Photo: Russ Scully on his bike. Scully is a visionary leader, a developer, a windsurfer, a foil surfer, a snowboarder, a paddle-boarder, a kiteboarder, a hotelier, a restauranteur, a water sports retailer, a documentary producer, and the associate publisher of a magazine. Photographed by Sarah Kjelleren
by Joyce Marcel, Vermont Business Magazine It was a sun-splashed late spring day with a light breeze whipping up the waters of Lake Champlain. A couple of intrepid windsurfers were plowing through the waves. And in the parking lot of HULA, the new multi-million dollar high-tech business Xanadu in Burlington’s South End, the man who created it, Russ Scully, rode in on a bicycle to talk.
Tall, blond, tanned, incredibly fit, with cheekbones that look like they could cut glass and wearing flip-flops, Scully, 52, looks like a surfer dude and talks like a buttoned-down businessman.
That he happens to be both is one of the engaging mysteries about him.
Scully is a visionary leader, a developer, a windsurfer, a foil surfer, a snowboarder, a paddle-boarder, a kiteboarder, a hotelier, a restauranteur, a water sports retailer, a documentary producer, and the associate publisher of a magazine. And I've probably left out a few things.
“It's like an onion,” Scully told me. “I love saying yes to things.”
Most recently, Scully and his wife and business partner, Roxanne, have turned the South End's old Blodgett Oven factory — now called HULA, for reasons I will explain later — into 160,000 square feet of paradise for young, hip, tech-minded entrepreneurs.
Inside the long, open, light-filled building with a multitude of waterfront views are working desks, very small offices, small offices and regular-sized offices (where companies are doing — or planning on doing — amazing things), conference rooms, a fitness center, a large buttery leather hotel-style lobby that can, with a little furniture rearrangement, hold a seminar for 500 people, modernistic pods for making private phone calls or taking a Zoom meeting, a bar, offices of a bank and a law firm, a restaurant, and, most importantly, a beach and a surfing club. Because after the deals of the day have been cut and the business clock wears down, the most important thing is getting out onto the water.
“In the summertime, I go out every day,” Scully said. “What's kind of cool is the surf club has all the stuff we need. So I, as well as a lot of other friends of mine and other people, we all gather down there at the end of the day and get out on the water after work. Sometimes that can happen for an hour or two in the middle of the day, too.”
Surfers like him wake up in the morning with the thought of: “How am I going to get on the water today?” Scully said.
Photo: Russ Scully paddleboarding on the water with the HULA building in the background. Photographed by Sarah Kjelleren.
“It's kind of a question you ask yourself every day, and there's lots of different ways to do it between paddling or windsurfing, or winging or kiting,” he said. “We joke about it as our little puzzle. What are we doing today? What's the wind direction? How much wind? Where's it coming from? Are we paddling? And summer's short — not too short, you know — but you try to maximize that opportunity. Once the water warms up, I try to get out there every day.”
Scully comes most alive when he's showing pictures of himself doing really exciting things on the water.
“The most fun thing we did on water was go to Galveston Bay in Texas and foil-surfed tanker wakes,” he said.
A hydrofoil board has a kind of airplane wing built under it; it lifts the surfer out of the water.
“We were the first ones to ever foil on a tanker wave,” Scully said, laughing.
But we weren't there to talk about water sports.
Like the proverbial onion, Scully's business empire is many-layered. The overall umbrella is Scully Interactive, under which come: three Spot restaurants in Burlington; WND&WVS, his windsurfing and paddle-board retail store; the luxury Villa Playa Maria, a surfing resort in Rincon, Puerto Rico; Standup Journal, “a water lovers’ magazine;” and HULA, which is itself an umbrella organization.
Under the HULA umbrella you find the HULA building, the Burlington Surf Club, and a self-funded venture capital fund with a deep interest in new and exciting companies that are doing marvelous things — like Beta Technology, which is developing electric airplanes that can take off straight up, or Benchmark Space Systems, which is developing mobility for satellites.
These companies also happen to have offices in HULA.
HULA is not so much a business incubator as a business accelerator, Scully said.
“There's a difference in definition between the two of them,” he said. “An accelerator is really about building a coalition or building a concentration of startup companies all in one space.”
It's hard to quantify Scully's business interests.
