Tech titans are looking for talent outside the meccas of Silicon Valley and Seattle, but they aren’t really sharing the wealth. Instead, they’re building satellite campuses in already wealthy places like New York, Austin and Boston, the New York Times reported.
Apple said recently that it would build a $1 billion campus in Austin, expanding to 11,000 employees there. This is after Amazon selected Long Island City and Arlington, Virginia, for its headquarters 2.0. And Google is looking for more space in NYC to more than double its workforce in the city, the NYT reported.
“They’re expanding out,” Mark Zandi, chief economist at Moody’s Analytics, told the newspaper. “Tech talent is in very short supply. So if these tech companies want to grow and flourish, they need to find talent in other parts of the country.”
The companies do look for specific talent in second-tier-type cities that have engineering schools like Pittsburgh, where Google and Uber opened offices. Pittsburgh attracts artificial intelligence talent because of Carnegie Mellon University’s computer science program.
The idea of recruiting outside the tech-focused cities was one of the themes addressed in a recent interview I did with Paul Barber, co-managing general partner with JMI Equity. JMI, focused on software investments, just closed its ninth fund on $1.2 billion.
Many middle-market PE firms look for an edge on the competition through geography, among other things. While the crowded markets on the coasts attract lots of capital and heavily contested auctions, less visible areas in the hinterlands can be sources of rich opportunity.
JMI, based in Baltimore and San Diego, invested in companies in 26 states and three provinces in Canada over 25 years, Barber told me. “Software today is a global business; software talent is everywhere and it is not dependent on Silicon Valley or the Northeast,” Barber said.
“Companies in secondary cities are often more capital efficient, they have lower headcount and they often have lower turnover,” he said.
Recent investments include Cosential, the Austin maker of proposal-automation software for architecture, engineering and construction. JMI in July invested $34 million in the company.
In April, JMI led a $55 million investment in CampusLogic, the Phoenix student-financial services-platform.
Good to keep open minds about where to find growing businesses.
I have a bias, being a Pittsburgh native, and it amazes me to see the transition of the city from what it was in the ’80s, when I was a kid, to the bustling city it’s become again.
That’s due to tech companies finding homes in the city, where the quality of life is high because employees can afford to live there. Let’s keep spreading the wealth!