AOL Tries for Some Silicon Valley Cred

"AOL is cool." The phrase appears in big blue letters on a long whiteboard lining a hallway of AOL's (AOL) newest outpost, in Palo Alto, Calif. Since the Internet giant signed a seven-year lease on a 225,000-square-foot building last August, it has thrown the space open to a wide assortment of startups, which work in close proximity to 170 of its own engineers. The new digs are part corporate office, part startup incubator, and part college community center. The hope for AOL executives is that some of that entrepreneurial energy rubs off on their 28-year-old company.

Nothing is less cool than professing one's coolness, of course, especially if you're an Internet dinosaur evoking a bygone era of dial-up modems. AOL was a hot stock in the 1990s, only to become half of AOL Time Warner in one of the worst mergers in U.S. history. The company spun off in 2009 and has a market cap of $2 billion; that's a fraction of its value on the day the Time Warner merger was announced. Yet AOL's quest for cred may actually be working. There's a waiting list of startups that want to move in. "We really have tried to make our offices into centers of creativity where we can invite other people to come in and work with us," says Tim Armstrong, chief executive officer of the New York-based company. "The opportunity is to take some of the world's best entrepreneurs and technologists and have them work in a deeply engaging place."