“I think the largest staff is really at The Spot on the Dock, but that's seasonal,” Scully said. “But in the middle of the summer, it has about 100 people on staff. And here at HULA, we have a pretty small staff. There's eight of us on the HULA team. And there's about another eight or so people at WND&WVS, and about four people down in Puerto Rico. They're really kind of small, concentrated teams.
“I think the most important number to know is that there is 160,000-square-feet of space here at HULA, with over 100 different companies represented. Ultimately, you will have 500 to 600 people in these buildings. These are all short-term leases. We're really trying to turn companies over, turn the spaces over, and generate as much growth as we can in terms of workforce development. In terms of revenue numbers, to me that is less interesting. We're charging market rate for this space, so anybody can get a calculator out and try to generally get a sense.”
Scully said that every space in HULA is now rented, even though it is taking time for people to leave quarantine. There is a waiting list of about 50 companies wanting to lease space.
The buildings, which are not open to the public, are designed to support “collision zones,” or places where random meetings can lead to spontaneous ideas and new collaborations.
“There's definitely a mood elevational thing that happens,” Scully said. “There are creative juices and motivational juices that just start pumping when you come into this space. And a lot of it has to do with a lot of natural light, and long, long, uninterrupted sight lines. We went down and visited a number of different WeWork offices in New York to try to get a flavor for why they were so popular. And one of the very common traits we found was a lot of glass, lots of lines of sight, and there was this whole notion or idea of creating collision spaces.”
The people who have worked with Scully on the HULA project adore him.
“Russ is one of the greatest investors I've ever known,” said HULA CEO Rob Lair, who left a wealth management career at Morgan Stanley to work with Scully and manage the investment fund. “Russ has the magic. He has a great eye for investment. And perhaps more importantly, he's one of the best human beings I've ever known. He's compassionate, generous, always working for the good of the community, and he's a visionary leader. He sets the tone at HULA, and it's a tone of generosity and inclusion and helpfulness and all those things. He's just a good person.”
Scully works from a vision of how to improve the community, said John Caulo, HULA's project manager.
“Russ is unlike other clients,” Caulo said. “His vision for HULA was to make Burlington — and this portion of Vermont — more relevant in attracting the types of jobs that Vermont needs in a creative economy. While Russ is responsible for managing his success, he's not solely preoccupied by financial metrics like return on investment. You can see that in some of the decisions he's made – the attention to detail. It's also important to note that Roxanne is an equal participant and brings as much to the table as Russ. It's truly a team and a shared vision.”
According to Scully, Roxanne is, “My go-to to make sure that we're doing everything the way we feel like we should. She's my business partner. She's the one that I count on to check in with and keep us grounded. And she does a lot of work around mindfulness, which is kind of a fun connection to a lot of stuff that we do. So she's a meditation coach. She's a Nia instructor, (Nia is a combination of movement, martial arts, mindfulness and dance.) She runs a meditation coaching here in HULA, with various tenants. But ultimately, she steps up to the highest level with me to make decisions on process, procedure, design, aesthetics and everything else.”
Photo: Russ Scully and his wife and business partner, Roxanne. Photographed by Sarah Kjelleren.
The Scullys were “absolutely the ideal clients,” said architect Stephen Smith, a partner in SAS Architects.
“The building is entirely heated and cooled by geothermal, so there are no carbon emissions,” Smith said. “It's carbon neutral. All the power for the project is generated by solar panels on the roof. Taking a former manufacturing complex that centrally heated its whole area, the energy costs must have been phenomenal. So this alone is a really nice story. Also, Russ showed a lot of courage in going forward with the project during COVID. He's collaborative and open to design ideas. He and the whole HULA team were a pleasure to work with.”
The entire project was done on a handshake, Smith said.
“My insurance company wouldn't be happy about it, but that's how we feel about Russ,” Smith said. “And it wasn't just us. There was a whole team of engineers who worked with us. It was a real pleasure getting to know Russ and his wife and his team, a bunch of creative people. I love the idea that he surfs and kite surfs.”
Peter Jones, senior vice president of lending for Mascoma Bank, which funded HULA (along with private money from the Scullys) was impressed from the start by the HULA vision.
