Creating opportunity
Innovation Built on Pittsburgh’s Steel Skeleton
Free Enterprise Staff | October 14, 2014

When Luke Skurman graduated from Carnegie Mellon University a little over a decade ago, the California native faced a difficult decision that had confronted many Pittsburghers over the years — to stay or to go.

Sure, Pittsburgh at the start of the Millennium didn’t bear much resemblance to the global startup capital of Silicon Valley, but the Steel City was emerging as a tech hub that provided a more nurturing — and affordable — environment for planting an enterprising idea.

In a fateful decision, he chose to stay instead of going back west, in large part because people in Pittsburgh seemed to want him there. “All of a sudden, all these doors kept opening up, and I was this guy from California who went to Carnegie Mellon that stayed in Pittsburgh,” recalls Skurman, who soon founded the college review startup that became Niche.

Just 15 years ago, Skurman wouldn’t have had much of a decision. From 1970 to 2000, Steel City’s population dropped by 40 percent, the casualties of empty steel mills that caused widespread flight from town. The trend is finally starting to reverse. For the first time since 1950, the Pittsburgh area population is up, and, according to the Pittsburgh Downtown Project (PDP), the city center population is up 40% to 9,000 people. PDP says residents are also getting younger, with increases in those in their 40s and increases in those older than 70.

Innovation Between the Coasts

In hindsight, Skurman clearly sees the value of staying in Pittsburgh. Carnegie Mellon provided access to an elaborate business ecosystem and network of “great professors, great alumni, and great students,” he said, noting that it didn’t hurt that he could “afford more time in Pittsburgh than in California.”

Born from the determination of visionaries who worked tirelessly to revive Pittsburgh’s economy after the steel bust, the region is home to an innovation ecosystem that has taken on a life of its own.

Maureen Harp’s life neatly encapsulates the city’s transformation. The daughter of a Pittsburgh steel worker, Harp left town to seek out success in New York and Boston.

Yet realizing that her hometown now offers some of the same opportunities, she recently returned to raise a family and focus on launching her own startup. With the help of hardware accelerator AlphaLab Gear, Harp is working to develop consumer robotics for woodworkers through her company, Saturday Garage.

“Everybody always thinks those other places — San Francisco and Boston — are these tech centrals. But it’s so amazing and awesome to have this here in Pittsburgh because there are a lot of really bright and innovative people here. We know how to build things,” said Harp.

Pittsburgh’s economic renaissance is feeding off of local innovation, talent, and capital. Just as Stanford acts as an idea generator for Silicon Valley, universities in the Pittsburgh region are the lifeblood of the local innovation economy, infusing themselves within the business community.

At Carnegie Mellon, these crucial networks span the labs and lecture halls and include adjunct professors who are also CEOs. Skurman valued the real-world experience his professors brought to the classroom and also the talent they brought in to give presentations—the best startup attorneys, venture capitalists, and accountants. “They were really going the extra mile,” he said, providing tips on everything from potential investors to office space.

Incubating a New Steel City

Rich Lunak plays a key role in the innovation ecosystem as an investor and incubator of local startups. He called the universities an “irreplaceable asset for Pittsburgh.”

As the president and CEO of Innovation Works, the No. 7 seed-stage investor in the country last year, he has also launched two startup accelerators that provide capital expertise and hands-on support for regional entrepreneurs: AlphaLab and AlphaLab Gear.

While AlphaLab supports a broad range of tech startups, AlphaLab Gear specializes in nurturing companies that manufacture physical products, such as robotics and the “Internet of things.” Regardless of the industrial path, AlphaLab entrepreneurs are thrust into a 20-week program that involves top-of-the-line investment guidance, education, and mentoring that leads to the eventual product launch. Their work is showcased at a “Demo Day” attended by potential investors and the startup community.

Dick Zhang, who like Maureen is a member of the first AlphaLab Gear class, says he has been pleasantly surprised by the energy and sense of community in the Pittsburgh startup scene.

“I’m very impressed with the sort of energy and the community that’s built around technology here, and I guess that makes sense,” said Zhang, president and CEO of Identified Technologies Corp, which is developing flying robots that can access locations too dangerous for humans to gather data. “You have all these universities—CMU, Chatham and Pitt are all technology powerhouses—really creating the next generation of the nation’s brightest engineers and scientists.”

The Princeton, N.J. native discovered AlphaLab Gear after his team won the University of Pennsylvania’s Y-Prize Competition for innovative robotics technology. Now he’s considering staying. “It’s been wonderful to be in Pittsburgh, because all of our customers and all of our employees are here.”

Not Just Overnight Success

“We have all the pieces here, and we are going to crush it here in Pittsburgh.”

Pittsburgh’s innovation ecosystem has truly come full circle, especially for Lunak — who left a promising career at Westinghouse to join a healthcare startup that was eventually acquired by McKesson Corp. in 1996. Such connections are not accidental; they are the natural outgrowth of economic development strategies implemented in the late 1980s.

“In many cases, because Pittsburgh has a burgeoning tech business community, some of those first and second generation [businesses] that emerged are spitting out other startups, and so it becomes a virtuous cycle,” Lunak said.Baby products manufacturer 4Moms, which uses advanced robotics, is among Innovation Works’ successes.  E-retailer ModCloth also got its start with seed funding from IW. Over the past 15 years, Innovation Works has investment north of $53 million in more than 160 tech startups.Terri Glueck, director of community development and communications at Innovations Works, says Pittsburgh has “always been the center of making things.” With the universities acting as “feeders of ideas” and an active network of business mentors, Pittsburgh has the potential to lead the advanced manufacturing industry, she said. “We have all the pieces here, and we are going to crush it here in Pittsburgh.”

Count Niche’s Skurman among the clutch community of successful entrepreneurs now offering a hand to the up-and-comers. Thrill Mill, a nonprofit incubator founded in 2006, provides financial, business development, and office space to early stage startups. New businesses need time to figure out their business model, operations, and customers, says Skurman. That process can be more difficult on the West Coast because the “California mentality is to try and hit a billion as quickly as possible. And if it doesn’t work, move on.”

Turning to a metaphor suitable for the sports town, Skurman says entrepreneurs in Pittsburgh have more breathing room. “It’s not just about hitting grand slams. Singles, doubles and triples are also really, really good.”