Chapel Hill has the potential to attract and retain high technology companies that would diversify the economy and tax base, as other university towns have done. Conceivably, ‘uptown’ Chapel Hill with its proximity to the university could become an ‘innovation district’ that houses multiple tech companies.
Outstanding research universities such as UNC typically ‘spin out’ numerous high technology start-up companies. These companies often provide excellent jobs and can be valuable additions to the local economy and property tax base. However, unlike some other college towns, Chapel Hill has not been very successful in retaining or attracting high-tech companies.
Over the last two years UNC and the Town, with some prompting from CHALT, have made some progress.
What are the achievements and challenges so far?
In June, 2016, CHALT sponsored a forum entitled ‘Nurturing High Technology Businesses in Chapel Hill.’ The forum, attended by business leaders, elected officials and members of the wider community, addressed the opportunities and challenges that Chapel Hill faces in its efforts to support the growth of local life-science and technology businesses, particularly businesses based on research carried out at UNC. In the two years since the forum took place, there have been some encouraging signs of progress, but many challenges remain.
Subsequently, Mayor Hemminger, as well as several candidates in the 2017 Town Council election, emphasized the importance of this issue. This article will discuss the recent progress the Town has made in encouraging high-tech development in Chapel Hill, as well as the challenges that remain.
Developments at UNC.
Under the direction of Judith Cone, the Vice Chancellor for Innovation, Entrepreneurship and Economic Development, UNC has provided many types of support for student and faculty entrepreneurs. The technology transfer mission of the Vice Chancellor’s office is a broad one with responsibilities at the state, national and global levels. However, over the last few years there has been increased collaboration with the Town to promote local entrepreneurial activity. An important symbolic milestone was the August 2017 transfer of the Vice Chancellor’s office from campus to 109 Church Street thus bringing 22 staff members to rented space in downtown Chapel Hill.
LAUNCH expands.
Another development was the 2017 expansion of the LAUNCH startup accelerator to 3500 sq. ft. of office and meeting space located at 306 W. Franklin. LAUNCH is a joint project of UNC, the Town, and Orange County. Led by Dina Rousset, LAUNCH has supported 75 startups of which 25 remain in Orange Co. Total investment in LAUNCH companies in 2017 was about $13 M, allowing creation of over 1000 jobs, with 200 of those within Orange Co. The 1789 Venture Lab at 173 E. Franklin is a student-oriented UNC incubator space that has also produced several promising startups.
While LAUNCH and 1789 have been successful, the start-up companies they have supported are largely in areas such as information technology, retail, and social entrepreneurship, activities that primarily need little more than office space and an internet connection. However, the lion’s share of research at UNC is in the health sciences, and many of the start-up companies in that arena require ‘wet-lab’ space where biological and chemical studies can be performed. Thus, in an important new development, UNC has decided to create several thousand sq. ft. of wet-lab space within rented facilities in downtown Chapel Hill. The exact location hasn’t been determined, but this new facility may allow biotech start-ups to remain in Chapel Hill rather than migrating elsewhere, as they do now. However, as discussed below, many challenges remain.
Developments at the Town Level.
Mayor Hemminger has enthusiastically supported the idea of bringing more high-tech companies to Chapel Hill. One important event was the recent creation of a light industrial district on Millhouse Road. CHALT’s input on this project helped make the regulations for the district less cumbersome. As of now, several companies in the Biotech and Ag-tech areas have expressed interest in the district, but there are no occupants yet.
On another front, Dwight Bassett, the Town development officer, has assembled an index of available commercial space in town and is advertising that on social media in hope of attracting high tech businesses.
Another interesting entity is the Mayor‘s Entrepreneurs Council. This group comprises of a number of local tech entrepreneurs, business leaders, and commercial realtors. It was initiated at a meeting sponsored by the Mayor in Feb 2017 and has met several times since using space in the LAUNCH facility. While Mayor Hemminger and VC Judith Cone both attend these meetings, the emphasis has been on letting the business people direct the discussion. Some interesting projects have evolved from this group, including plans to develop a uniform short-term lease agreement to allow small companies to access space in CH without protracted negotiations. Additionally, Anton Puech, one of the Entrepreneurs Council members, has committed to develop about 10,000 sq.ft. of tech-oriented office space at 206 W. Franklin.
Remaining challenges
While the Town and UNC have made significant progress during the last couple of years in their drive to bring more high-tech business activity to Chapel Hill, there remain many challenges.
- Lack of appropriate space. There is a dearth of high quality office space that would be suitable for companies in the information technology area, and a total absence of ‘wet lab’ space suitable for biotechnology companies.
