The Pittsburgh region's global ranking of the ability to launch a startup has seen an improvement in its year-over-year placement, though several metrics used to determine the city's place among its peers continue to lag behind averages seen across the planet.
That's according to the 2022 Global Startup Ecosystem Report from the Global Entrepreneurship Network (GEN) and Startup Genome, an innovation policy advisory and research firm based in San Francisco.
The report ranked the Pittsburgh startup ecosystem as being No. 13 in the list of "Top 100 Emerging Ecosystems," an improvement from its ranking of No. 23 in last year's list of the same category. Separately from that list but within the same report, Startup Genome also released the 2022 version of its "Global Startup Ecosystem Ranking" featuring the top 30 cities around the world to launch a startup, of which No. 11 Washington, D.C., is the nearest.
"Being ranked in this (list) increases our access to a global audience of people interested in the startup world and improves our ability to tell our story in a condensed and easily-digestible way," Jason Griess, ecosystem director at InnovatePGH, said in an email statement. InnovatePGH, a public-private partnership based in Oakland that's looking to advance and champion the region's startup scene, was one of several local partners that worked with Startup Genome to help compile this year's report.
"With any report of this scope, we don’t think it is telling the entire story of our ecosystem, but it helps us tell a version of that story to a large audience," Griess said.
Per the report, Pittsburgh's accelerating advancement in its rankings is due in part to three significant exits it saw last year: The July IPO of East Liberty-based educational platform makers Duolingo Inc., the November IPO via special purpose acquisition company (SPAC) of Strip District-based autonomous vehicle company Aurora Innovation Inc. and the October IPO of Cognition Therapeutics Inc., which employs a significant amount of its workers out of its Pittsburgh research laboratories on the South Side but is officially headquartered in Purchase, New York. In total, the report found that the region had 111 exits throughout its surveying period, besting the national average of 101 exits.
Pittsburgh's advanced manufacturing and robotics sector as well as its life sciences and clean tech industries also received praise in the "Sub-Sector Strengths" portion of the Pittsburgh highlights page found within the 382-page report. That same page also recognized the region's talent pool of 142,000 people who work at tech, advanced manufacturing or life sciences companies throughout the greater metro area as well as the region's relative affordability when it comes to purchasing a home compared to other cities.
"Pittsburgh’s strength in (advanced manufacturing and robotics) presents a huge opportunity for our startups to scale with customers from around the world," Griess said.
Another metric used in the report — compensation for a software engineer — averages $80,000 per year in Pittsburgh, almost double that of the global average figure of $46,000 per year, the report found.
When it comes to securing funding for a startup, the report found that Pittsburgh's median Series A round for a startup company averaged $4.7 million from 2019 to 2021, which is tied with the global average of the same figure.
As for where it's lagging compared to other cities around the world, Pittsburgh's median seed round for a startup company from 2019 to 2021 averaged $50,000, a fraction of the global average startup seed round of $671,000, per the report. Seed rounds are often one of the first routes a startup pursues to obtain outside funding so they can then scale and grow their business. In exchange, those who invest in a startup's seed round are usually offered an equity stake in the company, which they can cash out during additional series funding rounds or during an IPO.
Other funding-related gaps the report noted when comparing averages included total venture capital funding from 2017 to 2021 — Pittsburgh had $1.5 billion compared to the global average of $4.5 billion — and total early-stage funding from 2019 to 2021 — Pittsburgh had $196 million compared to the global average of $687 million.
According to the report, the total ecosystem value for Pittsburgh from 2019 to 2021 was $11.6 billion, less than half the global average ecosystem value of $28.6 billion over the same time period.
Despite these figures, Griess said he's inclined to believe that the years ahead will continue to see Pittsburgh's annual ranking in the report improve.
"Startup Genome uses data from the previous 2.5 years, so the exits we saw in 2021 will continue to count in our rankings for at least the next two releases of the report," Griess said. "Since our ranking is relative to other Emerging Ecosystems, the big question is whether we are able to capitalize on the exits we’ve seen, accelerate our support for growing companies, and outpace the growth of our peer ecosystems."
He said there's still work to be done, however, and that's what he and InnovatePGH will be tasked with accomplishing in the months and years to come.
"When it comes to other metrics, I think we have some clear indicators on areas we are working to improve. Early-stage funding continues to be an area many people in our community are working to improve and partner with others on," Griess said. "These metrics are an important indicator of which direction we’re moving in as an ecosystem, but they should not be taken as the definitive set of metrics that defines the health of our ecosystem. As a community, we have the opportunity to define our priorities and create some metrics around those topics. This report is a good place to start, but there is a lot of room for local priorities to drive that conversation.
A copy of the full report can be found here.
