It Takes a Cybervillage

Hot Spots

Cities are attracting start-ups with hives of new-media activity. But what's life really like in these Silicon Alley wanna-bes?

Friday, June 16, 1995. Carl Weisbrod gazed down the corridor of steel and glass that stretches into the heart of Manhattan's financial district. He was looking for a building--a single building--that by dint of high technology and high-powered marketing could be transformed into a new-media mecca.

Weisbrod is president of the Alliance for Downtown New York Inc., a not-for-profit organization charged with managing the city's lower-downtown business district. His plan was to lure hip new-media and Internet-related start-ups--critical to the growth of New York's entertainment and advertising industries--out of their SoHo lofts and into the stodgy financial district. The bait: affordable bandwidth, and lots of it. Mayor Rudolph Giuliani was on board with a tax-credit plan making downtown real estate more affordable. Now all Weisbrod needed was a building that--wired to the hilt--could offer those start-ups the lightning-fast Internet access that is their most critical raw material.

But negotiations with one developer had failed, and the effort seemed in danger of losing momentum. So that afternoon, Weisbrod called William C. Rudin, a powerful New York developer. "I knew there were few that could move as quickly as the Rudin organization," recalls Weisbrod.

Rudin is the grandson of Samuel Rudin, a real estate tycoon who made his fortune buying and developing buildings in midtown and the financial district. One of those buildings was 55 Broad Street, the former home of Drexel Burnham Lambert Inc. Like so many buildings mothballed after the stock-market crash of 1987, 55 Broad Street had closed its doors in 1991; by 1995 it seemed destined for white-elephant status. Weisbrod no doubt reminded Rudin of that fact when they chatted that Friday afternoon.

Things happen fast in Manhattan. By Monday morning Rudin had agreed to reopen the building and try to make space affordable for small companies. In exchange the city offered tax breaks and the alliance pledged to help market the new techno-edifice. On Wednesday, Weisbrod and Rudin held a press conference in front of City Hall and inaugurated New York's Information Technology Center. By the end of the week, Rudin had begun talks with investment bank J.P. Morgan, which would field a significant portion of the $41 million needed to renovate 55 Broad Street. The cash would go for satellite hookups, high-speed videoconferencing, and fiber optics for high-speed local area network connections and Internet access at T1 speeds and faster.

Meanwhile Weisbrod, Rudin, and other civic leaders were talking up their efforts to the city's magazine and newspaper editors. "Say it enough times, and people begin to believe," one of Rudin's long-time associates likes to say. And she's right. That fall, Metropolis, a national publication about urban planning, ran an article titled "If You Wire It, Will They Come?" Soon after, New York magazine picked up the story, and a flurry of articles appeared in the New York Times. Silicon Alley--or at least the myth of Silicon Alley--had been born.

Since then a great many articles have been written celebrating--and lately debunking--Silicon Alley and other areas seeking recognition as centers for new-media growth. The phenomenon is widespread: civic leaders, local businesses, or other interested parties set out to create vibrant communities of software companies. The goal is to help diversify their economies and fill the gap left by large manufacturers that have moved overseas. Most rely on a strategy similar to New York City's: build a state-of-the-art cyberdistrict smack in the middle of a decaying neighborhood and hope that it becomes the epicenter of a local economic boom.

But what's more important than the phenomenon itself--or the who's hot/ who's not approach so many take to it--is the experience of small companies trying to operate in one of those cyberdistricts. You might think that location is not an issue for businesses that rely little on natural resources and whose employees are accustomed to working remotely. But individual locations offer vastly different advantages and disadvantages that can significantly affect the fortunes of new-media start-ups.

What follow are the stories of three cities--none of them usual suspects--that experts have deemed potential hotbeds of new-media activity. From those stories, small businesses will better understand both who's trying to woo them and what to expect once they've been won.

Pittsburgh: An Ambivalent Suitor
In its 1950s heyday, Pittsburgh had close to 700,000 residents. Today, in the wake of Big Steel's decline, there are about 360,000. So you wouldn't be surprised to see the city's leaders chasing after fresh blood in the form of new-media companies.

But they're not doing enough to catch them, at least in the view of many entrepreneurs. In Pittsburgh the major source of high-tech entrepreneurial activity remains Carnegie Mellon University (CMU), ranked high among graduate schools in engineering and business management by U.S. News & World Report. A good number of high-tech companies have spun out of CMU research projects and into money-making enterprises on the streets of Pittsburgh--one street in particular.

Architect and real estate developer Joel Kranich began developing Craig Street when he arrived in Pittsburgh in the late 1950s. Back then it was a run-down avenue lined with bars, bowling alleys, and dilapidated houses. Steel mills darkened the sky with soot and smog. The pollution obstructed even the University of Pittsburgh's Cathedral of Learning, a massive Gothic tower only blocks from Kranich's office.

But Kranich considered Craig Street a safe bet because of its proximity to CMU, the University of Pittsburgh, and the Carnegie Museum. "People said I was crazy to buy here," says Kranich. "But it was obvious to me that this was prime real estate." Today Pittsburgh's air is cleaner, and Craig Street is home to upscale clothing retailers, coffee shops, and a growing community of software companies that draws heavily on the university's talented programmers and engineers.

Although CMU has been the dominant force in nurturing Pittsburgh's entrepreneurial technology base, its civic leaders haven't been missing in action entirely. In 1983 a group of area business leaders founded the High Technology Council. Today the council has more than 1,400 members--mostly small to midsize companies--and several programs, products, and services aimed at building local and national awareness of Pittsburgh as a center for technology. "First, we have to get people in the region to recognize that there is a strong technology base here," says Raymond Christman, president of the council, "and then we have to sell it outside of the region."