StartingBlock, Madison’s Answer to Chicago’s 1871, Hits Crucial Stage

A vacant 1.75-acre piece of land in downtown Madison, WI—once the site of a car dealership—could become one of the most important hubs for tech entrepreneurship in the state’s capital, if the backers of a proposed project called StartingBlock Madison make their vision a reality.

StartingBlock would put startup accelerator Gener8tor and maker space Sector67 under one roof, and be the go-to event host for networking group Capital Entrepreneurs. The exact details are still being worked out—including who will foot the bill for the roughly $30 million-plus project, and whether startups will flock to it—but the early plan is to construct a 10 to 12-story mixed-use building totaling between 113,000 and 140,000 square feet. StartingBlock would be the anchor tenant, taking up about 50,000 square feet. (The above picture shows an early rendering that is subject to change.) The building would include a co-working space, office suites with flexible lease terms that are conducive to startups, conference rooms, a 1,500-seat performing arts venue, and commercial and retail space.

The idea is to coalesce some of Madison’s key tech organizations and create an environment where small, young companies can set up shop next to all the resources they need to grow. Investors, business services providers, and universities are expected to have a presence. Organizers intend to hold educational workshops and community events.

The project’s supporters hope the space will spark plenty of collaboration among the various tenants. Say, for example, a startup going through Gener8tor’s three-month accelerator program is working on a Web-enabled device, but needs an engineer to build a prototype. The founder might be able to walk down the hallway to Sector67 and find someone who could build the device on site.

“Our hope is there’d be a lot more serendipitous outcomes by bringing all these groups together,” says Gener8tor co-founder Troy Vosseller, a member of StartingBlock’s planning committee.

Advocates clearly have high hopes for StartingBlock. Michael Gay, Madison Region Economic Partnership’s senior vice president of economic development, put it this way: “This is not just a physical location. This is not a real estate play. This is a game-changing centerpiece of innovation and ideas and economic growth.”

Bold statements aside, there has been growing interest around the country in catalyzing entrepreneurship through buildings designed to foster collaboration within a local startup community. Co-working and maker spaces are popping up in entrepreneurial hotbeds from coast to coast. Xconomy has chronicled several of them, including Startup Hall in Seattle and Greentown Labs near Boston. These types of developments often form the heart of innovation districts—strategic neighborhood clusters of startups, corporations, universities, and other entrepreneurship drivers, usually alongside retail and housing. Examples include Kendall Square in Cambridge, MA, and the Cortex district in St. Louis, MO. If StartingBlock gets built at the proposed site in Madison’s Capitol East District, it would be located across the street from a mixed-use building that includes apartments and Google’s Madison operations, and another planned complex that will include more apartments, offices, and a grocery store.

Gay sees StartingBlock as a way to amplify the Madison area’s existing strength in information technology and advanced manufacturing through a physical hub that would help align the local sectors, similar to what The Water Council built and the Mid-West Energy Research Consortium is building in Milwaukee. At the same time, efforts are underway to strengthen another one of Madison’s industry clusters, life sciences, through a possible expansion of the successful University Research Park.

StartingBlock organizers specifically cite Chicago’s 1871 as an inspiration for their project, although they think that having a maker space will set StartingBlock apart. It’s a feature not found in many co-working offices for digital startups, they say.

But the vibrant startup community at the two-year-old 1871 co-working space wasn’t built overnight, 1871 officials tell Xconomy. StartingBlock organizers will have to work hard to recruit tenants if the center gets built. And that’s by no means guaranteed, as supporters still must raise millions of dollars for the project.

Supporters have been planning StartingBlock for more than two years, and the project has hit a crucial juncture, Gay says.

The building proposal submitted in September by real estate company Gebhardt Development—which is working with StartingBlock organizers on the project—received initial approval from a city committee. Gebhardt, which was the only developer to respond to the city’s request for proposals for the site, now has an option to buy the property and has been given several months to turn in an updated proposal that would require Common Council approval before Gebhardt could negotiate the purchase of the land from the city, says Matthew Mikolajewski, manager of the city’s Office of Business Resources. Mikolajewski previously told the Wisconsin State Journal he wasn’t concerned that Gebhardt was the only developer to submit a proposal for the site, and he thinks StartingBlock could help spark the boost in entrepreneurship that city officials desire for the Capitol East District.

The city acquired the site in 2010, when it bought the former Don Miller auto dealership for $5.8 million, which also included parcels across the street, according to the Capital Times. The city has been selling the land off in pieces to encourage economic development in that neighborhood, historically home to manufacturing companies. Gebhardt has been one of the biggest beneficiaries of the city’s strategy in that area. Across the street from the proposed StartingBlock building, Gebhardt developed the Constellation, a 12-story building with 220 apartments, a coffee shop, and Google’s Madison operations, among other tenants. Gebhardt is also developing the adjacent Galaxie complex currently being constructed, which will include more apartments, offices, and a grocery store, according to the Wisconsin State Journal.

