Venture capitalists pony up faith in Pittsburgh

| Monday, Feb. 16, 2015, 10:30 p.m.

Venture capitalists poured more than twice the amount of money into Pittsburgh companies in 2014 as they did the previous year, highlighting the region's growing reputation as a center for lucrative investment opportunities.

Annual venture capital dollars committed to local companies totaled $338 million last year, up from $138 million in 2013, according to Pittsburgh Today, which tracks regional economic trends with the University of Pittsburgh's Center for Social and Urban Research.

The size of deals grew, too. Total dollars increased even though fewer companies attracted investors — 79 in 2014, compared with 91 the year before.

Venture-backed businesses have had success nationwide, with both initial public offerings and merger and acquisitions on the rise, and lately have promised investors better returns than stocks or bonds.

Armed with extra cash, firms are hungry for opportunities at a time when Pittsburgh's entrepreneurial ecosystem is maturing, said Gary Glausser, chief investment officer at Innovation Works.

“VCs are actively searching for opportunities, and I think they've recognized that this region has generated some awesome companies,” he said.

The total venture capital dollars coming to this area are a fraction of technology hubs such as San Francisco, which attracted $22.4 billion in venture capital money in 2014, up from $12 billion the previous year. But Pittsburgh is becoming a go-to place for startup investments, Glausser said.

Carnegie Mellon University and Pitt are doing more than just pumping out ideas and talent — they are dedicating resources to help entrepreneurs get businesses off the ground.

“Basically, the universities are really pushing to commercialize technologies, and they've done a great job from that aspect,” Glausser said. “I think those aspects are really fueling opportunities for venture capital firms.”

Thorley Industries LLC, which has ties to Carnegie Mellon and makes infant products under the name 4moms, secured $41 million last year from Massachusetts-based Castanea Partners and existing investor Bain Capital Ventures.

Thorley isn't the only local company to garner interest from outside of Pittsburgh. Boston-based Volition Capital made a $15 million investment in The Resumator Inc., a company that provides software to help managers screen job applicants.

“It's great to see local companies performing at a national level,” said Ned Renzi, a founding partner at Strip District-based Birchmere Ventures.

Cloud-based software companies have been popular with venture firms, and Pittsburgh has a few that made multimillion-dollar deals this year. The Resumator was one of those, as was NoWait, which developed an app that restaurants use to notify customers that a table is ready by sending text messages to their phones. NoWait raised $10 million last year in a round of financing led by Ohio-based Drive Capital.

The market for venture financing was very active last year. Venture capital funds lately have outperformed stocks and attracted investors seeking large returns, according to the National Venture Capital Association. Venture firms nationwide raised $29.8 billion in 2014, compared to $17.7 billion in 2013, Glausser said. And the size of the opportunities is growing as many companies choose to stay private for longer, giving them time to mature.

“There's a lot of money chasing a lot of deals,” said Ray Leach, a board member of the National Venture Capital Association and CEO of the Cleveland economic development group JumpStart Inc. “It's also some of the fundamentals of the economy. Where can you go to generate a (high return) in a low-interest rate U.S. economy?”

Chris Fleisher is a Trib Total Media staff writer. Reach him at 412-320-7854 or cfleisher@tribweb.com.

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