‘A dam about to burst’: Pipeline of startups eying Reno-Sparks bigger than ever amid COVID

RENO, Nev. — “I feel like there’s a dam about to burst,” says Doug Erwin, spreading his arms wide. “We have a big pipeline and people are like, ‘As soon as it’s safe to travel, I’m coming.’”

In fact, Erwin, vice president of entrepreneurial development at EDAWN, told the NNBW in a video call that Northern Nevada’s pipeline for relocating startup companies — as well as larger established companies — is as big as it’s ever been.

After all, the coronavirus pandemic has driven many startup companies to rely on functioning remotely. This is especially true in dense tech hubs like the Bay Area, where COVID cases are spiking and restrictions are tightening.

These factors, Erwin feels, will only accelerate the growing trend of startups pulling stakes from cramped Silicon Valley and planting in vast Northern Nevada.

With a lower cost of living, higher chance of sticking out, easier access to the outdoors and friendlier tax climate, many Bay Area entrepreneurs were already leaning toward a Reno-Sparks move prior to the pandemic.

COVID’s impact may tip the scales.

“In some cases, we’re hearing this is the last straw for some companies,” Erwin said. “I think we’re going to actually be a net-beneficiary of company relocations as a result of COVID.”

Grace Chou, director of the University of Nevada, Reno Innevation Center, a pre-accelerator based in downtown Reno, has a similar perspective.

“Entrepreneurs are drawn to Reno due to our lower costs, laid-back lifestyle, and superb outdoor recreation,” she said in an email to the NNBW. “These factors have not changed.”

Building Blocks

What’s more, Erwin said Northern Nevada’s startup ecosystem has more infrastructure than ever before. He pointed to the fact that, in the last five years alone, the region has added a pre-accelerator (UNR Innevation Center), incubator (StartUpNV), a seed fund (Reno Seed Fund), and, most recently, an accelerator (RNOX).

“From a building-block perspective, we have all the building blocks,” Erwin said. “They can always get better and we can get more diversity, but we just don’t have those big gaping holes in the ecosystem anymore.”

Entrepreneurial support groups are another piece that is helping prop up Northern Nevada’s startup space. Groups such as Entrepreneurs Assembly, Entrepreneurs’ Organization Reno-Tahoe, 1 Million Cups and more are helping startup founders transform their idea into scalable and revenue-generating businesses.

In fact, Brian Gifford, president and co-founder of Reno-based BluePeak Technology Solutions, said joining EO Reno-Tahoe in 2017 was a game-changer for him.

Since, BluePeak has seen triple-digit revenue growth, making Inc.’s list of the 5,000 fastest-growing companies in the U.S. in 2018, he said.

“I gained a lot of perspective on how owners look at their business and how they approach their own life,” said Gifford, who launched his IT solutions business in Reno in 2008. “I went from struggling to find a way to run my business and grow it to having to figure out how to manage the growth because of the changes that I’ve put in place.”

Lacking Local Investment

One piece of the ecosystem that needs strengthening, however, is the bridge between Nevada investors and entrepreneurs, said Jeff Saling, co-founder and executive director of StartUpNV, a statewide incubator.

Case in point: In about two years, 16 companies that have been incubated by the StartUpNV program have raised a total of $40 million in capital. However, less than 1% of that money has come from Nevada investors, Saling noted.

“That’s not a good thing for a startup ecosystem,” he continued. “You need to have local money investing at the earliest stages of companies. The ecosystem’s healthier with local capital.”

Saling said having new funds in the market — FundNV, an early–stage venture fund for StartUpNV companies, and the Reno Seed Fund — is an encouraging sign, but there is still a lack of local investment in the market.

This, Saling said, is why StartUpNV created AngelNV, a program that provides mentorship and access to a network of capital partners to startup companies.

Furthering that effort, AngelNV in September is starting a free 12-week boot camp for startup founders that will teach them how to attract angel investing, create a pitch deck, and eventually apply for a $200,000 investment from a group of angels.