Organizers haven’t released an official estimate of the StartingBlock building’s total construction costs, as the designs are still being modified, but something of that size could exceed $30 million, Gebhardt president Otto Gebhardt says. The project would be financed primarily with private money, although Gebhardt proposes an undetermined amount of tax increment financing from the city to build an on-site parking structure and for potential soil remediation costs.

StartingBlock supporters are already out raising funds.

The city of Madison has committed $1.5 million for StartingBlock capital expenditures, Mikolajewski says. Gay is also working on winning a $500,000 federal grant that would fund StartingBlock operations over the next three years. That grant would be used to rent a temporary space while StartingBlock’s permanent home is being built, and to hire an executive director who would begin recruiting future tenants before the building opens, Gay says.

If all goes according to plan, construction would begin next year, and the building would open by the end of 2016.

But that will partly depend on successfully courting private backers. StartingBlock project manager George Austin, who has consulted on several prominent Madison real estate projects over the years, says the group is in talks with a potential partner that would provide “major support.” Once that deal is finalized, StartingBlock would pursue an additional $3 million or so from other sources, he says.

StartingBlock officials say they plan to share updates on the project this week, which could include news about fundraising.

“This next month or two is going to be extremely instrumental in rallying the coalition of interested parties around the table to invest in this project and to move it forward to the next phase,” Gay says.

Madison’s aspirations to become a leading tech startup hub don’t hinge on StartingBlock coming to fruition, but the initiative could form a “critical piece of the ecosystem puzzle,” says Greg Robinson, a former Silicon Valley venture capitalist who moved to Madison this year to manage 4490 Ventures, a $30 million IT-focused fund.

“This is one of those things that helps to create the energy, the feel, the vibe, the stuff that gets people excited to be part of early-stage companies,” Robinson says of StartingBlock.

If successful, StartingBlock would help support a “critical mass” of startups that could keep talented young people from fleeing to the coasts. The initiative could also have residual effects on the surrounding neighborhood, like the development of more offices, restaurants, and coffee shops, Robinson says. That type of density and momentum gets created more easily in bigger startup hubs like San Francisco or Boston.

“I think in these smaller markets that don’t have the history of these types of companies en masse, sometimes you have to do things that are a little bit more orchestrated in the beginning,” Robinson says. “At some point, the orchestration is less relevant, and the ecosystem just naturally and organically starts to take off.”

The block where StartingBlock would be located has already picked up steam, thanks to the two other Gebhardt projects across the street.

The challenge for StartingBlock organizers will be to make sure that if they build it, the entrepreneurs come. “Just because you have a great building doesn’t mean that people are going to want to be there,” Robinson says.

And if StartingBlock successfully recruits the diverse group its organizers envision, they must then figure out how to “knit all these things together in an effective way,” Sector67 founder and director Chris Meyer says.

Filling up a 50,000-square-foot space—essentially building a community “from zero”—was one of the tallest orders for Chicago’s 1871 co-working offices when the organization launched more than two years ago, chief operating officer Tom Alexander says.

But the payoff can be significant, if 1871 is any indication. Located on the 12th floor of the Merchandise Mart in the heart of Chicago, the center recently tacked on another 25,000 square feet to accommodate demand, Alexander says. It’s currently home to about 325 companies that employ more than 600 people. Another 50 companies—former tenants that outgrew their 1871 offices—have gone on to create more than 500 jobs and raise more than $40 million in venture capital, he adds.

1871 has also established itself as a gathering place for mentorship, educational workshops, lectures, and events that have drawn the likes of Facebook chief operating officer Sheryl Sandberg, Dallas Mavericks owner and angel investor Mark Cuban, and U.K. Prime Minister David Cameron, Alexander says.

“People always felt like one of the things that Chicago could use was a physical place to gather the community, that would really raise the spirit of entrepreneurship,” Alexander says. “And that’s really worked out well.”

Gener8tor officials frequently visit Chicago—140 miles southeast of Madison—to recruit startups for their program and to hold meetings between portfolio companies and Chicago investors, Vosseller says. One might think such an agenda would require rushing between multiple offices spread throughout the metro area, but Gener8tor is able to conduct its business at one location: 1871.

“Literally, we go to one place, one building, and all that activity happens,” Vosseller says. “And I’ve always been jealous of that.” That’s one motivator for making StartingBlock happen, he adds. “I like to say that I want to return the favor for other groups to be able to access Madison’s tech scene in such an efficient way, for the benefit of all involved.”

Jeff Engel is Deputy Editor, Tech at Xconomy. Email: jengel@xconomy.com Follow @JeffEngelXcon

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