- Lack of a high-tech ecosystem. Almost as important as space for tech development is a network technologists, entrepreneurs, financiers and real estate experts who interface with each other and provide the environment to nurture new tech companies.
- Lack of efficient transportation. Limitations in parking availability and in public transit create difficulties for employees of new tech companies.
Lack of appropriate space. According to the founders of several local small tech companies that have recently graduated from ‘incubator’ space at LAUNCH or on UNC campus and have moved to commercial space, one major competitive problem is the availability of many thousands of sq.ft. of commercial lab and office space across the Triangle area. The rental costs for those spaces are usually substantially less than those in Chapel Hill, and they have free, abundant parking. However, there are a couple of factors that make moving to space in suburban office parks potentially less attractive to contemporary tech startups. One is their distance from a university campus, and from other tech companies, which tends to isolate the employees. A second, related, factor is the lack of close amenities such as restaurants, coffee shops, stores, and the general lack of a good ‘vibe’. This reflects a relatively recent paradigm shift for high tech development away from suburban research parks and into downtown ’innovation districts’ with clusters of tech companies in proximity to urban amenities. The prototype of this paradigm is the Kendall Square area of Cambridge Mass., the home of hundreds of hi-tech start-ups. However, there are also good local examples including the Wake Forest Innovation District in Winston-Salem, HQ Raleigh, and the American Underground in Durham.
Chapel Hill has the possibility of emulating these successes on a smaller scale since it does have the urban amenities so valued by young tech workers. However, there are problems. For biotech companies, a major liability is the lack of ‘turn-key’ lab space in CH. Small companies, often goaded by their venture capital partners, are in a big hurry. They don’t have time to negotiate complex leases or re-equip space that was designed for other purposes. For example, two recent UNC biotech start-ups, Symberix and Ribometrix, recently moved to Biolabs in downtown Durham. This facility advertises ”launch in less than a week.” Additionally, it provides a lot of useful common equipment and even has its own coffee shop. That, plus the location in trendy downtown Durham, makes Biolabs very attractive to UNC biotech startups, even though it is remote from campus and rather expensive. Right now, Chapel Hill is very far from having anything that would be competitive with Biolabs Durham for companies that need wet-lab space.
However, many high tech companies, even biotechs, don’t need lab space. For example, another UNC biotech start-up, Meryx, is largely a ‘virtual company’ with most of its ‘wet’ research farmed out to contract research organizations (CROs). Likewise, many IT companies have prototype products assembled by CROs. In these cases what is required is high quality office space served by speedy internet connections plus the cross-fertilization that comes from multiple companies functioning in proximity. Development of this type of activity in downtown Chapel Hill may be easier to accomplish than extensive creation of wet-lab space. However, high rents as well as affordable, accessible parking will remain issues for any young company in Chapel Hill.
High Tech Eco-system as well as Transportation needed. A highly successful innovation district is more than a collection of labs and offices. Rather, it is a sort of ecosystem with multiple connections at multiple levels including technology, finance, job opportunities, convenient personal/professional interactions, and lifestyle amenities. Nick Ghitelman of Quantworks indicated that the main reason that his 20+ person company remains in downtown Chapel Hill is the presence of lots of bright young people who are interested in IT work and who like the CH lifestyle. However, Nick (who is also a member of the Mayor‘s Entrepreneurs Council) cautioned that deficiencies in local infrastructure could be a barrier to further tech development in town. A growing population along with continuing under-investment in schools and in transportation may make Chapel Hill a less attractive place for people with the talent to be tech entrepreneurs.
It would be difficult for a small place like Chapel Hill to compete with the likes of Boston or the Bay Area or even Durham across the whole high-tech spectrum. However, some college towns have been successful in that arena by building on their unique strengths. A good example is Ann Arbor MI, which has piggy-backed on the long-term relationship between University of Michigan and the auto industry to become a hotbed of R&D on driverless cars and other advanced transportation technologies. Perhaps Chapel Hill can do something similar and focus on areas such as bioinformatics and health care management that are strengths of the UNC Schools of Medicine, Public Health and Pharmacy. However, that may take specialized leadership that is currently lacking. Currently there is no one whose full time job it is to promote high-tech development in Chapel Hill, whereas other tech-savvy towns have such people.
To sum up, Eric Tomlinson the CEO of the Wake Forest Innovation District, often talks about the complex ‘magic sauce’ that is needed to nurture high tech entrepreneurship. Chapel Hill has assembled some of the needed ingredients, but in order to really get cooking, we need to add the catalysts that are still missing.