Contrasting “Pittsburgh tech is booming!” stories with “the rest of Pittsburgh is struggling” is always interesting … because those sorts of comparisons are done so rarely. But the comparison tells us and others something important about the region.
“Pittsburgh region’s low startup ranking a bitter pill for local stakeholders; Entrepreneurial activity here lags in national index,” covering a recent Kauffman Foundation report about Pittsburgh’s (continuing) low rate of new business formation, prompted a sort of rebuttal from a leading Pittsburgh-based venture capitalist:
“With 20 years’ experience in funding Pittsburgh-based startups, I feel compelled to respond to your recent article on our region’s relatively poor performance in national startup rankings (“Region’s Low Startup Rank Startles,” June 4). Since founding Birchmere Ventures in 1996 to seek technology startup opportunities in the Pittsburgh metro area, we’ve expanded nationally, but we’re still based here, and we view this market as our most promising.
The Kauffman Foundation’s statistics indicating that Pittsburgh has the lowest rate of startup activity among the country’s 40 largest metro areas is disheartening on its face. But these numbers obscure rather than reveal what’s really happening. Kauffman’s overly broad definition of entrepreneurial activity conflates dry cleaners and landscapers with the comparatively small number of companies raising significant venture capital — those with the potential to transform a region’s economy.
The vast majority of Kauffman’s startups are small proprietorships that will never have more than nine employees. Lumping them in with companies striving to go public or to be acquired for hundreds of millions of dollars yields misleading results.
Looking backward 20 years and forward a few more, I see our region’s venture sector booming with world-class investment opportunities coming out of Carnegie Mellon, Pitt, Innovation Works and Alphalab. NoWait, Resumator, 4Moms, and Indentified Technologies are national leaders in their markets. These are the companies we should be tracking and celebrating — our region’s star companies aiming to change Pittsburgh, and change the world.
In other words: Never mind the low rate of small business formation that addresses the goals and needs of the vast majority of the region’s residents — whether they are current or prospective business owners, employees, customers, partners, and/or neighbors — instead focus on the tiny number of small companies hoping to win the tech IPO / exit lottery for the benefit of their investors, most of which will fail. (By the way, take a look at the portfolio at Birchmere right now, and count the number of Pittsburgh-based enterprises that it regards as world-class investment opportunities.)
That last dig is a little unfair, of course, because Pittsburgh *does* need risk-based investing and more of it. There’s nothing wrong at all with the VC model, unless an investor (let alone a region) falls under its spell and fantasizes that venture investing and risks and rewards are actually the way to economic prosperity for an entire region. That’s not true here; it’s not even true in the Shangri-La of venture investing, Silicon Valley.
For a Silicon Valley illustration (one among many), drive through the southern end of Middlefield Road in Redwood City, which is just a couple of miles to the north of Menlo Park and a couple of miles northwest of Facebook’s headquarters. I’ll wait.
Or here in Pittsburgh, read this excellent summary (thanks to @deborahtodd) of a program designed in small ways to identify and encourage small business owners who happen to be black. And which ran into barriers in Pittsburgh because of “the limited number of black-owned businesses providing gasoline, fresh produce and other essentials.”
In other words, none of this should be an either/or issue, even if the way that development topics appear in the mass media make it appear so, and even if some folks in the development business — for understandable if self-regarding reasons — perpetuate the either/or idea.
In truth: The region can’t succeed unless the money circulates widely. The Post-Gazette, despite news and business coverage that is dwindling to the point of nonexistence, still excels at the sort of big-think-features that this theme cries out for. More of those, please?
On a similar point, a friend pointed me recently to the mini-non-hubbub that erupted about a month ago when it came to light that Uber, setting up a sizable research program in Pittsburgh, has hired a number of people away from Carnegie Mellon. I was out of town when all of this happened, but looking back it appears that the media was abuzz both locally and nationally. Uber-the-disruptor is/was disrupting yet another revered local institution! (Post-Gazette) (Pittsburgh Business Times) (WSJ) (Fortune)
Except, of course, nothing of the sort. As Audrey Russo wisely told the PG, this sort of thing (large investments in Pittsburgh by wealthy companies, lured by Pittsburgh’s two key assets: talent, and low costs) is exactly what the region has *wanted* for decades. Carnegie Mellon will be fine, even if in the short-term its National Robotics Engineering Center will have to re-balance its staff. Universities are used to competing for resources, especially universities like CMU, which like to play in the commercialization pool.
All of which goes back to a note that I touched on in another post: The city’s psyche is a delicate thing. Conflicted, still, about what Pittsburgh wants and who should get that, and how to move from where we are to where we want to be. The New York Times Sunday Magazine published a recent piece that talked about urban or (“community”) psychology and its effect on public health. Turns out that connectivity is key to collective psychological health — making physical connections plain and accessible (bridges, pathways, roads, and so on), and making virtual and conceptual connections explicit as well (shared neighborhood histories, for example).
It’s not just the money that needs to circulate widely. It’s the narrative of contemporary Pittsburgh: Talented, hard-working people everywhere, living on the cheap.
I looked at the Birchmere link and counted at least two companies that were based in Pittsburgh (CoManage, FreeMarkets).