Investors poured nearly $3 billion into Pittsburgh startups in 2019, five times the previous year’s total of $550 million.
Though the total number of companies funded dropped slightly from 2018 — 147 to 139 — it was a banner year for Pittsburgh-based startups, according to a new report, “Investment in Pittsburgh’s Technology Sector, Trends and Highlights 2010-2019,” from Innovation Works and Ernst & Young.
Nearly 600 Pittsburgh companies have attracted more than $6.6 billion in investment in the past 10 years, according to the report, which tracks investment from 2010-2019.
Additionally, more than 270 firms from around the world have invested in Pittsburgh in the last five years.
“Pittsburgh is always at the top of our list when we explain why we’re investing outside of Silicon Valley,” says Chris Olsen with Drive Capital. “The region has incredible founders, talent and world-class research institutions. Companies like Duolingo, Gecko Robotics and Fifth Season are now proving that the region has the raw ingredients necessary to build the world’s next generation of great companies.”
There’s been growth in non-West Coast-based investment funds, which are more focused on the middle of the country. That’s helped Pittsburgh a lot.
“Investors that are within a day’s driving distance of Pittsburgh are typically the ones that see the value of a low-cost, high-talent region like ours,” says Terri Glueck of Innovation Works.
Big companies were also eager to invest in Pittsburgh startups.
“A lot of that activity was not just venture capitalists or traditional investors as we think of them,” explains Glueck. “They were corporate investors. Many corporate investors cause additional growth of the companies. They become first customers for the company. They provide other kinds of resources and connections and investment that goes way beyond just the dollars.”
Self-driving cars are what’s driving it, for the most part, while investment in the energy and industrial sector declined.
“It’s so visible — we all see that spinning LIDAR sensor on top of the car,” says Glueck. “We understand that technology is being grown and tested and deployed here in Pittsburgh. Argo AI and Aurora and other self-driving technologies were definitely leading the pack with the bulk of investment this year.”
In 2019, VW Group announced a $2.6 billion investment in Argo AI, for example.
There are other strengths that are less obvious to casual observers. “There’s so much under the surface that many people don’t get a chance to see: software, life sciences including medical devices,” says Glueck.
The growth of Pittsburgh’s startup scene is held up by three things: hardware, software and life sciences.
To single out one superstar, the language learning app Duolingo alone raised $30 million from Alphabet’s CapitalG venture fund.
“Duolingo was a huge deal for the region this year,” says Glueck. “Duolingo is a fantastic example of a company that is so firmly rooted here, their people are here, the growth is very much in its flagship here. It brings a lot of attention to Pittsburgh. The valuation of the company puts it at a billion dollars-plus.”
Pittsburgh research universities had almost a threefold increase in the number of patents issued, and the number of spinout companies increased by 131%, according to the report.