Moreover, in January, AngelNV is launching an intensive program for 40 accredited investors — from first-time angels to experienced investors — that focuses on strategies and tactics. After 11 weeks, the investor group makes a $200,000 investment together in at least one company.

“It’s taught by people who have done it for decades,” Saling said. “At the end of it, you’ve now got investment in local companies by local investors. And you’ve created 40 new angel investors who are more than likely going to go on to make more investments.”

Buyer’s Market 

To that end, Saling said it’s a “buyer’s market” during this economic slowdown, pointing to valuations being in the investor’s advantage.

“You might have invested $100,000 in a company that in a more robust economy might be valued at $5 million,” he said. “Suddenly, it’s valued at $2 million or $1 million. So, for the same money, you’re buying a much bigger stake in the company.”

Meanwhile, for startups looking to raise capital, it may be a good time to build a network of investors, said Chou, adding: “Investors may be more willing to do an informal video call.

At the halfway point of 2020, Northern Nevada startups have raised $18.4 million in capital, according to EDAWN. Though the economic uncertainty may slow the pace, the investment amount is on track to surpass every year’s total except for 2019, an outlier year that saw $110.3 million raised, according to EDAWN.

Expanded Talent Pool

Of course, startups that relocate to Reno-Sparks to grow their companies will need to hire local, skilled workers. Pre-COVID, the low unemployment rate (3.3% in January), made it difficult to recruit talent, Chou said.

“Now,” she continued, “the pool of available talent may have expanded; thus, creating opportunities for startups to hire great talent.”

According to EDAWN, regional startups have created 150 jobs so far in 2020, which is trending to be the highest one-year total since the organization started tracking that data in 2013. Two years ago, Reno-Sparks saw 210 new jobs spring from startups.

“If there continues to be this much unemployment in the labor market, I think it will be good for startups,” Erwin said. “They will be able to access more talent.”

Looking Forward

For Saling, the outlook for the startup space is bright. Though the incubator’s pitch count dipped from March to June, he said the organization is creeping back to its average of seeing seven to eight pitches every week, which he takes as an encouraging sign for the ecosystem.

“We are still seeing a good amount of startup activity,” he said. “It spells good things for us in our future. Because, as long as we don’t lose sight of our roots by being business-friendly, by being less interested in regulating people out of business and controlling how they live and do their work, and open to new ideas, I think we’re going to be the benefactor of all of the creativity and good ideas going forward.”

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Reno, Nevada is America’s best small city for 2020.

The 2020 ranking of America’s 100 best small cities is out, and Reno came out on top.

Resonance Consultancy released the latest edition of its annual small city ranking Tuesday, which rates American cities with populations between 100,000 and 500,000.

Reno edged out other highly ranked cities including Naples, Florida; Santa Fe, New Mexico; and Savannah, Georgia in the study, which used factors such as natural environment, airport connectivity, sports teams, nightlife, educational attainment and online reviews to rank each city.

Reno ranked sixth in last year’s study.

‘Enviable location’

“By day, this sun-drenched town at the feet of the snow-capped Sierra Nevadas earns its #16 rank for Weather,” the report said of Reno. “By night, its neon-lit casinos help Reno to the top spot for Nightlife among our small cities.

“But it’s not just gamblers taking a chance on the ‘Biggest Little City in the World.; Increasingly, it’s tech companies and highly educated young workers, who come for the jobs and stay for the enviable location (Lake Tahoe is less than an hour away) and accompanying year-round outdoor lifestyle.”

Reno also scored well for Instagram hashtags (second overall), convention center (third) and attractions (third).

“The nation’s small cities face particularly pivotal months ahead,” Resonance President and CEO Chris Fair said in a press release. “Small-center urban growth was already rising before the pandemic. Now with millions of workers increasingly able to work remotely, many may choose to move to these smaller cities.

”At the same time, we expect travel to drive-to destinations to recover first. As American travelers hit the road, they’ll likely look to small cities to satisfy their travel desires.”

