Catalant, Rochester entrepreneurship and Austin McChord

When news broke last week that Boston-based Catalant Technologies was opening a Rochester office with plans to hire 45 software engineers in the next few years, it is safe to assume that many were momentarily pleased, but that they quickly moved on. After all, while it’s always nice to hear about more jobs, this was the kind of announcement that—on the surface—sounded like one we hear on a somewhat regular basis.

Pat Petiti

Yet from a little research and questions to Catalant’s co-CEO, Pat Petitti (see below), it became apparent this story is more special than it may first appear. First, because Catalant is by no means an average startup or the kind we often see setting up shop in Rochester. And second, the story of how Catalant got here contains key lessons for our area and what we must do to keep growing as a technology and entrepreneurship hub.

First, let’s understand why Catalant itself is a rare company. There are typically around 500,000 new startups created each year in the U.S., and it often can be difficult to distinguish the potential superstars from the rest. One shortcut used by professional investors and others in the tech startup community is to look at whether a startup is obtaining sizable investment rounds, and which entities are actually making those investments.

In the case of Catalant, its latest funding was a $41 million round in 2017, bringing total investments in Catalant to more than $73 million. Importantly, this funding has also come from an extremely impressive syndicate of venture capital and other investors, including Highland Capital Partners and General Catalyst. Highland Capital has invested in such well-known companies as Harry’s (direct-to-consumer razors) and Rent the Runway (a “closet in the cloud”). General Catalyst’s investments have included famous brands like Airbnb, Kayak, Snapchat and Warby Parker. The lead investor from General Catalyst, David Fialkow (who also happens to be a 2018 Oscar winner for producing last year’s best documentary film “Icarus”), ended up playing a key role in the opening of the Rochester office (more about that below). Other investors in Catalant included Greylock Partners (which has Reid Hoffman, the co-founder of LinkedIn, as a partner), GE Ventures and Mark Cuban.

What’s important to understand is that companies with Catalant’s pedigree and financial backing do not open offices in a new city because they are looking for the “cheapest” workers or because they received slightly more in tax breaks than they would have gotten elsewhere (Catalant received a package of tax breaks and other assistance as part of their move here). Rather, they look for a city where talented and innovative people are plentiful, and where costs to operate are reasonable. In other words, premiere startups seek a location where their ability to find and retain top-shelf talent will serve as a significant strategic advantage for them for years to come.  Despite some of Rochester’s very real problems and shortcomings, we certainly fit the bill of being a city with much STEM and other talent and a great cost structure when compared with better known tech hubs.

The second unique aspect of the Catalant story is how they learned about Rochester. As their co-CEO told me, it was Fialkow, Catalant’s board member, who suggested that Catalant speak with Austin McChord. As it turns out, Fialkow’s firm (General Catalyst) was an early investor in Datto (which McChord founded), and McChord joined General Catalyst as a partner after he left Datto. McChord, a Rochester Institute of Technology grad who recently gave the school $50 million, headquartered his successful startup in Connecticut but built a very sizable employee presence in Rochester.

A simple conversation with McChord put Rochester on the map for Catalant, which is now materializing into local jobs with an exciting company. And this speaks to an important lesson for Rochester.

It may be tempting to look for silver-bullet solutions in growing jobs and the economy. But silver bullets generally don’t exist. Rather, what more often works is a combination of getting individual wins, publicizing those wins, and then being intentional about sharing those examples of success often and enthusiastically wherever Rochesterians have reach.

That is exactly how McChord helped Rochester to get another employer, by discussing his own successful example with Datto. And hearing about a success story from a person or company that you respect is much more persuasive than reading any marketing brochure.

Luckily, Datto is by no means alone as an example of why companies should hire in Rochester. Another one is EmployeeChannel, which recently explained its decision to come here in “Why our Silicon Valley company chose Rochester.”

So, thank you, Austin McChord. And welcome, Catalant Technologies. We hope your continued success will soon prove a compelling example to many others looking for a city with abundant talent and creative spirit.

Here is an edited transcript of my exchange with Pat Petitti.

What were the key attributes of Rochester and its workforce that led you to choose this location for your new office?

Rochester’s spirit of innovation is a natural fit to complement Catalant’s mission to usher in new levels of business agility on a global scale. Talent access is at the core of Catalant’s DNA, so being able to expand to a city producing top engineering candidates from leading institutions including Rochester Institute of Technology, University of Rochester and more, was a deciding factor for our team. We see incredible symmetry with the city of Rochester given its commitment to substantial investments in business empowerment. Our team is looking forward to growing as innovation accelerators together and being a part of Rochester’s long-term business success story.

I understand you considered other cities as part of this process. As you learned about and compared Rochester to these other cities, what may have been the most unexpected thing you learned about Rochester?

The hockey team! Next trip to the Rochester office will be based around the Americans’ schedule so we can get our whole team out to a game!

The initial Rochester-based jobs that were announced were for software development. Do you envision other kinds of roles also being filled out of the Rochester location? And, if so, what types of roles might those be?

Initially, the positions we’ll be opening in Rochester will be focused on expanding Catalant’s engineering operations, with a primary focus on software development. As needs emerge, there is opportunity for our Rochester hub to expand. However, at this time, we’ll be concentrating our efforts on recruiting STEM and technical talent.

Given that Catalant’s business involves helping to match companies with talented individuals to enable agile, on-demand expertise, how can businesses and individual professionals in Rochester benefit from Catalant as users or customers of its solutions?

Catalant’s technology platform and programs enable companies to get mission critical work done faster, so there is opportunity for both talent and companies based in Rochester. Our platform works like a two-sided marketplace—where companies connect with independent experts and firms to work on strategic projects.

For experts in the Rochester area, Catalant unlocks an enormous opportunity to connect with even more available jobs, around the world, all in one place—giving them more access to open projects that fit their skill sets and interests. Overall, this lets talent based in Rochester stay in Rochester, and also have greater control over their work/life balance, as Catalant can connect them with businesses seeking remote project assistance.

For companies, Catalant provides the tools to transition to an agile operating model and access a wider pool of talent with the skills and expertise they need to rapidly innovate, stay ahead of disruption and fill positions quicker than ever.

What kind of support and collaboration are you hoping to receive from the Rochester entrepreneurial and business eco-systems as you grow your presence locally?

We aren’t just coming to Rochester so that we can hire great talent. In addition to that, we are excited and believe we have a responsibility to be an active part of a fast-growing community of entrepreneurs and an increasingly innovative culture. It’s clear the state and the universities are committed to making the city a hub for innovation, and that will mean more companies, thought leaders, and entrepreneurs helping to push our thinking and engaging us in dialogue that helps us be a more innovative company.

We’re looking forward to continued collaboration with the city and the likeminded community we’re joining in the Downtown Innovation Zone. The state is clearly proving to be a significant partner to both the city and the greater Finger Lakes region, and we look forward to our mutual investment into the area. The momentum of Rochester’s Downtown Innovation Zone was a huge factor in our decision. We found a great partner in NextCorps, where we look forward to seeing us realize our potential over the next three years.

We noticed that one of the VC firms that invested in Catalant also previously invested in Datto. Which, as you may know, has a significant presence in Rochester and was started by a graduate from the Rochester Institute of Technology. Did that connection play a role in Catalant choosing Rochester?

It certainly did. It was our shared board member, David Fialkow, who encouraged us to talk to Austin McChord about whether Rochester would be a good city for us to expand to. After talking to Austin about it, it was clear we had to give it serious consideration. Everything Austin told us was proven right—it’s an amazing community with great people. We hope to return the favor and help other growing companies understand how wonderful a location Rochester can be, as Austin did for us.