For Tech Startups, No Place Like Here

When Patrick McGregor and Matthew White decided to quit their jobs to start a data security company a few years ago, the first thing they had to figure out was where to start it.

They popped in on Raleigh-Durham, checked out Boston and San Francisco and Atlanta to have a look-see. But the former Carnegie Mellon roommates soon discovered the right place to launch was staring them in the face. “In the end, the right choice was abundantly clear,” says McGregor, the CEO of Downtown-based BitArmor. “It was clear that we needed to start in Pittsburgh.”

The two 30-year-olds are in good company these days. A growing number of 20- and 30-somethings are choosing to start their tech companies in and around Pittsburgh. Many are graduates of local universities tapping the wealth of expertise the city has to offer.

“Carnegie Mellon is arguably the number one institution in IT (Information Technology) in the country. Pitt is among the elite institutions in the country in life sciences,” says Steven Zylstra, president and CEO of the Pittsburgh Technology Council. “There’s a lot of great minds in region, a lot of students being produced; that’s always fertile ground for start-ups.”

The profusion of young entrepreneurs is helping to build a friendly atmosphere for start-ups in a region long thought of as risk-averse. “There’s an interest in what is percolating in Pittsburgh,” says Catherine Mott, managing partner of BlueTree Allied Angels, a four-year-old venture capital group in the North Hills that has invested in 12 local start-ups, many of them technology-based.

“We’re seeing a change,” says Mott. “When we started back in 2003, there was essentially no outside money coming into Pittsburgh. Since then, the number of venture capitalists that have called us from out of town, that want to see our deal flow, has really gone up.”

On Your Mark, Get Set...

The relatively low cost of living and deals on real estate is a big reason why young people feel they can start their companies here. “It’s a great city to start a business in,” says Nathan Martin, co-founder of Deep Local, an East Liberty-based digital mapping software company. Martin came to Pittsburgh on an artists’ residency at the Studio for Creative Inquiry, an inter-disciplinary atelier at Carnegie Mellon. While there, he worked on what would eventually become the company’s flagship product, MapHub.

“This is a city where you can take a risk. You can start a company with a lot less money here. To exist for a month in New York might cost $70,000 for a company like ours. Here, it would cost a third or a quarter of that,” he says.

Technology is also alleviating some of the hurdles to locating in Pittsburgh. Eric Brown, co-founder of Impact Games, which makes the Peacemaker video game, contracts work out to programmers as far away as London and Seattle. “It’s getting to that point to where you’re doing business doesn’t really matter as much as how you’re doing business,” says Brown, 30, who grew up in Point Breeze but has “boomeranged” after stops in St. Louis, Seattle, and New York.

Brown began working on Peacemaker, a game that challenges players to broker peace between the Palestinians and Israelis, as a grad student at CMU’s Entertainment Technology Center. He’s taken full advantage of the friendly atmosphere among the region’s business community. “You don’t need to be shy about writing to anyone for advice—it’s a very open community here.”

It turns out, the expertise, money, and encouragement one needs to start a business can be a lot easier to get in a city of Pittsburgh’s size than in some bigger markets. McGregor and White spent months cold-calling anyone they thought could help—other entrepreneurs, potential investors, CEOs of similar high-tech companies.

“One thing we found is that people here are very open to talking with you and offering advice.” Simply put, McGregor said, “People here answer the phone.” Pittsburgh’s size also helps good ideas to spread pretty quickly, says Michael Matesic, CEO of Idea Foundry, the Oakland non-profit that helps get local start-ups off the ground. “If you’re in the door at one place, they can open up doors for you somewhere else,” he says.

Knock Knock. We're here.

Getting doors opened is important for young entrepreneurs, says Shanna Tellerman, an ETC alum who co-founded Sim Ops Studios last year. The company makes simulated training software for firefighters and other high-risk occupations.

“My background’s not at all in business,” says Tellerman, 25. “I’ve had a lot of smart advisors and people willing to walk me through everything about running a company.”

The same could be said for BitArmor’s co-founders. After graduating from CMU in 1998, McGregor went on to get a Ph.D. in cryptology at Princeton. White stayed in Pittsburgh, working as a chip engineer with Marconi Plc, the North Hills networking equipment maker.

“A lot of our initial introductions were related to personal friends of mine and professional networks, especially Matt’s,” said McGregor. One example is two tech entrepreneurs that White had come in contact with while at Marconi. “They met with us and made immediate introductions to potential investors. We met with basically all the sources for high risk capital in Pittsburgh,” he adds.

In 2003, from a basement office in Oakland, the duo launched the company with help from the Technology Collaborative which promotes Pittsburgh’s high tech industry.
The company now occupies an office with a lofty view of the Allegheny, PNC Park and the incline, on the 19th floor of Gateway 3 in the Golden Triangle. Yet it retains that start-up feel: No receptionist, blank walls, with some cubicles yet to be filled.

McGregor says they’ve learned a lot about what it takes to start a business—mainly a lot of late nights in front of a computer. “You can’t be committed to it 90 percent,” he offers. “You have to know in your core that this is an idea that will succeed.”

Deep Local

Eric Brown of Impact Games

Screenshot of Peacemaker (Impact Games)

Screenshot of  Hazmat Hotzone (Sim Ops Studio)

All photographs copyright © Jonathan Greene
except Peacemaker, courtesy of Impact Games
and Hazmat, courtesy of Sim Ops Studio