Top 10 cities

The top 10 cities, according to Resonance Consultancy’s methodology:

  1. Reno, Nevada
  2. Naples, Florida
  3. Santa Fe, New Mexico
  4. Savannah, Georgia
  5. Asheville, North Carolina
  6. Anchorage, Alaska
  7. Boulder, Colorado
  8. Trenton, New Jersey
  9. Myrtle Beach, South Carolina
  10. Ann Arbor, Michigan

The Reno/Sparks office market is in a unique position: caught in the throes of a rapidly expanding commercial marketplace and aided by an ever-increasing population base. The most vibrant commercial real estate sectors in our area are industrial and multifamily, and they have been for decades. The office market is also seeing new companies, new developers and new buildings.

For the first time in many years, we will see a true speculative office development begin construction this summer. McKenzie Properties will be going vertical with its Skypointe development. Tolles Development Company is in the middle of completing its Rancharrah project, which contains 64,000 square feet of retail space and 36,000 square feet of office space. Last, but certainly not least, Reno Land Inc. and its partner Lyon Living have started the first phase of their Park Lane development, a 46-acre, master-planned development that will include office, retail and multifamily.

This new development shows the Reno/Sparks area is on the move, and fast. The area provides for a quality of life that is difficult to find when combining Lake Tahoe, the Sierra Nevada mountains and the Truckee River, which bifurcates the city. In comparison to the more populated cities of California, Reno is more affordable while still maintaining easy access to the many attractions California provides. Reno also works with the many companies that relocate from or maintain their existence in California. All companies that relocate to Reno expect a quality work environment that meets or exceeds their previous location. Reno/Sparks has invested in the resources to improve its downtown, roadways and UNR to facilitate this growth, now and well into the future.

This growth has led to an overall reduction in the office vacancy rate, going from 10.56 percent in 2018 to 9.93 percent at year-end 2019. We’ve also seen rent growth gain 4.4 percent year-over-year, ranging from $2.20 to $3.25 per square foot (full-service gross) for Class A office product. On the negative side, owners and developers are being impacted by the cost of construction. Whether it’s ground-up development, a rehab project or tenant improvement, all are impacted by construction costs and how they impact returns.

Looking into the future, we expect a very solid growth pattern to continue for years to come. Obviously, there will be challenges and, like every other community, we could see that impacted by the national and local political climate, geopolitical issues or, as we’re dealing with now, a significant health occurrence like the coronavirus. This strong and vibrant community was looking very bleak during the last recession, but now the promise of a vibrant community has been realized and should continue.

By Scott Shanks, principal, Dickson Commercial Group

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One of the busiest intersections in all of Northern Nevada has been literally nothing more than a huge hole in the ground for decades. That’s set to change this summer, though.

The southeast corner of McCarran Boulevard and South Virginia Street, which sees more than 43,000 vehicles pass by daily, will become the home of a new multi-story office and retail project by McKenzie Properties.

Todd McKenzie says Skypointe Reno will benefit residents of the Truckee Meadows for decades.

“It’s a property that I have always loved — it’s the best office and retail property in town,” McKenzie said in a March interview. “For me, this is a dream project, and it’s definitely a legacy project.”

Skypointe Reno will feature a six-story office tower of 180,000 square feet, as well as 35,000 square feet of retail split among three buildings and a five- to six-story parking garage that includes one level of below-ground parking. The garage will hold roughly 1,000 vehicles.

McKenzie expects to break ground this summer and bring the project online after an 18- to 24-month construction schedule. It will be just the second speculative office building taller than three stories built in Reno-Sparks in the last three decades, McKenzie says.

The last two were the five-story brick building anchored by U.S. Bank on Neil Road by Meadowood Mall and the Museum Tower downtown.

McKenzie Properties’ speculative office building at 5520 Kietzke Lane was the first spec office building greater than three stories constructed in the region since 1987. That building came online in January 2019 and is fully leased.

“In 32 years we have not built an office building over three stories,” McKenzie says. “The city has a lack of Class A office supply, and we need more to accommodate the growth that Reno is enjoying. There are zero Class A spaces 20,000 square feet and above, so we are meeting the demand for that absolute lack of supply for larger quality Class A office space in this market.