“Russ really cares about the Burlington community,” Jones said. “He raised his family there. He's concerned about the economic future of Burlington. That played a large role in the design of the project.”
Architect Bren Alvarez, another partner in SAS Architects, praised Scully as “a rare human being.”
“He's a community-oriented environmentalist who loves life and wants to share what he loves with everyone around him,” she said. “It’s his mission. From water sports to care about the planet, to even his favorite foods. It seems like all the people who work with him are his friends. He has a happy, smart, dynamic team that surrounds him. His vision is shared with his wife, Roxanne, and she has a really big impact on the whole karma or the vibe of the space. She's part of the overall aesthetic. He's very proud of that. It was a real pleasure for us to work with them.”
Early Years
Scully was born in New Jersey, one of four children. He has a fraternal twin brother, now doing a different kind of development work in Montana, plus a younger brother in New Jersey and a sister who lives in Charlotte.
His father worked in investments and his mother was a secretary who left the work force to wrangle four children.
“My dad grew up in Manhattan,” Scully said. “He's really a self-made man. He was a scholar-athlete, played basketball, worked his way through college, then went back to New York and was an analyst for various financial institutions in Manhattan. He did that pretty much his whole life and still does a lot of that today. He's still working, but for himself.”
His mother grew up in the Midwest.
“She moved to New York and met my dad,” he said. “And they still live together in Florida. She didn't work. She was doing a lot of volunteer work and managing four kids. But she's got a pretty amazing backstory as well. She was the oldest of five kids. She didn't go to college. She ended up working at General Motors for a long time. So the both of them did well, but they started from very humble beginnings.”
Growing up, Scully had all the usual teenage jobs.
“I did a lot of odd jobs around the house,” he said. “And I did everything from like caddying, to mowing lawns, to working in retail, to painting houses. I did anything that anybody would let a 17-, 18-, or 19-year-old kid do.”
He went to St Lawrence University, where got a BA in fine arts and sociology. More importantly, he met Roxanne; the two have been together ever since.
“We graduated from St Lawrence in '91 and moved to Santa Barbara,” he said. “We were living out there for six years.”
In California, Scully became interested in graphic design.
“I re-enrolled in some graphic design programs at the University of California-Santa Barbara,” he said. “I studied graphic design for five years and got very immersed into digital print design. Then, ultimately, I got into building websites. By 1996, or so I started getting into web design. The whole internet thing was developing around that time period.”
Coming to Vermont
The Scullys came to Vermont in 1997, fresh from living the surfing life in Santa Barbara. They are often asked why they chose land-locked Vermont.
“We were on the coast for a long time, and we were interested in trying something different,” Scully said. “We wanted to get back to the East Coast. My parents had moved to Dorset, so that was a factor. Now they're in Florida full time, but they had moved here, which was definitely compelling. And you know, Burlington was one of those places that was definitely on the list of interesting places to live. It has Lake Champlain. We were excited to kind of explore that option. And we were also at the age where nothing was permanent. Let's try it out, see how it fits. But we were also at that age where it can be easy to start rooting in pretty quickly, especially if you're starting a company, buying a house and having kids.”
Their roots found fertile soil and the Scullys stayed, raising their two boys, now teenagers, in Burlington.
Scully got a job in Colchester with Vertek, which offers telecommunications operations, cybersecurity and custom software development.
Photo: Russ Scully during his interview for this article. Photo: Randolph T. Holhut.
“It had its headquarters operation in New Jersey,” Scully said. “They were building business applications for Tier One telecommunication companies like AT&T. I worked at Vertek from '97 to '99 and really got immersed in web application development.”
The work gave Scully the confidence to begin launching his own companies in 2000. He started building public websites.
“Literally on the millennium, I started Scully Interactive,” Scully said. “Prior to that at Vertek, I was building sort of non-public, private web applications for AT&T. None of it was in the public internet space. I was really more interested in getting into that. And I still do that today. I have a colleague, plus myself, who build all the websites for all the properties underneath this Scully umbrella. So all the Spot restaurant websites, WDN&WVS, HULA, Villa Playa Maria in Puerto Rico, they all run on a platform that I built back in the early days of Scully Interactive called e-beans.”
Scully originally built the e-beans platform for the coffee roasting industry.
