More on Pittsburgh's Entrepreneurship Commons

What do I mean by an "Entrepreneurship Commons"? A commenter asked me to elaborate on this earlier post, in which I distinguished between processes and institutions that offer (metaphorically) "retail" economic development services, on the one hand, and infrastructures that support (metaphorically) "wholesale" economic development. I wrote that policymakers should focus on "public and private resources to create infrastructures and environments to which resources (time, talent, money, innovation) can be contributed, in which they can be shared and mixed together, and from which they can be combined to produce new stuff -- knowledge, products, services, enterprises, industries. A university is a kind of commons. The internet is a kind of commons. A library is a kind of commons." (If you want a more detailed, theoretical elaboration of the idea, you can download and read this paper.)

A couple of recent Post-Gazette stories highlight bits and pieces of what I'm talking about.

Over here, the City of Pittsburgh wants to use the Urban Redevelopment Authority (URA) to funnel some seed money to technology entrepreneurs, using IP rights as collateral. As an IP lawyer, I can say that this last part isn't as easy or as smart as it sounds. As someone with experience representing entrepreneurs, I can say that the first part of the plan needs a lot of work: Who is going to decide who gets the money? How are they going to decide? Who is going to follow up and monitor use of the money? As someone who is interested in building institutions to really grow the regional economy, I can say that this is more "retailing": A prospective borrower (an entrepreneur) comes into the bank (the URA), gets a loan (if all goes well), and goes out into the market economy to hire people and make and sell things. The economy grows, one small company at a time.

Over there, the Penguins and the Tech Council are showing off the fruits of their collaboration last year. More than 100 new ventures offered goods and services to the team for present use, with an eye to adoption in connection with the new hockey arena. This is an example of an "entrepreneurship commons" (note that "commons" come at lots of different levels: small and large, and commons within commons). Neither the Tech Council nor the Penguins created or funded these new ventures; instead, the Tech Council and the Penguins built an environment (that's important: environments and infrastrucures don't just happen - they get built) where new and existing ventures could come and get visibility and possible deals. There were lots of inputs (new ventures, new products and technologies), pooled in one place. (Both a physical place and a metaphorical marketplace.) There were no specific expectations regarding outputs (bigger ventures? more jobs? better technologies?). But -- voila! -- out of the pool, deals were struck. The Penguins got useful stuff. The participating companies will get revenue and exposure.

And -- to my mind, the best part of the process, though the Post-Gazette didn't pick up on this at all -- the leaders of the participating companies got some time to meet and see one another and to learn about potential complementarities and partnerships. This is something that "retail" economic development almost always misses -- the idea that client 1 and client 2 and client 3 might have something to do with one another. A thoughtful venture capitalist can link portfolio companies; Innovation Works or Idea Foundry or the PLSG can build connections between clients that are doing similar things. But the most interesting connections are often made between the companies themselves; entrepreneurs see the world and their products in ways that investors and mentors may not. The economy grows, batches of companies at a time.

Alpha Lab, hatched at IW, is a great example of local institution that is taking a "commons" approach (in part) to economic development, even if the AL team doesn't necessary think in "commons" terms. The AL space has shared common (or "commons") space for AL companies. There are Open Coffee Club meetings and mashups under AL auspices, all of which are designed to grow and nurture a commons sensibility.

Focusing on an Entrepreneurship Commons means focusing not only on new technologies, new entrepreneurs, and new sources of funding. It means focusing on infrastructures, that is, on physical and conceptual environments in which entrepreneurial resources can be pooled -- so that new and unanticipated things can happen.

The least-developed part of Pittsburgh's Entrepreneurship Commons is the professional services infrastructure, especially the lawyers. There are plenty of lawyers in Pittsburgh who spend all of their time representing entrepreneurs. There are relatively few lawyers in Pittsburgh who spend much time building an legal infrastructure for entrepreneurship. (At our law school, we're working on programs to help fill that need. Watch for more - next Fall.)

