This story is part of our new series, "Under the Hood," in which we examine where startups choose to set up shop and the effect they have once they get there. Here's our piece on St. Paul's startup scene. Have a neighborhood you'd like to see included? Reach out: mkennedy@americaninno.com.
SportsEngine and Electramatic Inc. seem like unlikely neighbors.
Although less than a mile separates the two companies in Northeast Minneapolis, they have more than their share of differences. SportsEngine became the first tenant of the neighborhood's trendy Highlight Center after its 2014 renovation, and was purchased by NBC last year. Electramatic has been producing the same product, electrical cables, in the same neighborhood for more than a half-century.
This synergy between seemingly opposite industries is common for Northeast, a traditionally industrial neighborhood that's seen a tremendous influx of tech startups over the past three to five years.
"You're seeing a gentrification of the area, and a lot of that has to do with the tech industry," said Kevin Anderson, a senior associate at CBRE who helps tech companies find office space in the Twin Cities. "The North Loop is getting a bit crowded, so companies are starting to go across the river where leases are cheaper and access is easy."
Old Becomes New Factories that once produced paint or asbestos are steadily being cleaned up and converted into fashionable office spaces with bare-brick walls and large, friendly windows for upcoming startups looking to do business somewhere other than downtown.
In addition to SportsEngine, the Highlight Center also houses Kidizen, Kipsu, Oneome and nearly a dozen other companies. But in its previous lives, the building served as a lightbulb factory, then headquarters for the Minneapolis Public School system.
"You still see people making things you'd expect in an industrially-zoned area, but that's also shifted into producing art, beer and data."
The Frost Building, located about a half-dozen blocks from the Highlight Center, underwent a particularly challenging renovation. The space was a linseed oil manufacturing company for nearly a century before it was purchased by Hillcrest Development, the same company that revamped the Highlight Center. Decades of heavy industrial use left the area and the building itself trashed and polluted. But after an intense cleanup process, the space became home to a ceramic studio, photography company and several other creative businesses.
"No one wanted to touch that place, but entrepreneurs had vision of what they wanted it to be and they went for it," said Northeast-area councilman Kevin Reich.
Reich has held his councilman position since 2010, but has called Northeast Minneapolis home for his whole life. He believes that the mix of old and new Northeast makes a lot of sense for the area.
"It's always been a place where people go to make things," Reich said. "You still see people making generators and other things you'd expect in an industrially-zoned area, but that's also shifted into producing art, beer and data."
Reich was previously a project director for the neighborhood's community improvement association. In this role, he and other members of the Northeast community worked for years to build a "baseline of attractiveness" for the area that would bring business and jobs into Northeast.
Part of that involved getting the crime rate down, which Reich said the neighborhood was mostly successful in doing. One building in particular, he said, went from reporting an average of 50 police calls a year to zero.
"A lot of location has to do with employees...Where they want to be is important, because right now we're in a talent war."
There was also a conscious effort to make sure long-time residents didn't feel edged out by the new businesses. The Northeast art community, for example, was well-established by the time techies started eyeing up the neighborhood. Reich said some of the newly renovated buildings would reserve partial space or a whole floor to be filled exclusively by artists.
"There was a lot of pre-work, but once that was down, things really started to fly," he said.
New Neighbors Breweries like Dangerous Man, Indeed, 612Brew and popular festivals like Art-a-Whirl popped up, creating an undeniable cool factor in Northeast. Combine that with cheaper leases and easier parking than downtown or North Loop, and companies started to take notice.
"A lot of location has to do with employees," Anderson said. "Where they want to be, where they want to live and whether they like the area. That's important, because right now we're in a talent war."
After SportsEngine moved into the Highlight Center in 2014, other startups followed. Kipsu, a digital customer service messaging company, moved to the building from a different location in Northeast about two years ago. Kipsu's vice president of operations, Justin Porter, said that Kipsu employees enjoy the business' Northeast digs.
"Our only challenge is that we're running out of space," Porter said. "So our next challenge is where do we go?"
He added that the company already knocked down a wall to create more space for its expanding team, which is now up to 40 people. And now that the Highlight Center is nearly full, there isn't much more space to expand to internally.
"It's central to everything, and a lot of our employees live nearby," he said. "It's just become a fabulous place to grow a business, and we want to stick around."
Although there's been dozens of new developments in the neighborhood over the last few years, don't expect to see any glitzy skyscrapers popping into the Northeast skyline.
"We're not trying to be downtown," Reich said. "We want to retain our grittiness. People have always wanted to come here and make things. But what that something is is now more abstract."
Featured Image via the Minneapolis-St. Paul Business Journal - Rick Peters.
