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National Spotlight: Rise of the Rest

Louis Van Ahn

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This story originally appeared in our sister publication Confluence Denver; click here for more on Issue Media Group and its work spotlighting what's next in American cities.

AOL Co-Founder Steve Case has a great perspective on the country's vast and varied startup universe. Now Chairman of Startup America and CEO of Revolution, a venture capital fund based in Washington, D.C., Case wrote a February blog post for the Wall Street Journal describing what he dubbed the "rise of the rest."

"I'm convinced that we're beginning to see a regional 'rise of the rest' as cities like Washington D.C., Denver, Chicago, Atlanta, Raleigh, Cleveland, Detroit and many others experience unprecedented growth in startups," wrote Case.

Case is the unofficial pied piper for this "rise of the rest." He recently crisscrossed the country in search of investments for Revolution outside of established tech hubs like Silicon Valley and Boston. And he's not alone in recognizing this movement.

"We're just seeing the beginning of this trend," says Craig Howe, Founder and CEO of Rocket XL, a Los Angeles-based social media agency. 

Howe is involved in no less than seven startup accelerators and incubators from South Carolina to California as mentor, advisor or investor. He is seeing entrepreneurialism blossom in unexpected places. "I never imagined in a million years that one of the strongest accelerators in the country -- the Iron Yard -- would be in Charleston, South Carolina."

Silicon Valley set the template of academic institutions and companies feeding off of each other to create a first-rate ecosystem for tech startups and innovation. Now that model is being replicated in all sorts of places with all sorts of specialized technologies -- and with a boost from government subsidies and successful entrepreneurs coming back to their roots to help catalyze local networks of investors and advisors.

"A lot of people are returning home," says Howe. "There's such energy and excitement for successful businesspeople to invest and be part of a startup community." 

Talking the talk in Pittsburgh

Home to Duolingo, Jibbigo and Carnegie Speech, Pittsburgh's strong translation tech cluster is in large part due to the presence of Carnegie Mellon University. But there's a lot more to it than that.

"One of the problems startups in other areas have is finding engineers," says Luis von Ahn, CEO and Founder of Duolingo. "In Silicon Valley, they say it's so hard to find engineers. We don't have that problem." 

Born in Guatemala in 1979, von Ahn is known as one of the godfathers of crowdsourcing. He was the recipient of a MacArthur Fellows "genius grant" in 2006 and started Duolingo in 2011. The company teaches people languages on the Internet and uses those lessons to crowdsource translations to a wide variety of customers.

Duolingo has four computational linguists on staff. That is usually a challenging position to fill, but Carnegie Mellon has one of the biggest and best computational linguistics departments in the world at its Language Technologies Institute.

The company has 24 employees total in Pittsburgh (12 of its 14 engineers are Carnegie Mellon grads) and is growing at a torrid pace. "We're scaling and we're continuously hiring," says von Ahn.

Fortunately, Pittsburgh is not a hard sell to new recruits. "Affordability is a big deal," he says. "When you compare New York and Pittsburgh, it's almost laughable. Here you can buy a four- or five-bedroom home for what you could maybe rent a two-bedroom apartment in New York."

And the city over-delivers in terms of quality of life. "It's not the middle of nowhere," says von Ahn. "It's a cool city."

Healthy Growth in Philadelphia

Philadelphia has always been a leader in medical technology with stalwarts like Penn Medicine, Wistar Institute and Pennsylvania Bio leading the way. The rapidly growing field of Healthcare IT -- digital solutions to healthcare issues -- is poised to benefit from these institutions as well as the city's growing entrepreneurial ecosystem.

One hub of this movement is the University City Science Center, a fifty-year-old institution dedicated to technology and life science entrepreneurship in Greater Philadelphia. The Science Center boasts both Quorum, a clubhouse for entrepreneurs, and the Port Business Incubator. To date, they've helped launch 350 companies -- and those companies have raised over $80 million in private funding -- in diverse areas including digital fabrication, diagnostic devices, cancer treatments and clean energy. 

"What I see happening is a merger between the tech community and the profound need for new solutions to unmet market needs in healthcare," says Stephen Tang, President and CEO of the Science Center. "That includes everything from apps development for mobile all the way down to the treatment of big data."

In recent years, the Science Center's QED Proof-of-Concept program -- which provides over $600,000 to commercializing life science technology -- has focused their awards on Healthcare IT projects, including ProstaCAD and Dynawheel.

Additionally, DreamIt Ventures, Philly's leading tech accelerator, recently launched DreamIt Health, a department dedicated solely to Healthcare IT. They have created an innovative partnership between Penn Medicine, the region's largest healthcare provider, and Blue Cross Blue Shield, the largest insurer. This year, they will launch ten digital healthcare companies.

In tandem with these efforts, a host of business accelerators, coworking spaces, the 8,000-plus member Philly Startup Leaders, Startup PHL and the innovative venture capital firm First Round Capital continue to build an entrepreneurial ecosystem that prizes the exchange of skills and ideas. 

"The need for collaboration and the need to be in a community are important," says Tang. "Our community of Greater Philadelphia offers a lot."

Mile High Rising in Denver

Denver is another city that's proving fertile ground for software and web technology startups -- and quality of life enters almost every conversation on the topic.

