If you’re an entrepreneur trying to launch a business in Pittsburgh, it might be getting easier, according to data released this week by Innovation Works and Ernst & Young to a packed house at Alloy 26 on the North Shore.
Leon Hoffman, managing partner of EY’s Pittsburgh office, opened the event by sharing the good news that investment funding for Pittsburgh technology companies reached new heights during 2017. More than $687 million was invested and more than 250 venture capitalists from around the world invested here.
Rich Lunak, CEO of Innovation Works, gave details of the successes, from the recent $225 million acquisition of security awareness trainer Wombat Security by California-based Proofpoint, to the $1 billion round of funding recently raised by self-driving car intelligence provider ArgoAI from Ford Motor Company.
Encouraging data across a decade
“Pittsburgh is bucking the trend,” said Lunak, “where many Midwestern cities are struggling to attract investment. Over $22 billion has been invested in our local technology ecosystem during the past decade. It used to be difficult to attract out-of-town investors. That’s no longer the case.”
As proof, he rattled off a list of companies who raised between $17 million and $93 million in funding, much of it from name brand out-of-town venture capitalists and corporations.
If Pittsburgh once seemed to be too many miles away from mainstream venture capital, the trends shown by Lunak and Hoffman would demonstrate great news for the local tech industry’s growth potential. The investment growth is further leveraged by the increases in spin-outs, licenses and patents from local universities and the $8.7 billion in exit values that were produced between 2008 and 2017.
Exit values, in particular, are exciting news: In order to create a sustainable economic growth model within the local economy, the companies that attract investment need to provide their investors with a way to get their money out — which are the exits.
Once the money is back in the investors’ hands, they can reinvest in other companies, thereby sustaining the momentum. It’s a model used successfully in Silicon Valley that had previously eluded most of the rest of the country.
Lunak admits that 75 percent of investment into tech companies happens in California, Massachusetts and New York. But Pittsburgh has been climbing the rankings, in 2017 reaching ninth in venture rounds per million residents.