It’s morning again in Pittsburgh. Today more people will go to work in Pittsburgh in tech jobs than at any time in our past and in percentages greater than most American cities. We are starting more companies then ever and more of our top tech talent are starting companies or joining start ups. Pay attention America because Pittsburgh is back. After starting my own software company, I moved to Pittsburgh in 1998 to invest in early stage technology companies and I have never been more excited and optimistic about the region’s future that I am now. As a entrepreneurial ecosystem, we are trending unmistakably up and to the right.
While Pittsburgh has long been ahead of its peer group cities in terms of cultivating a start up ecosystem, there are three reasons I am particularly excited now. First and foremost, there is a growing critical mass of engineering talent, especially in software and mobile technologies. Google’s opening of an engineering office in Pittsburgh has been transformative to the region in terms of attracting and retaining high demand software and mobile development skill sets and has also helped transform several neighborhoods in the east end of the city. It is one of Google’s largest engineering offices outside of Mountain View. Additionally, Carnegie Mellon has long been a strong source of entrepreneurially minded engineers and is the source of many of the region’s start ups. In providing talent to start ups and they are taking their game to new levels with a new President, Subra Suresh, engaged and generous alumni, and entrepreneurially minded faculty including Dave Mawhinney and Lenore Blum.
Next, Innovation Works and AlphaLab (and now also AlphaLab Gear) have been instrumental in providing seed stage financing and advice to start ups and under Rich Lunak’s and Jim Jen’s leadership, have built a very attractive portfolio of companies and a very strong investment team. AlphaLab alums, NoWait and The Resumator are among the strongest investments in our portfolio and each new class of companies keeps raising the bar. With their new fund, IW will generate greater financial returns by investing in later rounds and will be able to recycle that capital into future generations of start ups.
Finally, the stars are aligning regarding demographics with more young people staying in the city or moving to the city combined with Carnegie Mellon’s ascendency as a premier engineering school. A key part of our investment thesis is that not all of the smartest engineers and scientists go to just a few universities on each coast. Great research is done in a lot of places and great companies can start anywhere. So what will it take for Pittsburgh to continue on this trajectory?
First, we need to continue to build out our talent ecosystem beyond engineering to include product management, product marketing, and other sales and marketing functions. This will come about via success of existing companies that get to critical mass and hire/develop those skill sets and via boomerangs who have left the area, acquired the skills and want to return because of the growing opportunities the region offers. Additionally Google plans to add product management to its Pittsburgh office which should help jump start the process.
Next, our start ups need more early adopters of their products. I applaud Sean Ammirati’s work via Innovation Happens to get our larger local companies to adopt the technologies developed by local tech companies. It can be frustrating to have a world class team with a world class product in our back yard and then the companies have to go to the coasts to get their first 10-20 customers. We will actively support any efforts aimed at helping our more established companies be early adopters of our early stage company’s products.
We also need more early stage capital in the region. I believe capital generally flows freely across borders and the really good opportunities will get funded. However, much of that capital focuses on convenience and Pittsburgh is not an easy place to get to these days. In a company’s life cycle, the most likely time for a start up to uproot and move is as part of a Series A when the technology and product/market fit risks are diminished and the company still has few enough people that it is easy to move. Additionally, when there is a success, the money leaves the region if it is invested in funds outside of the region. Large institutions in the region could align financial investment with regional goals.
The tech industry, like many parts of life are driven by power laws. Given that reality, when we are fortunate enough to have a startup generating real momentum in a growth market, let’s commit to dominating those markets. The more we foster the foundation of a complete entrepreneurial ecosystem, the more likely we will be to capture the asymmetric upside of luck when it strikes.
So please join with Birchmere and let’s start a fire in the Pittsburgh start up ecosystem!
