Matthew Gutierrez | August 15, 2016

Tech startups surprised to find Pittsburgh's assets add up

Until recently, Joel and Justin Johnson were nomads. Before landing in Pittsburgh three years ago, the brothers and co-founders of BoXZY had lived in several cities: Albany, N.Y.; Jacksonville and Tampa, Fla.; Phoenix; Oklahoma City; Denver and Louisville.

But it took only a month for the Florida natives to fall for Pittsburgh.

“We’d been searching for a home all our lives,” Joel, 35, said. “And we found it in Pittsburgh. We’re going to be here for the next 50 years.”

The makers of an in-one 3-D printer, CNC mill and laser engraver are not alone. While Pittsburgh ranks No. 27 among the country’s top 40 cities in entrepreneurship growth — a 15-point drop from last year — 20- and 30-somethings are still coming, according to the Kauffman Index of Entrepreneurship.

People ages 25 to 29 now make up 7.6 percent of all residents, up from 7 percent a decade ago, according to census data on Allegheny County. The 30-to-34 age group now comprises 6.5 percent, up from 6 percent.

Technology co-founders and innovators said the cheap cost of living, proximity to research universities and tax incentives are among the reasons they’ve decided to set up shop here over larger markets such as Philadelphia, Boston and Austin, Texas. Techies also mentioned less obvious reasons: The tight-knit startup scene and array of food and culture. Even bike lanes.

Software typically receives the largest slice of venture capital investment, accounting for nearly 36.2 percent (nearly $12 billion) of all investment over the past year, according to a 2016 report by Toronto-based Martin Prosperity Institute. Biotechnology was in second place with 17.3 percent, or $5.7 billion.

And Pittsburgh’s in the thick of that, ranking 11th in venture capital investment dollars per capita among the nation’s 40 largest metropolitan statistical areas, according to a joint review by the accounting firm Ernst & Young and Innovation Works, a state-funded small business incubator. Venture capital firms invested $550.3 million in 2014 and 2015, a jump from $351.2 million in 2012 and 2013, according to Dow Jones VentureSource and Innovation Works.

Luca Rigotti, an associate professor of economics at the University of Pittsburgh, credits the externality effect for Pittsburgh’s popularity — that large research universities lure human capital. But it’s more than that, because as Mr. Rigotti notes, “not all cities with good colleges have startups.”

Mr. Rigotti said Pennsylvania’s tax incentives have propelled startup growth — but not on their own. It’s not only universities or the vibrant cultural activity, or the cheap rent that’s driven the blooming. Instead, it’s all of these things together that has lured techies to the Steel City.

“If you’re poor in New York, you can be richer in Pittsburgh,” Mr. Rigotti said.

In May, San Francisco-based Trulia ranked Pittsburgh the No. 1 city for recent college graduates to live, based on job availability, cost of living and share of population age 22 to 30 with at least a bachelor's degree.

Pittsburgh’s intimacy factor is perhaps most appealing, said Zan Gilani, a marketing associate at Duolingo in East Liberty. He illustrated this by comparing the Steel City to New York, where he went to college, held internships and worked.

“You’re not lost in the forest,” here, he said.

Stefano Gridelli, who in 2013 co-founded Netbeez, a network-monitoring tool startup with offices on Baum Boulevard, also said the cost of living is affordable given the perks the region has — notably sports, arts and food. Housing is getting more expensive in some areas, but “still nothing” compared to Silicon Valley, he said.

After graduating from college in Philadelphia last spring, Dick Zhang founded Identified Technologies in Larimer thanks to a business development service. The cost of living didn’t play into his decision to come here, but was “nice to have after the fact.” Mr. Zhang had considered New York, Florida, Texas and California — never Pittsburgh.

One of his colleagues, Jonathan Shapiro, has worked in the city since 1991. Mr. Shapiro considers Pittsburgh a big town, not a city. For instance, he says he can call business leaders at top firms and talk for 10-15 minutes.

Six years ago, Matt Stewart moved Downtown. The Digital Dream Labs co-founder called it a “ghost town.” Now he raves about Pittsburgh, citing the youth-driven tech environment.

He also said the bike lanes, which run throughout Shadyside, Downtown and the North Shore, have let him commute so that he’s “in a better mood when I come to work.”

Pittsburgh’s relatively low cost of living is part of Station Square-based Schell Games’ pitch to prospective employees. When prospects dig a little deeper in their research, chief operating officer Jake Witherell said they uncover other “attractive” attributes.

“As soon as they start doing their homework, it becomes apparent Pittsburgh is that place, a hip place to be.”

Wombat Security’s vice president of marketing, Amy Baker, said CMU deservedly gets much of the credit for churning out talent, but Strip District-based Wombat also hires Pitt and Robert Morris University graduates. The universities are the main driver for Wombat’s stay in Pittsburgh.

“It keeps us close to innovation,” Ms. Baker said. “Staying close to Pittsburgh felt like staying close to the expertise.”

Matthew Gutierrez: or 412-263-3852. Twitter: @Matthewgut21

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