From Pittsburgh’s hilltop, a co-op incubator keeps startup culture down to earth, and a local economy starts to rebound

Aug 29, 2017

By: An-Li Herring | Pittsburgh Post-Gazette | August 27th, 2017 | Read the full article

Josh Lucas, Work Hard Pittsburgh co-founder and manager, stands in the office space of the company on Friday, August 11, 2017 in Allentown. (Andrew Rush/Post-Gazette)

Photo Credit | Andrew Rush | Post-Gazette

When Josh Lucas’ first startup failed, he was left with an old hardware shop he had been sharing with a group of entrepreneurs in Pittsburgh’s Allentown neighborhood. The former Sto-Rox High School chemistry teacher reflected on how startup culture had grown to favor high-tech, fast-growth companies that might not even turn a profit, at the expense of more practical ventures.

“That seems like an odd way to structure an economy,” said Mr. Lucas, whose original startup involved crowd-sourcing funds for political advertising. “Before the West Coast Silicon Valley startup scene happened in the ’90s, entrepreneurship was at a community level. It was about getting customers. It was about generating revenue and making sure that you made more money than you spent.”

The Mount Washington resident, 41, decided to turn the hardware store into a business incubator for a diverse portfolio of startups. Called Work Hard Pittsburgh and located in one of Pittsburgh’s most affordable neighborhoods, the incubator supports 37 young companies, including a commercial cleaning company, coding academyweb development nonprofit, and grassroots wireless network, and 50 freelance professionals. Work Hard’s members share workspace as well as computing and media equipment.

About 50 members have also become owners of Work Hard, which is structured as a cooperative. Members earn ownership units by paying a $540 membership fee and completing 50 hours of community service each year.

“As members earn their equity in the cooperative, from their service and participation,” Mr. Lucas said, “they’re essentially positioning themselves for financial gains down the road.”

As member-owners of Work Hard, startups that fail may continue to participate in the cooperative. They can keep trying new ideas or join a more viable team. Successful startups, in contrast, contribute earnings to the cooperative, with the goal of ultimately spinning out from the larger organization.

Busting barriers to entry

Work Hard’s mission has helped to lower barriers to entrepreneurship in a long-struggling part of the city. Nestled in the green slopes above the South Side Flats, Allentown underwent a 70-percent population decline between 1940 and 2010, shrinking from 8,200 to 2,500, according to U.S. census data.

The data show that in 2010, 28.5 percent of residents lived in poverty, compared to a citywide poverty rate of 21.7 percent. Eighty-six percent of Allentown residents had no formal education beyond high school in 2010, compared to 59.5 percent citywide.

A resident of neighboring Beltzhoover, Lewis Johnson spent most days loitering outside businesses in Allentown before joining Work Hard about a year ago. Out of prison for nearly 30 years, he had been looking for work, but no one would hire him.

After following a woman into Work Hard one day, Mr. Johnson met Mr. Lucas and told him he needed a job.

Mr. Lucas asked Mr. Johnson what he could do.

“I’ll clean this building if you give me a chance,” Mr. Johnson replied.

Work Hard hired Mr. Johnson to clean the building and helped him to launch Bigg Dog Maintenance Services, which now has 6 clients in Allentown, Brookline and East Liberty.

Mr. Johnson credits Work Hard with finally giving him the guidance he needed to start his own business. “I had no one to assist me in enlightening me with these things,” he said. “Society being unforgiving, no one wants to tell you some things.”

Ashley Corts also attributes the success of her Allentown-based business, Black Forge Coffee House, to the assistance she received from Work Hard and the Hilltop Alliance, a community revitalization nonprofit based in Allentown.

She and business partner Nick Miller chose to locate in Allentown partly because rent was affordable. The commercial vacancy rate in the neighborhood stands at about 20 percent, according to the Hilltop Alliance.

Viewing Allentown as a risky investment and citing Ms. Corts and Mr. Miller’s lack of experience and equity, traditional banks refused to finance Black Forge, according to Ms. Corts. So, with help from Work Hard and the Hilltop Alliance, Ms. Corts and Mr. Miller raised all the funds they needed through the website Indiegogo.

Today the heavy metal, punk-themed Black Forge is a popular neighborhood destination and draws customers from other parts of the city.

Work Hard has provided additional financing for the coffee shop by drawing on an investment fund it established after receiving a $75,000 grant from the community development foundation Neighborhood Allies, according to Mr. Lucas. The fund has made loans to about five Work Hard companies.

Democratized decisionmaking

Business attorney Gregg Zegarelli has assisted Work Hard in organizing as a cooperative and is struck by the democratic nature of the model.

“The internal governance of the organization is based upon collective decision making, which is very unusual,” explained Mr. Zegarelli, who launched his own practice about 30 years ago. “The standard paradigm of entrepreneurship tends to be a top-down model.”

Work Hard gives each unit-owning member one vote in organization-wide decisions, regardless of how many units the member owns.

For Mr. Johnson, it is empowering to have an equity stake, and the potential to build additional wealth, at Work Hard. “I have stock!” he said. “I’ve never had stock before. As a person that has stock, that makes you an asset to the world.”

“If you want to really address wealth inequality – if you want to stop this 1 percent controlling 50 percent of the world’s resources – then co-ops are the answer,” Mr. Lucas added.

Even members who do not own units but simply rent space at Work Hard benefit from the enterprise. Businesses in the neighborhood regularly contract web development, social media and other technical and creative services from freelancers at Work Hard.

Freelance reporter Brian Conway has received numerous projects through referrals from other members at the cooperative. They’ve even helped him to scoop news stories.

The cooperative also sets base rates that clients must pay for contract services. Mr. Conway said he would not be able to command such high fees as a lone freelancer.

Community connection

Aside from generating economic activity in Allentown, Work Hard’s members have become directly involved in the community.

Mr. Lucas and Ms. Corts, for example, serve on the board of the all-volunteer Allentown Community Development Corporation, and from Sept. 15 to Sept. 17, Work Hard will host a hackathon to build computer programs for local nonprofits. Give Campparticipants will showcase their work product at a community celebration in Allentown’s Grandview Park on Sept. 22, also organized by Work Hard.

Dubbed “Hilltopolis,” the celebration will feature performances by the local hip-hop band PK Delay as well as The Cool Kids, a hip-hop band from Chicago. Allentown’s largest real estate company, RE 360, will host an after-party at the Industry Street warehouse where its offices are located.

Hilltopolis follows a series of collaborations between Work Hard and RE 360, which will soon sell 7,000 to 9,000 square feet in its warehouse to the cooperative. Work Hard decided to purchase the space, along with the former hardware store it also rents from RE 360, after receiving a $250,000 grant from the county’s Community Infrastructure and Tourism Fund through the nonprofit fiscal sponsor, New Sun Rising.

The transaction will increase Work Hard’s financial security by shielding it from future rent increases. The co-op might also rent commercial space to new businesses or turn some property into low-costing housing for its members. For RE 360 CEO Joe Calloway, the sale promises to strengthen Work Hard’s place in Allentown, which he believes will help to stabilize both the surrounding community and real estate market.

“Before Josh Lucas came up here, there was nothing,” Mr. Calloway, a native of the adjacent hilltop neighborhood of Knoxville, said. “Josh Lucas was kind of the first bold move to make an impact here.”

Top Header Image Photo Credit: Prototyping Larimer Stories by artist John Peña, photo by OPA