“I was going out and marketing specifically to the coffee roasters,” Scully said. “And that's basically what Scully Interactive became. Then at one point, when I started doing all these other things, I realized it was time to shut that business down. There was this catalytic event happening where this employee of mine, who worked with me for a very long time and who I was really good friends with at St Lawrence, he passed away. It was very tragic and very sad. But it made me sort of stop and pause and say, 'Do I want to keep doing websites for other people? Or do I want to take this opportunity to start focusing on my own stuff?’”
The problem, Scully realized, was the old one about the cobbler's children who go barefoot because their father is so busy working for money that he has no time to make shoes for them.
“It was really difficult to carve my time out between doing website work for other people versus all the stuff I need to do,” Scully said.
The ultimate goal of Scully Interactive was to be “client free,” Scully said.
“That was the mantra,” Scully said. “How fun would it be to not have clients? To be able to continue doing work for yourself? You can be as creative as you want. The sky's the limit in terms of what you want to do creatively if you're working for yourself.”
Still, as every creative personality knows, there are pitfalls.
“In almost any creative endeavor, you create a project, pitch a project, deliver a project, and then you have to start the whole process over again,” Scully said. “I learned that early on, with building websites, and it's just not sustainable. It's a lot of work, plus the cash flow is not steady because you've got these ups and downs where you're busy and not busy, busy and not busy. So in the early days, in the interactive space, I said, 'Listen, I really want to create a recurring revenue model, where you get paid on a monthly basis for a basic subscription to provide software.'”
Which he ultimately did. His clients were so happy that some of them proved hard to shake off.
“One day I decided to give my clients all the time in the world to transition away from our platform,” he said. “I told them my story and said, 'I'm going to go and focus on some other things.' Some of those clients I still have today, because they just didn't want to leave. They were happy with the situation, they were very happy being on the platform. So I still support them today. So that's kind of a fun little piece that's continued throughout this whole process.”
Looking back, he feels his biggest mistake might have been undercharging for his work.
“I never really, truly charged the proper value,” Scully said. “And I never really scaled up at the right time to make things work as well as I think they could have. I think I was hitting on something that could have been really great, but I just didn't really price it correctly. I priced it too inexpensively. And then I ultimately never really put the resources behind it to let it grow. What's interesting to me in talking to entrepreneurs is they all have the courage to go out and ask for money to grow the idea that they ultimately want to share. And I was always a little too tentative to go and ask people for money to invest in me to build something that I thought would be great. And that was the big difference between what I did in my interactive days and what I'm watching the rest of these people do at HULA.”
Building Businesses
Scully wanted to start businesses.
So he found an old garage on Shelburne Road and turned it into the popular Spot restaurant, serving the kind of food that the Scullys themselves love. (According to its website, it's “a surf-style restaurant in Burlington, Vermont with a Hawaiian-style feel and a killer fish taco... Mahalo.”)
Then came WND&WVS, in two buildings the Scullys bought on Pine Street, because Burlington, unfortunately, did not have such a shop.
“This was obviously a huge passion play for me, but it was also an opportunity to fill a void on Lake Champlain,” Scully said. “By that time, there had been a succession of retailers who came and went, who provided windsurfing equipment and kiting equipment and so on. But at the time I started WND&WVS, no one was doing it any longer. They had all sort of come and gone. So I saw it as a really fun opportunity to feed my own passion while at the same time providing a service to the community, so that they had access to gear and equipment and boards and so on, to go out and play on Lake Champlain. That's really why we created WND&WVS, as a service to the community. They could buy stuff online, but to be able to walk into a shop and talk to somebody who's knowledgeable about this stuff, to be able to touch and feel and see all see the equipment, it's a nice thing to have.”
Then the Scullys got the idea of creating a winter surfing retreat in the Caribbean.
“I think we were gaining some momentum and some interest with WND&WVS, certainly in the summertime, and building some clinics and giving some lessons and holding camps and things like that,” Scully said. “But everything really kind of slowed down in the winter. So we thought it'd be fun to explore the opportunity to have an escape from the cold climate, to have a space that people could go to in the Caribbean where they could recharge and have fun in a warm weather environment during the winter. And so that's when we started putting trips together down to Puerto Rico. That ultimately turned into a purchase of a little boutique hotel in Rincon, hiring staff and people to run it, and then putting it on the internet for people to book and stay.”
