'We were losing to American Underground.' How Chapel Hill changed its startup scene.

Five years ago, Launch Chapel Hill was started in response to the success that Durham’s American Underground was having.

Chapel Hill had no shortage of young entrepreneurs starting companies, but there was a problem. Many of them were moving their startups to Durham or Research Triangle Park.

“We felt it was important because we saw what we were losing to American Underground,” said Dwight Bassett, economic development officer for the town of Chapel Hill. “I knew that there were a lot of people over there that should’ve been in Chapel Hill, but they weren’t because we weren’t providing the opportunity.”


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Now, Bassett says, the town is starting to build a cluster of startups in downtown Chapel Hill thanks to Launch and a focus on creating more flexible office space in town.

Since 2013, 75 companies have graduated from the Launch program, and 25 still call Orange County home – not including those still in the program. That’s a retention rate of more than 54 percent, considering that only 46 of those 75 companies are still operating, due to the volatile nature of the startup world.

“Just knowing the number of companies that come through (Launch) just shows that people want to be here,” Chapel Hill Mayor Pam Hemminger said. “We can help nurture that. We are starting to get traction and companies are beginning to stay here. They have created jobs here and they are occupying office space.”

The quality of the companies graduating from Launch has also improved, Bassett said. That quality is reflected in the amount of money they are bringing in and the number of people they are hiring.

Last year, Launch Chapel Hill graduating startups raised nearly $13 million from investors, and revenues from those startups were $20.6 million, a 194 percent increase from 2016. Launch companies now employ 202 people in Orange County.

Those numbers are still relatively small, however, when compared to American Underground, whose 269 startups raised nearly $40 million last year.

Founders at Launch range in age from 16 to 70, and 31 of the companies have been student teams, though only seven student-led teams are still in businesses.

How Launch works

“We must remember at Launch we have two missions,” Launch Program Manager Dina Rousset said. “One (is) return on investment, so those companies that are out there building something will hopefully stay in this area and grow. But we also have what I call a return on learning mission. So it’s the students who come in and start their companies, because it is the best way to learn and some of those succeed and have been our biggest successes.”

The tech incubator – located at 321 Rosemary St. – offers startups a 22-week program that includes mentoring and help from an entrepreneur-in-residence. The Launch program accepts two cohorts of 12 teams each year.

Launch only selects companies that are ready to scale and have a national or global focus. It’s been pretty successful at selecting companies so far.

The analytics company Quantworks started at Launch Chapel Hill in 2016, and it has since moved into offices at the Greenbridge building, built a team of around 25 employees and is reporting millions of dollars in revenue.

Another former Launch company, the on-demand car services company Spiffy has received investments and leadership from serial entrepreneur and former ChannelAdvisor CEO Scot Wingo and has expanded into several markets across the country. And Jury-X, a startup that analyzes potential bias in jurors, is growing in the former Daily Tar Heel building on Rosemary Street.

And thanks to an expansion last year that included more co-working space, Launch now has more room to offer companies cheap and flexible space after they graduate. The co-working space is being used by 22 teams right now, but could house more.

Rousset said the key to keeping these companies in Chapel Hill is providing enough office space that doesn’t require longterm leases and can grow or shrink with the companies. More than 12,000 square feet of office in Orange County is now being leased by Launch startups, she said.

“What they want isn’t necessarily just cheap,” Rousset said, “it’s flexibility. They don’t want something with a five-year term.”

Launch’s three partners – Chapel Hill, UNC and Orange County – contribute a large amount of funding. UNC’s Office of the Chancellor provides about $165,000 a year, while the county gives $40,000. The town, with a $10,000 contribution from 3 Birds Marketing, also gives $40,000 a year.

Many startups also have benefited from the county’s small business grant and loan programs.

Durham still holds sway

But Launch Chapel Hill is still a young venture, and not every company is staying in Chapel Hill. Launch startups have moved as far away as New York and Washington, D.C., but Durham is still attracting a significant number of companies from Chapel Hill.

WalletFi, a financial technology company that has raised more than $300,000, originally began at Launch, but it is now operating out of American Underground.

“Honestly it was a convenience stand point,” WalletFi co-founder Glanzman said. “My co-founder is in Raleigh, and I am in Chapel Hill. But Durham has a great vibe, and we love the number of companies located at American Underground. It has become a part of the makeup of the company.”

Glanzman, a UNC alumnus, did credit Launch with helping build the foundations of WalletFi.

“(Launch) provided validation for what we were trying to build and the community around it was very helpful in supporting us .. and in giving us that foundational structure to go out and apply to accelerator programs and raise venture capital.”

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