Erik Mitisek is something of an ambassador for the city's booming startup scene. He's co-founder of travel startup NextGreatPlace and Chairman of Built In Denver.

"Denver is in the midst of an entrepreneurial renaissance," he says. "There's a lot of activity." He points to enterprise software and mobile technology as growing areas, and says local companies Rally Software, Ping Identity, FullContact and iTriage are some of the companies to watch.

Mitisek cites local higher education and easy access to technology as critical factors underpinning the current boom times. But if Denver has one trump card, it's quality of life.

"It's a great place to work, but it's also a great place to live," says Mitisek, highlighting a "trifecta" of development in the central core, access to capital and several companies on the cusp of going public.

Game on in Baltimore

Baltimore's been a computer gaming hub for a long time, and it's poised to bolster that status with a new generation of creative game-makers settling in the city.

The local ecosystem for computer games can be traced back to a singular event: In 1982, Sid Meier and "Wild Bill" Stealey co-founded MicroProse and based the company outside Baltimore in Hunt Valley. The company's flight simulators were popular in the early days, and Meier went on to develop Civilization, one of the top computer games of all time. He lives in Hunt Valley today.

After peaking in the 1990s with 220 employees in the Baltimore area, MicroProse has since changed hands multiple times and is now based in California. That said, its legacy has made metro Baltimore a gaming hub. Murray Taylor, founder of Digital Steamworks, is one of many former MicroProse employees to have launched their own startups. 

"We started making computer games when the industry began," says Taylor. "It's just natural now. We see the evolution clearly and can see what's next."

Digital Steamworks takes computer game concepts and technology to new markets -- they have developed 3-D rendering software for NFL coaches and interactive exhibits for the General Electric Visitor Center in Atlanta. Others, like BreakAway Games, have cultivated a relationship with the local military community -- a who's who of military leaders has used BreakAway's software.

Baltimore attracts the right talent to fuel visual and conceptual innovation. "Baltimore's kind of quirky," says Taylor. "It's kind of like Austin in a way. A lot of creative people are attracted to the city. People like funky things." 

And the Silicon Valley types who come out for a job tend to like Baltimore. "People come out from California and they stay," says Taylor, citing public schools and climate as prime selling points. "They love it here. It's lush here. It looks like a tropical rainforest compared to California."

Public-Private Snowball Effect in Tampa

Strong public-private partnerships often set the stage for the rise of a local tech sector. In Tampa, it's all about simulation, spanning both military and medical applications.

In terms of the latter, there's nothing more cutting edge than CAMLS -- short for Center for Advanced Medical Learning and Simulation -- a $38-million, 90,000-square-foot facility that's redefining medical teaching. The University of South Florida partnered with private medical device manufacturers, game developers, and medical and aviation simulation companies on the facility, which opened in 2012.

The big picture: Healthcare is the only high-tech, high-touch industry that does no skill assessments, and it's high time for change. 

"Healthcare is about to go through its largest transformation in a lifetime," says Dr. Stephen Klasko, CEO of USF Health and dean of the Morsani College of Medicine. "While many doctors and hospitals have not yet adapted to this, USF leadership has taken the approach best described by Buckminster Fuller: 'You never change things by changing the existing reality. To transform something, make a new model that makes the old one obsolete.' That is what we are doing here at CAMLS, at USF and throughout Tampa Bay."

"Silicon Valley was not Silicon Valley until they had a critical mass of transformative computer and information technology pioneers," says Klasko, pointing to the upcoming MediFuture 2023 event in mid-May as a sign of the regional rise of medical high tech. "We believe we are doing that in Tampa Bay and that we will build a snowball effect as we build on our current assets."

Critical Mass in Cleveland

Tampa's not the only place hip to public-private partnerships: Cleveland has fostered health-tech startups with incentives and grants, and the presence of the Philips North America Education Center is a locus for the medical-imaging industry. It's the center of a cluster that includes about 80 companies -- a critical mass that exerts a serious gravitational pull on imaging startups.

Take ViewRay. Founded in Florida in 2003, the company relocated to Cleveland in 2004. Today, after raising more than $80 million in venture capital, ViewRay has 40 employees and is making a big push to market in summer 2013. The company's technology is a real-time MRI that allows doctors to see how patients respond during treatment.

"You have to go where the technology is," says ViewRay senior director of marketing Michael Saracen, describing "a mix of heavy iron, high-tech and computer software."

Modern web-conferencing and mobile technology make it easy to have "the best of both worlds," says Saracen. "We've worked on being a remote-friendly company." 

Saracen himself spends more time traveling than he does at ViewRay headquarters in Cleveland -- he actually lives in San Diego. "You can have the company in a place like Cleveland and still leverage talent in other areas," he adds.

But hubs are key, especially when it comes to manufacturing. The presence of the Philips center has catalyzed imaging companies large and small in Cleveland. "Wherever you have a hub, that means there are ancillary components," says Sacaren. "It's easier to go down the street to pick up that widget than it is to go across the country."

Before joining ViewRay, Saracen says his mental image of Cleveland was of a very industrial place. Now that illusion has been dispelled. "It's a much more modern city than I expected," he says. "This area is up and coming."

ERIC PETERSON is managing editor of our sister publication Confluence Denver. Additional reporting by Dana Henry.
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