The Next Innovation Hot Spot? Erie, Pennsylvania.
Yes, it’s true.
Located just east of Cleveland and just north of Pittsburgh, Erie is home to a growing number of startups, entrepreneurs, and civic leaders working hard to make the city of nearly 100,000 a hub of innovation. While the city’s and region’s manufacturing roots remain critical to the local economy, civic leaders and local entrepreneurs have worked hard to develop one of the country’s fastest growing and most impressive startup scenes—and they are seeing significant success.
In 2018, the Erie Innovation District and several other partners launched the Secure Erie Accelerator. After successfully funding nine companies that focused on smart city technology in its first year—including multiple startups that have already received significant national attention—the program is pivoting slightly toward startups in the manufacturing and defense sectors.
“Manufacturing is in Erie’s DNA,” said Erie Innovation District CEO Karl Sanchack. “Cities across America are looking toward startups as replacements for lost industries. That is not what we are doing here in Erie. The reality is that startups and most tech companies are rarely if ever going to employ the same number of workers as the manufacturing sector does. However, it’s not an either/or. We have focused our accelerator on attracting and funding startups that complement Erie’s existing human and economic strengths. And we are very proud of that.”
Linking the city’s innovation efforts to existing industry isn’t the only way Erie is making a name for itself. The city has also aggressively pursued ways to take advantage of a new provision in the tax code designed in part to increase investment in startups headquartered in economically challenged communities.
Opportunity Zones, championed by Senator Tim Scott (R-SC) and Senator Cory Booker (D-NJ), were enacted as a part of the tax bill passed in late 2018. The new law allows governors to create Opportunity Zones by designating up to a quarter of their state’s census tracts as economically distressed. Once that occurs, a Qualified Opportunity Fund (QOF) can be created. Investors who put their money in a QOF receive preferential tax treatment, including a significant reduction in their capital gains tax liability. Once established, the QOF can invest in startups within the Opportunity Zone.
Local leaders in Erie were some of the first to take advantage of the program when they created the Flagship Opportunity Zone, which helps investors understand deal flow, identify local funds, and establish connections with a wide variety of stakeholders and potential fellow funders.
Nearly every mid-sized city in middle America is trying to reinvent itself as the next Silicon Valley.
What really makes Erie, Pennsylvania, different?
To begin with, innovation in Erie has nothing to do with unrealistic aspirations of being the next Palo Alto. The city and its leaders have not made the attraction of entrepreneurs a false savior. Instead, those leaders have started to change the community by thinking entrepreneurially. As a community, Erie has embraced a fundamental character trait of all entrepreneurs:
The deeply held desire to solve one’s own problems.
No one is going to swoop in and re-establish any city as a vibrant, economic powerhouse.
No one is going to save Detroit—except for Detroit.
No one is going to save St. Louis—except for St. Louis.
And no one was going to save Erie, Pennsylvania—except for Erie, Pennsylvania.
Local leaders realized this and have embraced a brand of innovation with a strong connection to the city’s community and historical economic base. That’s smart governance and smart leadership.
Actually, it’s not just smart.