Pittsburgh’s tech employment grew 12 percent in the past two years, but is that sustainable?
When it comes to tech talent, Pittsburgh earns stellar grades.
The city placed eighth in a study of 50 small tech job markets in North America and Canada, according to Los Angeles, Calif.based commercial real estate company CBRE Group, Inc.
The report describes Pittsburgh as a top “momentum market,” or a place where job creation grew faster in the past two years — 2015 and 2016 — than in the previous two-year period.
“One benefit that Pittsburgh has had lately is that our funding and venture capital has improved,” said Jeffrey Ackerman, managing director and market leader for the regional branch of CBRE. “That’s a key bridge if we’re going to get these startups to the next level.”
Pittsburgh’s pool of tech talent grew 12 percent from 2015 to 2016, and the region has the fourth-largest labor pool among other small tech markets with 42,130 employees.
“I’m from the generation when the steel industry collapsed in the 1980s and everyone just left,” said Dave Mawhinney, executive director of Swartz Center for Entrepreneurship at Carnegie Mellon University.
“It’s really reversed in this last decade and especially in the last
five years.”
Of course, the steel city’s success story was not as fast as outsiders make it out to be. Mr. Mawhinney joked that the overnight sensation took 10 to 20 years.
The magical narrative of instant turnaround has been perpetuated by outsiders who see Pittsburgh as a city transformed from rust belt Doomsville to a sophisticated tech hub, he said.
“We certainly have had growth from Facebook, Argo AI, Amazon and Oculus ... and that’s really accelerated ... but I think Pittsburgh has been growing for years,” he said.
And the tech hub is not without flaw.
CBRE’s study also shows Pittsburgh sees a “brain drain” of tech-educated students — a situation wherein fewer tech jobs are added than there are available students graduating with tech degrees.
Between 2011 and 2015, 17,795 people graduated from a university in Pittsburgh with a degree related to technology, but just 8,140 jobs in the sector were added between 2012 and 2016.
Mr. Mawhinney does not consider this a real brain drain, because most of CMU’s students, for example, are not actually from Pittsburgh.
“We import up to 3,000 of the smartest people in the world every year and some of them stay here,” he said, highlighting the benefit. “But we still send people all over the world ... that’s not going to change either. ... How can we continue to keep more of them here?”
Some mid-size markets like Madison, Wis., show net brain gain, or a net addition of industry talent after students graduate.
In the same period, Madison, which ranked first on CBRE’s list of tech talent momentum markets, graduated 6,695 students with a tech degree and added 7,910 tech jobs, a brain gain of 1,215.
Pittsburgh and Madison rank similarly for millennial concentration, though, with Madison’s population consisting of 26.5 percent millennials and Pittsburgh’s market holding 25.3 percent.
Millennials, less commonly known as “Generation Y,” are individuals born between the early 1980s and early 2000s, though demographers have not established a definitive range of birth dates.
Pittsburgh even experienced the largest increase in millennial population, by percent change, of all markets in the report; seeing growth of 17.7 percent from 2010 to 2015, in a tie with Hartford, Conn., and beating out Seattle and San Francisco.
Chasing the money
When young tech professionals leave, where are they going? Follow the funding trail.
It’s relatively inexpensive to start a company, so nearly anyone with talent can bootstrap one, said David S. Rose, CEO of Gust, a digital network that connects startups with investors.
“It’s at the next level that it gets tricky,” he said, noting that startups find it tricky to jump from seed funding to venture capital.
In Pittsburgh, Innovation Works is the largest investor in seed-stage companies, pouring at least $72.2 million into over 300 technology startups.
That’s attracted at least $1.8 billion in follow-on capital to the region since the seed fund began, according to Innovation Works.
Gust’s Startup Funding Trends 2016 End of Year Report found applications for startup funding in Pennsylvania rose to fifth place in 2016, claiming 4.4 percent of U.S. startup funding applications in the last half of 2016.
Mr. Ackerman noted that a high percentage of the tech jobs in Pittsburgh are created by demand from the large companies that have been solidly headquartered here, for years, with startups representing a smaller minority of the tech workforce.
Mr. Mawhinney said he believes there needs to be more balance between large tech firms and the nascent startup economy.
“We’re creating great opportunities but we’re not out of the woods yet. We still lose startup companies to Silicon Valley and New York because we still lose risk capital to other markets,” he said, noting that venture capital growth must rise along with tech talent and seed funding.
“Unless CMU and Pitt double in size, we won’t be importing more people,” he said, though he did note he believes the upward trend in Pittsburgh’s tech talent pool will continue over the next few years.
Mr. Mawhinney said, “If we don’t get more risk capital at work in this region, we will plateau.”