Why We Invested in AlleyNYC Co-working space AlleyNYC recently raised $16 million in a round we participated in. Here's our reasoning.

By Ray Hennessey

Opinions expressed by Entrepreneur contributors are their own.

I suppose it was the energy that first attracted me to AlleyNYC.

When you walk into a club, you often feel the vibration of the music first, not just in your ears but in your bones. Last year, while checking out the concept of co-working spaces for a story, I was introduced by two of our editors to AlleyNYC, a Midtown Manhattan location that was considered the model of collaborative startup community. When I walked in, the hum of work was like that club beat. Everyone was clustered, tapping laptops, scribbling unintelligible notes on white boards and people were just chattering away, brainstorming, debating, discoursing and, most importantly, innovating.

But there was another attraction: diversity. That's a tricky thing to measure. First, you need a big enough sample. You don't know you've got too many green M&Ms until you have a handful of them. Second, judging how diverse anything is becomes exponentially harder when you begin to add criteria off which to evaluate it. It is simple, say, to judge whether a room has an equal number of men and women. Slightly harder when you add race. Tougher still when you add age, and so on.

Silicon Valley, for instance, has been slammed for being underrepresented in both racial minorities and women. Tech, in general, faces that same criticism. "Culture," which should be the lifeblood of any company, is often a barrier to entry for potential employees of different backgrounds at far too many startups. There is a disappointing leaning toward homogeneity in the startup world.

But not at AlleyNYC. The diversity was easy to see, and not just in the hot-button categories of gender and race; there was a clear diversity of companies. Yes, this a legitimate hub of emerging technology, but there a music DJ working from there, a theater company, a real-estate legal practice. There was a diversity of experience. Kids fresh from college in their startup-logo tees were sitting next to people working on their third or fourth company, after successful sales of the previous ones. Those with a more traditional and stereotypical view of what startup culture is like would be surprised by the amount of grey in the hair, the number of women-led firms and the collegiality and fellowship that never seem to make it into a Silicon Valley script.

It took me no more than a minute to feel all that, a diverse, energetic and vibrant community of creators, innovators and risk-takers. This, I thought at the time, was our audience, the readers and community of Entrepreneur Media, the people who made us the leading publication in independent business for decades.

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It felt somehow insufficient simply to write about the place. We wanted a deeper relationship.

Last week, AlleyNYC raised $16 million to fund its expansion, in a round led by private-equity firm Vandewater Capital Holdings. Entrepreneur Media, which became a strategic partner of AlleyNYC last year, took part in that investment.

Why would a media company like ours invest in and partner so deeply with a co-working company? Well, part of it was pure storytelling greed. Being so intimately involved in the workings of the startups there gave us a leg up to chronicle firsthand startup development. As our president, Ryan Shea, wrote last year in announcing the deal, our partnership gave our audience the opportunity to "experience the highs and lows of the startup world, learning from failures and celebrating in successes." It is the kind of courtside seat no other media company could match, and it ensured our audience and the sponsors who want to reach them get an in-depth reporting impossible to match by other publications.

But we also saw an opportunity to help foster innovation itself. That's what I found to be the driving principle of Jason Saltzman, AlleyNYC's founder. Saltzman's attitude is what fuels AlleyNYC. He is less landlord than cheerleader and mentor. Jason's caps lock is often overused with words like "BADASS" and "HUSTLE" when he writes about the startup world, but the bravado is tempered by a real sensitivity to the challenges of starting and growing a business. Walking through AlleyNYC is a seminar in business management, and shows the odd mixture of talent needed to run a co-working space. Strolling the length of the office two months ago with him, I heard him answer, in succession, a question about how to do good content marketing, receive a plea for a new caster wheel for the foot of a desk chair, and discuss whether a company should outsource or hire app-development help. (Jason is blessed with an able co-founder and chief operating officer, too, in Nsi Obotetukudo.)

Related: The World Needs More of Richard Branson's 'Hubris'

We often write that people like Jason, who has become a friend, have "boundless" energy, but he was bound by the constraints of real estate. That was an opportunity we saw at Entrepreneur. The flaw with AlleyNYC was its physical space. It is, after all, a single, 16,000-square-foot floor on Seventh Avenue, and Jason, the wizard behind the curtain of so many of his member companies' growth, was always the first to suffer from their success. As companies grew, more and more found they needed larger, more traditional space, so moved out. AlleyNYC was blessed to have a robust waiting list -- larger than many in a saturated co-working marketplace like Manhattan -- but it was still sad parting when companies that been born and reared as part of AlleyNYC's ecosystem packed their bags and left.

The way to fix that is to expand, and the recent funding round we contributed to helps achieve that. The new money will allow AlleyNYC to move to a new flagship location in Chelsea, with 40,000 square feet over three floors, essentially built from scratch. That allows companies to grow within AlleyNYC.

It also helps export AlleyNYC outside of New York. The plan is to scale to other cities in the U.S. and internationally under the brand. Here's where Vandewater can bring a lot of value. The partners there have a ton of experience with real estate and infrastructure and scaling good ideas. There's also an opportunity to provide many of the services that are signature to the AlleyNYC experience in a virtual environment.

The raise also allows us to create an investment fund for early-stage companies it sees in the course of business.

Entrepreneur Media can benefit in other ways, as well. Over the past two years, we've built the most powerful contributor network in business news. These contributors are available as mentors to many of the companies at AlleyNYC, and will take part in the joint events and networking meetings we have. Already, we've managed pitch nights at AlleyNYC with our partners at Techstars. In addition, members of our contributor network will get to use Entrepreneur facilities at AlleyNYC, to help them manage their own businesses. We believe that access to such a vibrant startup environment will enrich their own columns and contributions for Entrepreneur's audience.

It is, admittedly, a new model for a media company, but entrepreneurship is about innovation and trying something new. Our immersion in the startup world will be profound, and it benefits the broader AlleyNYC community by giving them advice, exposure and mentorship, while giving Entrepreneur's great audience the clearest view of the runs, hits and errors of starting and managing a diverse range of businesses.

Energy and diversity were the attraction of AlleyNYC and continue to be. The opportunity now is to expand together, as our communities get to know one another more intimately.

Related: When Company Culture Becomes Discrimination

Wavy Line
Ray Hennessey

Former Editorial Director at Entrepreneur Media

Ray Hennessey is the former editorial director of Entrepreneur.

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