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Allegheny

Pittsburgh tech startups continue to attract investors

Aaron Aupperlee
| Tuesday, March 14, 2017, 9:33 a.m.
Rich Lunak is president and CEO of Innovation Works, a business accelerator based at Nova Place, a hub for innovative companies located in the former Allegheny Center on Pittsburgh’s North Side.
James Knox | Trib Total Media
Rich Lunak is president and CEO of Innovation Works, a business accelerator based at Nova Place, a hub for innovative companies located in the former Allegheny Center on Pittsburgh’s North Side.

Pittsburgh technology startups bucked a national trend by attracting more venture capital investment in 2016.

Funding for Pittsburgh-area companies from venture capital firms increased 8 percent in 2016, jumping from $217.4 million in 2015 to $235.1 million, according to a report by Innovation Works and Ernst & Young released Tuesday.

Nationally, venture financing dropped 32 percent in 2016, falling from $77.3 billion in 2015 to $52.3 billion.

“In a year when venture capital dropped significantly across the United States, Pittsburgh was up in every category,” said Rich Lunak, CEO of Innovation Works.

The report found that in 2016:

• Total investment in Pittsburgh-area technology companies was up nearly 35 percent to $376 million;

• Investment from venture capital firms rose 8 percent to $235.1 million;

• The number of deals increased from 35 in 2015 to 39;

• Seven companies raised $15 million or more; only two did in 2015;

• Ten companies were acquired by larger firms in deals that topped $275 million.

Pittsburgh moved up one spot in the national rankings of dollars invested per person, from 18th in 2015 to 17th in 2016. Lunak said Pittsburgh has solidly distanced itself from similar cities such as Cincinnati, ranked 19th, and St. Louis, ranked 20th, but thinks the region has the potential to break the top 5, a group dominated by San Francisco, Silicon Valley, Boston, San Diego and Austin, Texas.

“A big needle mover can be large successes. We have a lot of successes, but they tend to be more mid-market types,” Lunak said. “If we could score a really big IPO, that would be great.”

Lunak said he's keeping an eye on firms like Duolingo , a popular language learning app; Wombat Security Technology , an information security company; and Avere Systems , a cloud-based data storage company, for potential IPOs.

“There are companies that people don't always hear about, but they are extremely fast growing startups in our region,” Lunak said.

Michaela Kron, a spokeswoman for Duolingo, agreed with Lunak that an IPO of a Pittsburgh startup would greatly help to elevate the local tech community and the city but wouldn't comment on whether the East Liberty company is mulling such a deal. Joe Ferrara, president and CEO of Wombat Security Technologies, said the company was flattered by Lunak's comment but believed any discussion of an IPO was premature. Avere had no comment on a possible IPO.

Aaron Aupperlee is a Tribune-Review staff writer. Reach Aupperlee at aaupperlee@tribweb.com or 412-336-8448.

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