina Central University, a historically black institution, to get students more interested in the space and growing businesses. They have focused on bringing in successful entrepreneurs of different races and genders to advise and encourage startups. And they’ve sought out and brought in venture capitalists who fall outside the typical white, male mold. Already, Klein says, it seems like these efforts are helping to draw in entrepreneurs who are excited about the idea of joining a start-up community that is being strategically built to be more inclusive, rather trying to break into one that is struggling to diversify a near-uniform workforce.

Looking at the numbers, there’s something to what Klein is saying. Of the companies to come out of American Underground in 2015, for instance, about 30 percent are led by women and 22 percent are led by minorities. That’s significantly higher than most (admittedly fuzzy and tech-focused) estimates elsewhere for either group, which generally put the share of female-led ventures below 20 percent, and the share of minority led-ventures below 10 percent. When I asked Eric Toone, the head of Duke’s Innovation and Entrepreneurship Initiative about the gender makeup of student enrollment in his program, he happily reports that it’s a pretty even split thus far, and that the racial makeup falls in line with the overall makeup of the university: about 50 percent white, 25 percent Asian, 25 percent other minorities.

Toone says that Durham’s conscious divergence from other start-up hubs shows itself in other ways, too. According to Toone, the plan for Duke’s entrepreneurship lab is to teach students how to take an idea and make it into something that can tangibly better people’s lives, not necessarily to create the next Instacart or Washio. He also wants to dispel students of the notion that entrepreneurship is only for those who are interested in a tech-based solution. MATI Energy, a startup that makes health-conscious energy drinks, represents the first time a business that doesn’t quite fit into the tech mold won Google’s Demo Day. And it’s founder is a woman, Tatiana Birgisson, who started the company in her dorm room at Duke.

But the rise of Durham’s tech sector isn’t without its challenges, for both start-ups and the folks who were in Durham long before entrepreneurs headed there. The revitalization that has swept across downtown, bringing jobs, new buildings, bars, and coffee shops, also means that prices are going up. And the start-up-friendly rents that allowed burgeoning businesses to expand easily are quickly disappearing. Similarly, many of the jobs created by the entrepreneurs in the new Durham don’t exactly match up with the jobs lost in the old one. That can lead to displacement and growing pains in a city that’s still finding its footing.

And while convincing new companies to settle in the South has been successful in many regards, drawing similar interest from investors can still take some work. The heavy hitters of start-up funding have traditionally been located in places that have a proven track record of returns and success—the places that Durham is intent on not patterning itself after.

Klein says he’s optimistic, not only because of the success of the past few years, but because of the city’s history as an entrepreneurial hub that predates any of today’s popular apps. “If you go back to the origination of the city, it centered around entrepreneurship and innovation,” he says. “Now it’s just a matter of creating a center of gravity and coalescing those different forces.”