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Software firms find attraction in hubs

Pockets of software companies are developing downtown. 

So-called “software hubs” are loosely defined as a few companies in the same area with the potential to create an ecosystem for Rochester’s software industry.

“For clusters of companies, the concept is, if you know that there’s a skill-set that’s available in a particular area or geography, it makes it that much easier to recruit and build a company,” said Michael Riedlinger, program manager of technology commercialization at High Tech Rochester Inc. 

The hubs developing here include Village Gate, home to companies CaterTrax, Jorsek LLC and CloudCheckr—all at least five years old. 

CaterTrax, a dba of Hospitality101 Inc., employs 91 people in Rochester, Jorsek has 16 people here and Cloud Checkr 40 people locally.

In Sibley Square, 13 software startups are part of High Tech Rochester Inc.’s business accelerator, each a one- or two-person operation. 

A critical mass of software firms is forming, and the city is ready for it, said Dan Keeley, director of startup community development for HTR, which is affiliated with the University of Rochester.

“There is this critical mass of innovative tech communities downtown,” he said. “A lot of them are heavy software endeavors, and I think over time we’re going to see more cross-pollination and the development of an even bigger community, because the people are there. I think we just need to facilitate the creative collisions.”

Tagging a collection of companies with a phrase like “software hub” might have some benefit to it, said Rich Notargiacomo, director of Rochester Institute of Technology’s Venture Creations.

“If you had something that you could tie together and brand, so to speak, then you could start to promote another industry with a tangible focal point,” he said. “If you had a cluster of software companies, even if they weren’t in proximity to each other, you’d still be creating a buzz (and) leveraging the (universities), and that feels like it could only be good.” 

The dream of the Downtown Innovation Zone—an entrepreneurial area of collaboration and innovation—is turning real.

“I think it’s a very good start—I’m very much encouraged by the development we’ve had in the past five or six years in the community,” Riedlinger said. “It shows there’s some momentum in the community for building those businesses, and it’s a very good sign.”

Two area incubators, Venture Creations and HTR, have contributed to the numbers of software companies. RIT and the University of Rochester are also strengthening software in the region.

Ready for more

The companies in the Village Gate are ready to collaborate, their leaders say.

Jorsek is the developer of easyDITA, a content management platform that focuses on high-value business documents and technical content. It serves clients in areas of regulation policies and procedures, user documentation, technical documentation and manuals.

Patrick Bosek and Casey Jordan founded the company in 2005, born out of RIT’s Venture Creations incubator. The firm’s size has doubled in the past two years to 20 employees, including 16 in Rochester and four who work remotely.

The company plans to move in March to a 5,000-square-foot space in another part of the Village Gate complex at 320 N. Goodman St.

Village Gate is prized as a centralized location for software firms.

“We came out of the RIT incubator, and I think (incubators) are really positive things for the community, but the problem is the growth software companies aren’t out in Henrietta,” Bosek said. “So you have these people who come into these incubators and they do great things, but I don’t think we’re integrating them into the rest of the community quickly enough.”

Recruitment is one of the major reasons a software hub can help companies such as Jorsek, Jordan said.

“Recruitment is a really big part of it, but more than that, having a community that has a lot of like-minded people around is going to be good for all of those companies,” he said. “Having an area like Village Gate, where people see new great things happening all the time, companies are collaborating… maybe just bouncing ideas off each other—it becomes a very loose business incubator.”

Leaders of CaterTrax—a web- and mobile-based software that serves caterers and food service operators—said the area has intrinsic value already.

“We are very fortunate to live in a city that breeds as well as attracts a talented workforce,” said Rich Rund, co-founder and CEO of CaterTrax. “The Neighborhood of the Arts—I think what makes it special and likely attractive to software companies like us, is that, as a renovated factory complex, (Village Gate)  has the space and flexibility to house a growing software company amidst restaurants, studios, retails and residential space.

“‘Software hub’ feels more like a descriptor than a distinction for Village Gate. I don’t know that calling it a hub would necessarily make it more attractive to software companies. It is attractive in its own way, (allowing) our companies to exist amongst everything else here.”

CaterTrax began in the HTR incubator in Henrietta, graduating from HTR’s Lean Launchpad program in 2004.

 “CaterTrax did start out as a High Tech Rochester startup, and we would love to have more of those stories,” Keeley said. “CaterTrax is a great success story about what we can accomplish here in the community.”

Operating in Rochester has helped CaterTrax, officials said.

“In the past five years alone, HTR has worked with 500 startups,” said Dan Welch, co-founder and chief information officer at CaterTrax. “Our community-at-large is emerging in tech and we feel lucky to have been a part of that.”

Rochester can create a strong ecosystem for software companies by identifying ways to collaborate and by adding more tech companies to the mix, Rund said. 

More companies are needed here to create a fully collaborative cluster of software firms, said Aaron Newman, founder and chief technology officer of CloudCheckr. It’s a platform for Amazon Web Services that specializes in helping businesses automate the cost, management and security of their cloud environments. 

Having just three established software companies in Village Gate is not enough for the kind of collaboration that creates a sustained ecosystem, Newman said.

“There are successful companies, but they’re in silos,” he said. “We’re not sharing ideas, and even the cross-pollination of expertise … isn’t working because there’s not enough of them.”

And with two companies, “I can’t cross-pollinate talent … because then you’re just stealing each other’s employees.”

Newman sees Rochester as what Raleigh, N.C., was 15 years ago, a nascent tech ecosystem that became the Research Triangle Regional Partnership. 

The Research Triangle brings economic development to the region through clusters of different industries, including clean tech, informatics, defense technologies and pharmaceuticals. Rochester could do the same thing, Newman believes. He sees the Raleigh-Durham area as a good analogy for Rochester, more so than New York City, Boston or even Silicon Valley.

In the coming years, it will take continued success in software development to help the young ecosystem thrive. A mental shift needs to take place in Rochester, Newman said.

“I think the idea is, ‘success breeds success.’ So why do people start companies around software? Because they see other people do it,” he said. “Software is eating the world. What are the biggest companies in the world? Companies like Apple, Google, Microsoft—they’re all software companies.

“Incubators—we have one or two incubators in Rochester and those people do a great job, but really what we need are 20 incubators.”

3/3/2017 (c) 2017 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.

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