Rincon is known for two things according to TripAdvisor: surfing and sunsets. It's also called “the best beach for swimming.” No surprise that business is booming.
“It's going great,” Scully said. “Despite the fact that every year there's some reason why tourists can't get to Puerto Rico. Whether it's a mosquito or a hurricane or an earthquake, it seems like ever since we've owned that place, there's been some challenges. But the location works really well. And ultimately, that's what makes the place really successful.”
All these businesses spring from one mind, coalesce around HULA and feed into each other.
“There's been a development of different activities that really work well together,” Scully said. “We see the Puerto Rico property as an opportunity to bring companies from HULA down to Puerto Rico in the wintertime to unplug and recharge. Think of that space as a corporate retreat, a sister sort of space to HULA. So in the winter we can get a group of different founders together. Or we can get a single company to bring a couple of their key people down there and just be able to connect in a way that you don't necessarily do in the office.”
HULA
Although it is unusual, Scully's explanation of why he chose the name “HULA” for a business incubator makes sense.
“It was either HULA or the Lakeside Economic Development Park, right?” he said, a little tongue-in-cheek. “You either go with a very descriptive name, or come up with something that's just creative and fun. One of the things that has been kind of interesting with WND&WVS and The Spot and some of the other things we've done is to create the thing that's least expected. You get different results if you create something that people are not anticipating. So the idea of calling it HULA would make people stop and go, 'What's that?' And ultimately, I really thought about people and companies outside of Vermont, learning about this space, and hearing the name HULA, it would only make them more curious as to what's going on here.”
The name is easy to remember and easy to spell, Scully pointed out.
“And typographically, it's nice to have some letters that work well together,” he said. “So all of that kind of plays into the idea of a name. You try it out on a bunch of people, you get some feedback from different groups, you try not to ask too many people and get too many opinions, and when you hear from a couple of people who say, 'I don't know if you want to call it that. It might be a little bit too out there,' then, you know, you're on the right track.”
The Blodgett Oven campus had already been designated as a federal “Qualified Opportunity Zone” when the Scullys got involved.
According to the IRS, A “QOZ is an economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as QOZs if they have been nominated for that designation by a state, the District of Columbia, or a US territory and that nomination has been certified by the Secretary of the US Treasury via his delegation of authority to the Internal Revenue Service (IRS).”
Scully had fallen in love with the Blodgett buildings while biking to work at WND&WVS.
Photo: Exterior of the HULA building. Photo: Randolph T. Holhut
“Every time my eyes gazed over that fence at the enormous campus and buildings, my adrenaline would hit the roof,” he wrote in his blog.
Even before he knew what he wanted to do with the property, he knew he wanted to own it. When it first came on the market in 2014, he bid but didn't win. Still, he remained passionate about the property and kept a close eye on it.
“I think I lost the bidding for a good reason,” Scully said. “Then I developed a relationship with the person who ultimately won it. We stayed in close contact. And I said, 'Listen, if you ever want to change your mind, please let me know.' I feel that was a good life lesson — just making sure that, 'Hey, even when you lose, take that opportunity to meet the person who beat you and figure out a way to maybe work together.'”
When the property came on the market again in 2017, Scully was ready. It was assessed at $4.1 million and he bought it for $14.3 million.
“The assessed value versus the actual market value can be completely different,” Scully said. “I think a lot of people were kind of skeptical about the idea of me spending that much money on something that was assessed a lot less. But ultimately, everyone decides what they want to do and what they think something is worth. I think this is a great opportunity to build something that was ultimately going to have a lot greater value than what we paid for it. We have a comparable next door — the Innovation Center in the old General Dynamics building. We felt pretty comfortable with that comparable, knowing that we were lake frontage and they were not. They had similar square footage to us. We just had a bigger, broader vision for what this ultimately could be.”
According to the City of Burlington Property Database, the Innovation Center is valued today at $44,080,440. And the HULA campus is already up to $22,167,300.
Since he bought the property — three buildings in all — Scully has spent far more than $14 million developing it. Much of the money comes from Mascoma Bank.
“Peter Jones of Mascoma came from New Hampshire,” Scully said. “He drove down here, he stood on the site here with us, looked out at the lake, and just said, 'I share your vision. I understand what you guys are doing here. And I see this happening.'”
