Pittsburgh startups catch eyes, pockets of venture capitalists
There's new momentum in Pittsburgh's startup scene, evidenced by a bigger flow of cash heading here, according to a local economic development group.
Innovation Works, a South Side-based nonprofit that helps new companies find funding, said more than $250 million went to local startups in the first nine months of 2014. That's more than the annual totals of funding to startups in the area in the past five years, according to the organization.
The uptick can be traced to an improving economy, an oversaturation of investors in Silicon Valley and greater visibility of research from Pittsburgh's universities, said Gary Glausser, chief investment officer at Innovation Works.
“Pittsburgh is on the radar screen,” Glausser said. “We're starting to see the universities really take aggressive steps to commercialize their technology.”
Innovation Works announced Monday that it has raised $24 million for a new, for-profit investment fund, Riverfront Ventures, which focuses on investing in local companies that already have seed money, but need more capital to expand. The fund has made investments in six companies so far and will invest in 12 to 16 more over the 10-year life of the fund, Glausser said.
“We're going to put our money where our mouth is when it comes to these investment opportunities,” said Glausser, who is managing director of the fund.
The announcement occurs on the eve of the 3 Rivers Venture Fair, which kicks off Tuesday at Heinz Field. The event, which aims to unite monied investors with new companies, is organized by the Pittsburgh Venture Capital Association and runs through Wednesday.
The fair includes 42 local companies, mostly from information technology, biotechnology and robotics, and has attracted the most out-of-state investors since its inception seven years ago, said Kelly Szejko, president of the association.
The event includes a new “shark tank” component, in which potential investors grill companies on their products, finances and vision, before deciding whether to sign on, Szejko said.
“That has helped give us an uptick of venture capitalists,” she said. “They are a part of the show rather than a spectator.”
The venture capital association tracks participating companies for one year after the event to monitor who gets money and how much. Over the past seven years, companies have received $500 million from investors, Szejko said. About 52 percent of companies who attend the fair receive funding, she said.
Innovation Works, which is partly funded by the state, received a $3.5 million grant in January from the McCune Foundation and says McCune is the largest investor in early-stage startups in the region.
Venture-backed businesses are experiencing success nationwide, with initial public offerings for the first nine months of 2014 surpassing the amount for all of 2013, according to the National Venture Capital Association and Thompson Reuters.
In the third quarter of this year, 23 companies raised $2.6 billion, pushing the total number of IPOs to 88.
“There's clearly a strong demand in the public markets for high-growth companies on the cutting edge of innovation,” said Bobby Franklin, CEO of the National Venture Capital Association.
Katelyn Ferral is a staff writer for Trib Total Media. She can be reached at 412-380-5627 or firstname.lastname@example.org .