Chinese Investors are Fascinated by Pitt’s Tech Boom

Figure 1. Carnegie Mellon University hosted CMU-Summit on US-China Innovation and Entrepreneurship on April 14-15 on main campus in Pittsburgh, PA.

Rui Ma is a known Chinese investor from FreesFund, a Beijing-based venture capital firm focused on cross-border tech startups. Since graduating from Carnegie Mellon University, where he earned a doctorate in computer science five years ago, Ma could not find the time to visit his alma mater.

That changed last Saturday, when he attended the CMU-Summit on US-China Innovation and Entrepreneurship, an annual event hosted on CMU’s main campus in Pittsburgh. To Ma, it was not just a regular entrepreneurship summit. Back in 2012 when he was still a PhD student at CMU, Ma founded the Summit and organized the first two annual events. Six years later, the summit has become a bridge connecting Pittsburgh and China.

“Through CMU-Summit, Pittsburgh is opening up to Chinese investors and entrepreneurs,” said Ma.

Chinese investors usually commute between East Coast cities like Boston and New York to West Coast cities like San Francisco and San Jose. Now, they may want to add Pittsburgh to their itineraries, as Pennsylvania’s second city is an emerging center for advanced technology and innovation. With Uber, Google and Facebook opening new offices in Pittsburgh last year, the former steel city has a new nickname: “Silicon Valley of the East.”

Pittsburgh, America’s new tech center

Over the last few years, Pittsburgh has been making progressive efforts to elevate technology to rock star status. The city government offered countless benefits to Uber, for example, since the self-driving giant set up its research labs in Pittsburgh 18 months ago.

Following Uber, Google and Facebook have also increased their voice and influence in Pittsburgh by expanding operations. Google had only a two-people presence in Carnegie Mellon back in 2006, but now hosts 150 people in an expansive penthouse space. Meanwhile, Facebook opened a new research lab for Oculus virtual reality research in Pittsburgh last year, to get closer to CMU’s top-notch talents. Apple has also been rumored to be eyeing a 26,000-squre-feet Pittsburgh space to launch an unknown project, according to the Pittsburgh Business Times.

There is no doubt those tech giants are coming to CMU because it is a top academic institution in the fields of machine learning, robotics and software application. Back in 2014, the city government empowered CMU as the city’s research and development department.

However, Pittsburgh has two additional advantages that attract tech companies – great infrastructure and low cost-of-living.

Since the 1980s, when the steel industry in Pittsburgh began to decline along with the deindustrialization of the US, the city has shifted its economy from heavy industry to other fields, mainly medical health and education. The $13 million University of Pittsburgh Medical Center is the top medical center in the entire country. It creates massive amounts of jobs for graduates as well as offering opportunities for technological innovation in mobile health and medical equipment.

“It will be a historic moment for Pittsburgh if the development of medical health is empowered by computing and data science,” said Feng Li, a founding partner of FreesFund.

Ma says Pittsburgh is a very livable city compared with the cost-of-living in New York or San Francisco. “The city is now aware of the need to retain talent. It is possible that in ten to fifteen years Pittsburgh could become the center of technology and manufacturing in the U.S.”

Rich in tech, but still developing in application

Bringing tech companies into the city is the first step. Pittsburgh also plans to move forward and boost local innovation by setting up an innovation ecosystem — a geographical concentration of amassed entrepreneurs, investors, talents, and universities.

The city today houses a handful of innovation labs and accelerators to help local newborn companies. Alpha Lab, a Pittsburgh-based startup accelerator, is a good example. Ranked a top-tier startup accelerator nationwide, Alpha Lab has helped local startups like AthleteTrax, which offers web-based payment processing and other online services for minor league sports.

The CMU Summit hosts an annual startup competition, bringing innovative startup programs into the spotlight. This year, Expii, a math learning platform to solve real problems, won the competition’s $15,000 prize. CMU Math Professor Po-Shen Loh, who is also the coach of the USA International Math Olympiad Team, built the startup from scratch.

“The startups from CMU are really robust in technology. About two-thirds of them are concern medical health, environmental protection and computer science,” said Feng Li.

Figure 2: CMU-Summit hosted a panel discussion about artificial intelligence.

Li points out however that Pittsburgh’s startups might encounter challenges in shifting technology to application. “The city is still struggling to build a diversified commercial environmental. This could be a substantial problem when startups attempt to put technology into practice.”

Another challenge is the dearth of investment from local venture capital firms. Pittsburgh ranked only 18th nationwide for money coming in to support technology start-ups in 2015, according to Innovation Works, another local early-stage venture capital firm. Only $333 million has been raised from venture capital firms, much less than San Francisco ($16.6 billion), San Jose ($7.2 billion), Boston ($4.4 billion), New York ($4.3 billion) or Los Angeles ($2 billion).

A win-win for Chinese investors and Pittsburgh

Lu Zhang, a Silicon Valley venture capitalist and founding partner of Fusion Fund (aka NewGen Capital), was inspired by her first CMU-Summit, and expressed keen interest in investing in local startups.

“Local capital infusion has have developed yet, so it could be a win-win thing for us to come in,” said Zhang. “We as early-stage investors might have opportunities investing in local startups. Capital is still critical for innovation.”

Zhang suggested Pittsburgh could be more inclusive in terms of diversity, even as the city takes great strides in supporting its economic shift. “It takes time, but things should improve when locals realize more and more Chinese are settling here,” she said.

The CMU is accepting an increasing number of Chinese students. In 2007, only about 200 Chinese students enrolled at CMU annually. The number had skyrocketed to 3,000 by 2014, and Chinese students now comprise over 10 percent of the campus population. The growing number of Chinese students creates many opportunities for Sino-US interaction.

The Sino-US relationship can be regarded as a two-way street, with China bringing technology back from the US while the US brings manufacturing back to its cities. Pittsburgh, enriched in technology and manufacturing, is ideally situated to play a major role in the development of future Sino-US future interactions.

 

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Author: Tony Peng, Synced Tech Journalist | Editor: Michael Sarazen