“Companies looking at tertiary markets like Reno, Boise, Phoenix or Salt Lake simply move on from Northern Nevada because there’s no availability in 30,000, 50,000 or 100,000 square-foot Class A office spaces. We are losing companies to other cities that have this type of product.”

McKenzie Properties will work with CBRE to lease the new office space, while Colliers International will handle retail leasing.

“Reno lacks large contiguous blocks of space, especially in the Class A office category,” Matt Grimes, first vice president with the office team at CBRE, says.“Skypointe, with onsite retail amenities, will provide Reno a true Class A office environment in a mixed-use setting, which is something that simply does not exist in Reno today.

“When tenants outside the market are considering a relocation to our area, they are often looking for an environment that will be the right fit for their corporate culture and will serve in attracting and retaining employees who often have to make a move to the region. The Skypointe project will appeal to a broader range of companies outside of this market.”

Despite its prime location, the prize piece of land sat dormant for decades. The project brings about several development challenges primarily associated with the parking garage since the first level of parking will be underground.

That level requires extensive mechanical, ventilation, fire suppression and electrical work, and it also must be engineered to support the platform for the retail and office structures above.

“That has not been done in this city, and it’s a major challenge,” McKenzie says.

McKenzie is working with world-renowned architectural firm Gensler of San Francisco on primary design and engineering for Skypointe, as well as Miyamoto, Glumac and Wood Rodgers for structural, mechanical and other work.

McKenzie says there are a limited number of companies that specialize in underground structural concrete work, so availability isn’t a concern. The project has not yet been let to bid for construction. As of this story’s writing in late March, plans should be complete in the next few weeks, and the bidding process should commence soon after.

Fortuitously, though, there’s not a lot of excavation that needs to take place once work does commence since site grade dips about 8 feet from the existing sidewalk.

“Because it’s a hole, we have a little bit of a head start,” McKenzie says. “The grade of the project starts about a foot from the corner of the sidewalk — that’s the high-water mark.”

McKenzie says Skypointe Reno will elevate the consciousness of the entire city and potentially spur similar types of infill development.

“You get one shot to get this right,” he says. “We have spent a lot of time thinking about the best and highest use, what’s best for the community, and the most needed product. All the ingredients that make a great project, we have been really thoughtful and careful about approaching because we want to do it right.

“It’s an honor and a privilege to develop this corner for the benefit of our entire community. We are providing a product that’s timely and that Reno really needs if we are going to attract the companies and high-paying jobs we want to attract. That’s why we are doing this project.”

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Harris and Tourin: Northern Nevada’s economy is being driven by logistics and distribution companies taking advantage of the region’s strategic location, and now advanced manufacturing companies are following suit. Panattoni is currently building more than 2 million square feet of spec industrial product in our North Valleys submarket. Dermody Properties has also completed several other big-box projects in the North Valleys over the past 12 months. Emerging industrial markets include the town of Fernley, 30 minutes east of Reno/Sparks on Interstate 80 and along the Union Pacific rail line. This new park will include an intermodal trans-load facility for logistics and manufacturers. Google’s 1,200-acre project in the Tahoe Reno Industrial Center is under construction and has yet to be officially announced. Speculation says it will be bringing in hundreds of high-paying engineering and tech jobs. All of this activity has led to a flurry of mixed-use developments like the project Reno Land is currently developing at the 38-acre Park Lane site in the center of the city. A former regional mall site is being transformed into luxury apartments, retail and office. Tolles Development Co. acquired land to also construct a retail and office project southwest of the Reno Tahoe Airport in the Meadowood submarket. McKenzie Properties has just announced Skypointe, a 200,000-plus-square-foot spec mixed-use project at the most traveled intersection in Reno. Downtown Reno is also experiencing significant redevelopment with a $1 billion, 20-block project by developer Jacobs Entertainment. Jacobs is expected to deliver more than 2,000 units including multifamily, hotel,
retail and entertainment venues.

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