Pittsburgh wants to be the next tech hub. This time, it has a real shot

When the NFL Draft comes to Pittsburgh next week, civic leaders will be using the spotlight to celebrate football’s Steelers—and the city’s growing reputation as a technology and artificial intelligence hub. The events include an AI pitch competition where judges including area native Mark Cuban will award startups from a 1.75 million prize pool—with preference given to companies with a presence in Pennsylvania. 

There’s a growing number of startups that fit that bill.  

As the name suggests, VC firm Valley Capital Partners is based in Silicon Valley. But for the past few years, firm general partner Mitchell Kokko has been living across the country in Pittsburgh. The firm considered expanding to a number of cities but was drawn by factors like the area’s universities, relatively affordable housing, a strong business environment, and its location in the Eastern time zone.  In Pittsburgh, he says a growing startup scene is taking advantage of strong talent networks, a close-knit business community including nationally known firms, and the area’s low cost of living. 

“Pittsburgh really offers differentiated networks to founders who are looking to sell to enterprise companies,” says Kokko. “Because it’s a smaller hub than a San Francisco or New York City, the major companies all do business with one another.” 

And local business leaders are willing to give startups a chance and directly work with their founders, which Kokko says can be critical to the enterprise businesses his firm invests in. “They get faster feedback cycles, and in early-stage startups that can mean the difference between life and death,” he says. 

Mayor Corey O’Connor, who took office in January, ran on a platform that included support for businesses large and small, through an economic development program he said would help revitalize business districts across Pittsburgh and also keep affordable housing available even as the city grew. Startups are increasingly setting up shop in the city, though some long-time residents have expressed concern about gentrification with rents on the rise, even while still low by national averages. 

One such startup is Factify, a Valley Capital Partners-backed firm that in January announced a $73 million seed round supporting its efforts to build a next-generation document format that it sees as a potential successor to the PDF. The Tel Aviv-based company deliberately chose Pittsburgh as its first U.S. “base of operations,” says founder and CEO Matan Gavish. That was in part based on its desire to work with a tight-knit community of businesses in regulated industries that would adopt the software and collaborate with one another using Factify’s document standard. The city’s closely linked business community made it a natural choice, he says. 

“That led us to Pittsburgh from first principles,” says Gavish. 

In general, Pittsburgh has long had a presence in AI, robotics, biotech, and other areas of technology thanks in part to institutions like Carnegie Mellon University and the University of Pittsburgh. But though it’s been home to buzzy tech businesses from Duolingo to Gecko Robotics, startup founders, college grads, and other young Pittsburghers looking for work have often historically made the trek to the Bay Area or other industry hubs.  Nearly half of all Pittsburgh-area college grads leave town after graduation, the Pittsburgh Post-Gazette reported last year. “The joke is that almost every [Steelers] NFL game is a Steelers home game,” says Kokko. “Because there’s so many people that moved all over the country.” 

In recent times, though, that’s been changing, with startups setting up shop and remaining in the western Pennsylvania city, says Mayor Corey O’Connor. 

“Now, more and more are starting to stick around, and from those companies you’re seeing spinoffs that create more of a hub in Pittsburgh,” says O’Connor. 

That sort of a feedback loop can be important to building an entrepreneurial scene, alongside factors like a skilled workforce, a ready stream of business ideas, and funding, says Olav Sorenson, a professor at the UCLA Anderson School of Management who has studied the geography of entrepreneurship.  

“Oftentimes, some initial startups and startup success are important, almost like an autocatalytic process just to get things started,” he says. 

Bust and boom 

The city itself is also looking to help jumpstart the process. O’Connor, who took office in January, has emphasized offering support to businesses looking to start or grow in Pittsburgh, including making it easier to get necessary permits and providing workforce training to get residents ready for today’s jobs. He also fields between 10 and 20 calls per week with businesses, promoting the city’s amenities, including the arts and culture scene and the easy access to the area’s rivers and trails. Of course, those calls also promote the idea that support for business development is available at the highest levels of local government, and O’Connor emphasizes a belief that business growth will help the city’s long-term residents as much as newcomers.

“It’s opportunities for the residents in Pittsburgh that may have never thought they’d see a boom like this before,” he says. 

It’s also a city that can offer businesses physical room to grow, he says, including dormant manufacturing centers dating back to its time as a steel and factory hub. It also delivers relatively affordable housing for employees, with local officials pointing to home and rental prices substantially lower than the national average, let alone high-priced hubs like New York and San Francisco. 

“The problem with a place like the Bay Area is that it’s become so phenomenally expensive,” says Sorenson. “The same startup could probably get going in a place like Pittsburgh for maybe a third or a quarter the amount of money.” 

After all, while Pittsburgh’s population has been on the rise in recent years, its Census-estimated 2024 population of just under 308,000 is still far below its official peak of 676,806, last seen around 1950. And the city was last year named the country’s lowest-price large U.S. housing market by realtor.com and frequently makes other lists of affordable American locales. 

“I think Pittsburgh has a unique advantage that’s driven by some of the structural shifts that happened during the collapse of the steel industry,” says Kokko. “And so, what you have is one of the cities in the United States that at one time was the third-largest business hub in the United States, and so you have infrastructure that can support much larger populations.” 

“Equitable Development” 

As the city’s mayor, and the son of a long-time Pittsburgh politician who was himself elected mayor in 2005, O’Connor naturally emphasizes residents’ longstanding pride in the city despite the decline in size. “When you’re a visitor and you go into a neighborhood, or you run into a Pittsburgher, they’re going to tell you what’s so great about Pittsburgh,” he says. 

Still, the rapid growth of the tech sector has gone hand-in-hand with rising costs and gentrification in many cities, and some local advocacy groups have expressed concern about affordable housing in Pittsburgh in recent years, especially for working class residents. Thousands of low-income families, especially Black families, have been displaced from the city in recent years, according to civic organization Pittsburgh United, which has called for “equitable development” in Pittsburgh. 

“Our vision of a growing Pittsburgh is a responsibly growing Pittsburgh—a Pittsburgh that includes the folks that have been here forever and for a very long time,” says communications director Kyla Rollins. “And that people that built the city have equitable opportunities to grow alongside this vision of the new Pittsburgh.” 

It’s a message that’s not outwardly at odds with City Hall, where O’Connor emphasizes work by the city to promote affordable housing. That includes a Housing Opportunity Fund to assist renters and homeowners, and the possibility of working with community groups to turn vacant city-owned lots into new housing. 

“Big emphasis for us [is] to make sure that if you’re living in your neighborhood now, you’re going to live there 20 years from now,” he says. 

View the full article