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202 tech startups reap Pennsylvania tax credits

| Thursday, Jan. 16, 2014, 11:54 p.m.

Joe Ferrara was one of the first employees at Wombat Securities when he came on board in 2011. The Oakland-based cyber security firm designs software and training programs for Fortune 1000 firms trying to guard against hackers, and in the past few years, business took off.

“As of 2013, we finished the year with 30 full-time employees,” he said. “We just keep growing.”

To help it along, Wombat was among 202 tech-focused startups to receive a tax credit from the Pennsylvania Department of Community and Economic Development, as part of the Keystone Innovation Zone tax credit program announced on Wednesday. More than $2 million out of $15 million in awards is headed to Western Pennsylvania firms ranging from app developers to robotics manufacturers.

Ann Dugan, executive director of the Institute for Enterprise Excellence at the University of Pittsburgh, said the tax credit program serves to spread aid among many companies.

“In my long-term experience, you might see one company get that kind of incentive package to relocate here to Pennsylvania,” she said. “Or they might happen to be a major fundraiser for whoever's in power.”

On Wednesday, a day before the tax awards, the state pledged a $30 million grant toward a $1.2 billion Philadelphia skyscraper project by Comcast, which reported $62.2 billion in revenue in 2012.

Pennsylvania is a high-tax state for business, Dugan said, with a 9.99 percent corporate net income tax. For startups, every dollar counts.

“We have energy, we have a great location, we have a wonderful workforce, but when a business is making the decision on where to start, grow and stay, they have to take this tax bill very seriously,” Dugan said.

Pittsburgh-based app developer NoWait Inc. started in 2010 and has grown to 20 employees with an office in New York City. The app lets users view restaurant wait times and join waiting lists online for participating restaurants. CEO Ware Skykes said the $83,333 tax credit will allow NoWait to hire additional engineers and develop an Android version of the app.

Tax credit recipients must be less than 8 years old. They must be in one of eight tech-based industries, including life-sciences and information technology. Applicants must be located in a Keystone Innovation Zone, geographic areas designated by the state's Ben Franklin Technology Development Authority, which focuses on securing funding for new industries.

Susan Ardisson, CEO of computer discovery firm bit-x-bit, said the company's $100,000 award will aid investments in new areas. The Downtown firm, in the Frick Building, has spent the past seven years doing “e-discovery,” helping lawyers and firms find and secure data required in connection with lawsuits such as trade secret theft.

“We are forging a strategic alliance to do incident response and cyber security work as well,” Ardisson said.

Sheri Collins, the authority's executive director, said this year the program issued a record number of tax credits.

Twenty-three Pittsburgh-based companies received a total of $1.44 million in tax credits.

Nine companies in Beaver Falls got a combined $650,000.

Awards were from about $5,000 to $100,000.

Year-over-year revenue growth determines the amounts. Recipients can apply the tax credit to state tax liabilities, or sell them for cash.

Rich Lunak, CEO of DCED's Pittsburgh-based Innovation Works, said states are focusing more public investment on startups because that's increasingly where jobs are created. Pittsburgh, he said, has “a tremendous amount of momentum” in its entrepreneurial community.

“There are generally innovation-led, technology companies that could be future engines of growth for a region, much like the Andrew Carnegies and the Westinghouses and a lot of the former giants of our economy,” he said. “This helps create that next generation.”

Melissa Daniels is a Trib Total Media staff writer. Reach her at 412-380-8511 or mdaniels@tribweb.com.

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