Jones, however, didn't immediately cut Scully a check. The contracting was a long, complicated and arduous project, he said.
“Russ is an intelligent fellow who had a very detailed vision,” Jones said. “He presented it in a way we could understand where he wanted to take the property. It's a somewhat unusual property – air desks, co-working space — it's new to this marketplace. But they did a good job of researching the possibilities of a project like that and putting together a team to get it done. It took over six to eight months, with presentations made, options, more questions asked and answered, and negotiations around terms. In the end we got to a place where we were comfortable. The results speak for themselves. It's a really lovely and functional reuse of that property.”
Mascoma Bank has a branch at HULA.
The Building
The point of the campus is to “create a better sustainable economic future for Burlington by creating a true incubator/accelerator where we're growing startup businesses in a space that ultimately has the scale and the size to do this in a big and meaningful way,” Scully said.
The main building is long, long, long — it's the old factory floor, still with some of the original concrete, although all the concrete is polished now. Light pours in from everywhere, and a large variety of windows look right onto the water. At the entrance, a bike shed sits behind a bamboo wall.
Many of the interior walls are made of redwood. But Scully is nothing if not sustainable.
“This redwood came from the Centennial Field bleacher seats at UVM,” said architect Smith. “They were cut out after 100 years outside and the wood was all stacked in a barn. We proposed it for an interior material and Russ and Roxanne said yes. We had it all re-sawn and planed and that became the wall siding inside the cafe and down the big space in the building. It's still solid.”
In the center of the building were four great leafy plants that would soon be replaced with palm trees for that “HULA look.”
Photo: Pictured is the interior of the HULA building. Photographed by Sarah Kjelleren
Palm trees in Burlington? That's another story.
They were ordered from a landscaping company in Florida, who took it upon themselves to up the ante. The architects wanted 12-foot palms. They had installed grow lights above the planters, and put a tiny four-pronged sprinkler above each pot to mist the palm a few times a day. Talk about attention to detail!
But the landscapers sent 24-foot palm trees instead; they were higher than the grow lights.
“It was a painful day,” said Smith.
The palm trees had to be sent back, but in the spirit of sustainability, the truck was detoured to the Franklin Park Zoo in Boston, where the trees are now part of a new gorilla habitat. The correctly-sized palm trees were supposed to arrive the week after I visited the building.
Scully's desire for sustainability runs deep, said architect Alvarez.
“Inside the building are no disposable products,” she said. “We use ceramic mugs and metal water glasses. We take out food from The Spot on a beautiful ceramic plate, and they'll come and collect it later. We're not filling the dumpster with plastic clam shells.”
Instead of asphalt covering the parking area, Scully used a special permeable material that allows for rainwater to run through it. And he adopted an equally creative idea when increased parking was needed.
“He decided to use a system of buddy parking,” Alvarez said. “They park two cars deep, so people need to communicate with each other about who is going and coming. It's all part of a community that doesn't want to pave over the waterfront. Russ is willing to run with that.”
Although some trees had to be cleared to accommodate construction, the wood was not wasted.
“The trees were cut and milled,” Alvarez said. “Instead of being ground into products, they took the time to cut them and mill them into the largest sections possible. They are being used as furniture in the building – and that includes using local craftspeople. Russ really wants local craftspeople to work on the project. That is really evident everywhere you look. We worked with local interior designer Anna Stein to develop the furniture layout and reuse the cut timber. It was an amazing part of the project, rare and serendipitous.”
The geothermal energy that heats and cools the building was inspired by a well which the Blodgett Co. dug outside the front door, said project manager Caulo.
“Blodgett used the well for processing water,” he said. “We tested the well for volume of water, and we were pleasantly surprised that it had good capacity. So we did an engineering calculation. We ended up drilling two wells that provide groundwater for a geothermal groundwater heat pump. Up on the roof, we have a solar panel system providing 500,000 kWh of power. The excess is put back into the grid. It's a well-insulated building. It's very energy efficient in a sustainable way.”
In a project this large, creative and expensive, some things were bound to go south. But Scully always kept a level head, Smith said.
