Durham, NC sparks a Tobacco Road business revival
Launching a beverage start-up in a saturated market, dominated by the Red Bulls and Monster Energy drinks of the world, isn’t for the faint of heart.
But Tatiana Birgisson never set out to take on the beverage giants. She did so quite by accident, when the now 25-year-old developed her brand—Mati Energy, a healthy caffeinated energy drink—as a student at Duke University, brewing teas in her room to combat fatigue while taking several antidepressants in 2012.
“When friends came over they would drink it, and then they started asking to buy it,” said Birgisson. (It was during a time when she had also made the switch from engineering to an economics major.)
Birgisson pitched the idea for Mati Energy as part of a live-in entrepreneurship club at Duke and won a $5,000 grant from the university to spend her summer turning the idea into a real business. She graduated in 2012, and the next year won an additional grant of $11,500 for having the best undergrad start-up at Duke.
Within two years she won an NC IDEA grant for $50,000, awarded to early-stage start-ups in the state to validate potential markets and expand. She was also selected to pitch at Google Demo Day in 2015, an event that brings a select group of start-ups to Google’s headquarters in Mountain View, California.
“It was with all tech companies, and I felt lucky enough to even be selected to pitch,” she said. Despite being in a sea of tech start-ups, Birgisson wowed AOL co-founder Steve Case, who led a $100,000 round of funding in the company. She also won the day’s top prize, the second Durham, North Carolina start-up to win in the past two years. The previous winner was Windsor Circle.
Perhaps what’s most surprising about Birgisson’s rapid-fire success is the fact that she hasn’t run off to some swanky new headquarters in Silicon Valley or New York City. She’s staying where it all happened—in Durham, North Carolina.
An underground success
Like many new North Carolina-based startups, Birgisson works out of American Underground, a campus that houses start-ups and accelerators, with 220 small businesses in Durham and another 20 on a nearby Raleigh campus. Just a few years ago, American Underground was an abandoned tobacco warehouse, but thanks to an undisclosed investment by regional media conglomerate Capital Broadcasting Company, it’s now a thriving startup scene, laying the foundation for entrepreneurs like Birgisson to call Durham home.
“It’s made a significant contribution to the region in terms of being a one-stop-shop for entrepreneurs,” said Adam Klein, chief strategist at American Underground. “We have an investor community here, mentor organizations, everything you need in one spot.”
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In 2014, Klein says American Underground start-ups raised $20 million in funding from the likes of Comcast Ventures and IDEA Fund partners.
Public-private partnerships have resulted in over $14 million in public investments and/or commitments and over $210 million in private investments and/or commitments since 2010 for major real estate development projects (those in excess of $10 million in project value), according to Kevin Dick, director of the Office of Economic and Workforce Development for Durham. Durham has also committed or invested over $1.5 million in grants to small businesses and entrepreneurs that have been matched by over $9.4 million in private sector investments and commitments. These additional funds have gone for building improvement projects, signage grants and other real estate property improvements.
“It’s affordable from a business and personal standpoint. I wouldn’t want to be anywhere else.”
Part of staving off “brain drain”—the emigration of talented individuals from three top-tier universities (University of North Carolina at Chapel Hill, Duke and North Carolina State) and from the famous Research Triangle Park—is having a booming downtown.
“We are committed to making this a place where people want to work and live. The large investments for larger projects and companies have created a more viable climate for small businesses and entrepreneurs,” Dick said.
Durham also hosted several classes of the Bull City Startup Stampede in 2011 and 2012, a concept that led to more interest in American Underground. This was spurred by the Durham Chamber of Commerce and Downtown Durham, working in partnership with developers and property owners to offer two months of free rent to entrepreneurs both in and out of state, and free parking, as part of a Durham “tryout” to see if they could make their businesses work there.
Over the past three years, “The buzz has self-sustained and grown,” Dick said.
The tax environment has also become more favorable in North Carolina for both businesses and individuals, according to the Tax Foundation. On the Foundation’s State Business Tax Climate Index, North Carolina made the biggest rankings jump in the history of the index, from number 44 to number 16 in 2015, due in large part to an individual tax reform that created a single-bracket system with a rate of 5.8 percent and a standard deduction of $7.500. Corporate tax rates fell from 6.9 percent to 6 percent as well.
Dick said that Durham incentivizes a percentage of capital investments that businesses in the city make, which is often used to offset future tax burdens. The application-based process is dependent on the sizes of both the business and investments made.
Expect Durham’s growth to continue, as it’s on the short list to receive Google Fiber, the web giant’s high speed Internet product in the near future. Look no further than the Kansas City market to see the type of entrepreneurial growth that occurs when given access to blazing-fast speeds. An entire startup village has been built there around the Google Internet service.
American Underground is also a Google for Entrepreneurs Tech Hub, meaning the company provides financing and access to entrepreneurial events and mentoring. Google declined to say how much it has invested in the area.
For entrepreneurs like Birgisson, Durham looks to be a long-term home. Mati Energy has surpassed $100,000 in sales and is in Whole Foods locations across the Southeast, as well as gyms, offices and local health stores. The drinks will be sold in Kroger and Costco stores in the region later this year.
“It’s affordable from a business and personal standpoint. I wouldn’t want to be anywhere else,” Birgisson said.
(Disclosure: Comcast Ventures is an investment affiliate of Comcast, the owner of NBCUniversal, the parent company of CNBC and CNBC.com.)