What I do I mean by that? I'll elaborate in a later post. But here's a taste. Question: In the Silicon Valley, if you're a grad student who would rather start a tech company than finish a Ph.D., who do you call? Answer: Your next-door neighbor will know -- and he or she will tell you to call one of a relatively small number of very well-known business lawyers. The Valley has a sophisticated and deep entrepreneurial infrastructure, and the lawyers play major roles in shaping it. Question: In Pittsburgh, if you're a grad student who would rather start a tech company than finish a Ph.D., who do you call?

Comments

4 Responses to "More on Pittsburgh's Entrepreneurship Commons"

Jia said... 4/17/2009 1:29 PM

Mike, you hit it exactly, the weakest support network for entrepreneurs in the area is lawyers.

I'm trying to bring my new social venture startup to the area and have reached out to basically everyone I know for legal advice over the last few weeks (10+ lawyers, 20+ C-level officers at other startups) and so far I've only gotten slight support from one nonprofit lawyer.

I'll be back on the west coast next month and I doubt I'll have this problem.

Mike, can you explain why this is? Even AlphaLab, which is a great program, can't seem to provide free legal support for its selected companies, which is basic feature of similar programs across the world. Are Pittsburgh lawyers just less willing to work with risk-takers and innovators?

Mike Madison said... 4/17/2009 2:05 PM

One problem, but not the only problem, is that Pittsburgh law offices have been reluctant to move away from a billing model that expects that every client will be a paying client. I'm not talking about pro bono work; I'm talking about taking work from 10 clients and expecting that 1 will pay off - but will pay off in a way that covers the costs of 10, plus a premium.

The reluctance to take those risks is understandable; the Pittsburgh economy has not historically been thick enough for law firms to be able to measure the risk involved.

A related problem has to do with internal compensation arrangements at Pittsburgh firms. But that's too esoteric to get into here.

Bottom line: If you mean "deferred compensation for legal support" when you write "free legal support," then as demand grows, eventually supply will emerge. If you'd like introductions to lawyers who might be a good fit for you -- non-large firm, reasonable price/reasonable (deferred???) billing structure lawyers -- then email me.

audrey russo said... 4/17/2009 11:00 PM

Mike -- as usual, you hit the nail on the head (well, many heads in this particular post)and articulate the point even better than I can pitch it. The work with the Pens was and continues to demonstrate a few things: it's all about leadership and in this case, I thank the Pens leadership who have fully embraced the importance of relationships; some of the most magic moments have been when we get a chance to just connect the dots for companies through introductions; demonstrating authentic ambassadorship for people who are taking significant risks; creating open dialogue with the notion that people who are working on building their companies often are busy doing work and don't get to see the macro view of the potential opportunities with new bedfellows. Money is not what Yinz Cam, for example needed. They needed a platform to demonstrate and iteratively test their designs. What better way to pitch? and Electric Owl, Pair Networks, get to say that the Pens are a customer...etc... shall I go on? Did this take money? Nope. Took vision and partnership. And you know what? we are now repeating this with the Phipps, the Aviary and soon UPMC. And we have a list of organizations and companies (large and small) who are suddenly understanding the notion of civic responsibility and collaboration...

We have been working on this for a year. Others didn't think there was a story here. You did and you do.

Audrey

Anonymous said... 4/22/2009 9:55 AM

Mike: You are illustrating an important perspective on economic development that we can only hope will be picked up by the MSM. There is a big difference between making the region more competitive by giving grants to individual companies, and developing platforms that allow groups of companies to become more innovative and productive.

The "tragedy of the commons" is usually seen in the context of individuals over-exploiting public assets, with private ownership the preferred partisan solution. In weak markets like Pittsburgh, the tragedy is more under-utilization of assets held by private individuals. Wealth creation is as much of a public activity as it is a private one, and public infrastructure sounds like a much better investment strategy than public gifting.

Great work in changing the conversation on economic development.

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Pittsblog 2.0 is written by Mike Madison, a law professor at the University of Pittsburgh. Send email to michael.j.madison[at]gmail.com. Mike also blogs at Madisonian.net, on law and technology. Chris Briem of Null Space drops by from time to time.

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