- As young tech workers plan to flee the San Francisco Bay Area for a lower cost of living, one tech investor is betting on Pittsburgh to become the next big tech hub.
- The former steel capital is more affordable than Silicon Valley, but it also boasts a rich talent pool.
- Patrick McKenna, a tech investor, runs a nonprofit called One America Works that aims to bring high-tech companies to overlooked tech hubs like Pittsburgh.
- “We like to say if it’s good enough for Google to go to Pittsburgh, isn’t it good enough for XYZ?” McKenna told Business Insider.
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At one time, tech workers sitting in cars along a San Francisco highway — returning home to apartments they could most likely only afford to rent — could look up to see a billboard bearing a proposal.
It read: “Own a home. Work in tech. Move to Pittsburgh.”
The former steel capital has reinvented itself in recent decades as a haven for tech companies seeking a rich talent pool in a more affordable market. Pittsburgh’s tech workforce grew 21% from 2012 to 2017, while major employers such as Google, Facebook, and Uber already have remote offices in the city. Still, it doesn’t have a reputation for cranking out startup unicorns or drawing venture capitalists.
Last year, an angel investor from Silicon Valley started a campaign to convince more tech employers to uproot for the old mill town. Patrick McKenna, who sold three companies before becoming a full-time investor, is betting on Pittsburgh to become one of the next big tech hubs, as places like the Bay Area leak young employees to other regions. His nonprofit works with local leaders to pique interest in the city.
It’s part of the startup playbook, McKenna said, for a fast-growing company to open a second office in a city like Phoenix, Denver, Austin, or Salt Lake City, to lower their operations costs. He believes more companies should look farther east.
“We like to say if it’s good enough for Google to go to Pittsburgh, isn’t it good enough for XYZ?” McKenna said.
Pittsburgh became a finalist for Amazon’s second headquarters for good reason. For starters, people who work there can generally afford to live there. The city has the highest rate of home ownership among the 40 largest metro areas in the United States. And the average rent for an apartment was about $1,280 in November — $2,500 less than an apartment in San Francisco, according to Rent Jungle.
Duolingo, which makes an app for learning languages, told Business Insider that having its headquarters in Pittsburgh is an advantage in recruiting.
“We’re getting just a good number of people who are just either moving from the Bay Area or just don’t want to go there to begin with, fresh out of college, because here you can get an apartment that’s pretty nice and you can just pay, I don’t know, a thousand bucks a month, and that is completely unheard of in the Bay Area,” Duolingo’s chief executive Luis von Ahn told us in 2018.
— Luis von Ahn (@LuisvonAhn) September 25, 2018
The city has more to offer than housing, McKenna said. It provides local employers with one of their most coveted needs: a major university system to help fill some of the jobs they create.
Each year, more than 4,000 students with tech-related degrees graduate from nearby universities. Some of them go on to start their own companies — 17 startups spun out of the University of Pittsburgh in the last fiscal year — and others are recruited into high-tech companies like Google, Amazon, and Microsoft, which all have local offices.
Uber filled its self-driving car research institute in Pittsburgh with mostly engineers and scientists from Carnegie Mellon University, and the company recently picked up 600 acres of land near Pittsburgh for testing its technology.
Pittsburgh’s chief evangelist
McKenna’s nonprofit, One America Works, was founded on the belief that great companies can come from anywhere. It wants to become a matchmaker for high-growth companies and metro areas, like Milwaukee, Columbus, and Baltimore, that produce locally-grown talent but get overlooked because of their locations.
A recent report from the Brookings Institute found that just five metro areas accounted for 90% of job growth in the innovation sector from 2005 to 2017.
The group has representatives in the Bay Area who pitch startups and their investors on opening their second offices in Pittsburgh. Its presentation is based on the proposal that city leaders used to bid on Amazon’s second headquarters. One America Works also has coordinators in Pittsburgh who can arrange tours, make introductions at the nearby universities, and help the interested companies make sense of the state’s financial incentives.
One America Works is funded through McKenna’s own financial resources and donations from Pittsburgh foundations. He said the nonprofit chose the city for its first campaign before there was local funding.
Last year, the group reached out to about 1,000 companies, mostly based in the Bay Area. Of those, a dozen companies said they would consider going to Pittsburgh, and a smaller group of five are currently hiring there, according to McKenna. They could create 60 to 80 jobs between them.
The impact was small. But McKenna has bigger plans.
He said the nonprofit will share updates from those companies with its mailing list, in the hopes of encouraging others to make the move. It also plans to start a second program in a different market to help it attract more tech companies.