“Russ looks at everything with a sense of humor,” Smith said. “There was no stress. He's just a lot of fun to work with. We were very lucky to get this project. Everyone at the firm feels this way. It's a pleasure to be connected to it. I think it’s a really special project and vision. Russ is good at enabling and inspiring people to do their best work. We think it's our best work.”
Photo: Interior view of the co-working space in the HULA building. Photo: Randolph T. Holhut
Venture Capital
With the goal of using Vermont money to keep Vermont money — and Vermont startups — in Vermont for the long haul (and for the jobs), Scully and Lair developed their own venture capital fund, mainly using the Scullys' money.
“Russ and Roxanne are the limited partners in HULA Fund, and I'm a general partner,” Lair said. “It's a rolling fund, open ended, containing many millions of dollars.”
It is not quid pro quo, but by renting an office in the building, startups are at a gateway to a nutrient-rich investing environment.
“You don't necessarily have to be in this building, but it would be a really good way to meet investors,” Scully said. “That's partly why this is built. It's efficient for Rob to be able to walk these halls and bump into a founder or schedule meetings with any number of founders that we're invested in. It's not a condition. But it makes it easier for us, because ultimately, our goal is to help them grow, and to nurture their road. And we can do that more effectively if they're here in the building with us.”
Lair has also networked with the many high-worth Vermont individuals who are seeking investment opportunities; these people do not invest in the HULA fund, but they invest independently when the time is right.
“When we go out to the community to talk to them about opportunities to invest, we're asking them to invest alongside of us,” Lair said. “They're investing in these companies directly. It's very inclusive. So we're telling them, 'Hey, listen, we're getting involved in this company, we're going to make an investment, we'd love for you to meet this founder, this CEO, and have a conversation and hear this pitch.' So if we know that Beta wants to raise tens of millions of dollars, we're going to knock on doors. We're going to shake branches. We're going to turn over stones. We're going to try to find the people that ultimately will make the investments to complete that round. But it's important for us to have our own skin in the game. It's hard to build the messaging around the fact that we think investors should invest in Vermont companies if we're not participating. So we do our own due diligence as well, we get to know these founders intimately, and then, ultimately, we take them around and introduce them to plenty of other people with an appetite for investing in Vermont.”
A second part of what they do, Lair said, is help new companies gain access to mentorship.
“We know people who have grown companies before,” Lair said. “We help companies get introduced to mentors who can help them.”
For HULA, venture capital is a long-term investment, Lair said.
“We have a 10-year horizon,” he said. “The idea is to reinvest the money we make in the fund right back into the next fund. We've been investing now for three years.”
Developing Burlington
There has been no government involvement in any of the Scullys' projects.
However, Scully has a deep interest in developing businesses in Burlington privately. He has been on the board of the Burlington Business Association for many years.
One thing he would like to see, he said, was the same kind of investment in Burlington's North End that the Pine Street-South End corridor has enjoyed.
“I think the South End gets way more attention than the North End,” he said. “And I don't think that that's a really healthy way for Burlington to exist. I think we've got to figure out a way to get some of this energy that's happening in the South End and make it happen in the North End. We've got to balance this equation.”
Perhaps HULA's momentum could bring more energy to the other side of the city, he suggested.
“It might help tilt the scale to give people confidence to do something in the North End as well,” he said. “Not necessarily the same thing. But this is all additive towards Burlington. So you do something like this, and there's going to be a reaction that will encourage someone to do something that they might not have done otherwise. And if that happens in the North End, I think that would be great.”
For the state as a whole, Scully sees economic development as challenging.
“There's a labor shortage,” he said. “There's a housing shortage which ultimately affects our cost of living. So it's hard to be competitive when people are assuming they're going to feel a real relief in the cost of living when they move to Vermont. If they find anything to the contrary, they leave. That makes it difficult for us to compete with other small cities.”
The “trailing spouse” problem presents another challenge. One married partner may find a job, but will the other?
“I met with an old friend of mine yesterday who lives in Portland, Oregon,” Scully said. “He's a very talented software developer. Now he's married. His first son was just born. And they're starting to think about moving back to the East Coast. He heard about HULA and wanted to come and see it. Classic scenario, right? He's looking for possible places to work. But he's kind of thinking about his wife as well. And she's a retail buyer for a small niche franchise out in the Pacific Northwest. That's certainly one of the challenges, making sure that we can employ both parts of a family or a couple or partnership or whatever, who wants to move to Vermont.”
The state's incentive idea — paying people $10,000 to move here — was mostly a bust. One interesting thing that came out of it, however, was the amount of press it received.
“It was incredibly successful in terms of its impression,” Scully said. “It reached a lot of people. They still talk about that and reference that campaign. It just went viral. You need to deconstruct why that message was so successful in getting to so many people. It's not 100 percent clear. A lot of that is timing. But that campaign had limited funding, right? It reached a lot of people, but ultimately, we were only able to convert a very small percentage of those people. So could you take that concept and scale it and make it bigger? If there was a larger budget? And you sent a similar message out? And if you still feel strategically it's the right thing to do? Would that work? I don't have a good answer for how we maintain better competitiveness with neighboring states. I certainly don't want to compromise on any of the values that make Vermont truly unique.”
Creative financing would certainly help, he said.
“I think Vermont does well on its own, based on selling the lifestyle that people ultimately move here for,” he said. “So we certainly wouldn't want to give that up. But for employers like Beta, who are going to be investing a lot of money in infrastructure to build a manufacturing facility here that will ultimately bring hundreds of new workers to the area? There's got to be some creative kind of financing to make sure that that happens, and to make sure that those opportunities don't end up drifting to other neighboring states because we just weren't willing to do whatever would be necessary. I don't know what we should do. But we're lucky that some people are just passionate about Vermont. The head of Beta is a guy who's been asked 100 times, like, 'Why here?' And 'Will you stay here?' And his answers? 'Absolutely! 100 percent! Always, yes, I'm staying here. I grew up here. This is where I'm going to build my company.'”
The Future
Scully sees his immediate future as building on HULA's effectiveness.
“The future for us is really to keep these bases turning over,” he said. “So we constantly have room and bandwidth for the next generation of entrepreneurs.”
By the time the turnover starts, HULA will have close personal relationships with many of the startups.
“We're going to have this intimate knowledge and relationship,” Scully said. “I think the hardest part of this job is going to be when they cycle out. Ultimately, we're an accelerator. We're trying to keep these leases really, really short. We're trying to create a rotation of space and companies. As soon as they grow to a point where they have to move out into their own office space, that's going to be a little hard emotionally, you know? We're gonna watch them grow up and then move out. And then we're gonna backfill with new companies.”
Scully could actually create his own ecosphere.
Photo: Russ Scully skateboarding. Photographed by Sarah Kjelleren
“We're already working really close with the guys who leased the Innovation Center,” he said. “We're helping them place some companies that were interested in moving in here when we didn't have the space to accommodate them. So they ended up moving next door. They wanted to be in close proximity to a lot of the activity that was starting to happen down here. And the same thing will happen with companies that move out of here. Hopefully, we can keep them as neighbors, working with neighboring properties to figure out, as space becomes available, how to keep them close by.”
His next big project, in keeping with the ecosphere analogy, will be building affordable housing.
“About a year or two ago, we bought the big parking lot across the street from the Innovation Center,” Scully said. “We're going to build affordable housing. That's going to be an exciting project. It's early to talk about it because we have to get approval for residential in this district. Right now it's not permitted. We want to build sub-market rate housing for early professionals, for low-income restaurant and retail workers. That whole market doesn't work with like $1,500 a room. We're trying to find new creative ways of constructing residences that will allow us to charge less money.”
Although his is a life of process, Scully has found that Vermont offers a great balance between work and lifestyle; it is a balance that feeds his many passions.
“You feel really good about living here,” he said. “The people are great. The outdoor lifestyle is great. The recreational opportunities are great. Just the access to the lake, to the mountains, to the outdoors is huge. And the fact that we have this small city on a lake creates an environment that's really attractive to entrepreneurs, to companies and to young people. Leaving California for Vermont was hard. It was definitely hard. But you see different opportunities, you change your perspective. And ultimately, you either see negativity or positivity or you see opportunity.”
Joyce Marcel is a journalist in southern Vermont. In 2017 she was named the best business magazine profile writer in the country by the Alliance of Area Business Publications. She is married to Randy Holhut, the news editor/acting operations manager of The Commons, a weekly newspa
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