Ernst & Young LLP and Innovation Works released the 10th annual report on Pittsburgh’s technology investment landscape on Wednesday, revealing that two-thirds of the $10.5 billion in funding during the decade occurred within the past three years.
“It was a remarkable year in 2021 but also a great way to sort of encapsulate a decade’s worth of trends,” said Rich Lunak, IW president and CEO. “It’s hard to measure or understand the trends by looking year-to-year or quarter-to-quarter, but when you step back and look at the decade, there’s clear momentum, whether it’s the growth in dollars, rate of growth for the deals, the number of investors and major corporations that now have offices here.”
The report spans 2012-2021 and the numbers almost tell the story. In 2021, 172 unique companies received funding, the highest number in a decade, and one above 2020’s 171. Last year, combined research budgets hit a new high of $1.42 billion. For the 10-year period, more than 300 firms from around the world invested in Pittsburgh companies, including 16 who made their first investment here in 2021. University research drew $11 billion in funding and saw a 179% increase in the number of patents issued. In 2021 alone, local technology companies received over $18 million in government and private research grants. And, over the decade, there have been $21.3 billion in exit proceeds — mostly via acquisition but last year marked a return to initial public offerings.
“Whenever you cut through all that data, each metric we looked at paints a picture of that positive momentum, whether it’s exits, funding rounds, the amount of federal research funding at universities, it’s all positive,” said Leon Hoffman, EY’s Pittsburgh office managing partner. “This continued buildout of Pittsburgh as a tech hub is happening.”
In 2021, a record $3.6 billion was invested in local tech companies. Some 65% of that was attributed to IPOs. The report listed five. Language app developer Duolingo Inc. and autonomous vehicle firm Aurora Innovation, both based in Pittsburgh, went public in the second half of 2021. Montauk Renewables, which specializes in the recovery and processing of environmentally detrimental methane from landfills and other nonfossil fuel sources, held its offering in January 2021. The report also counted two firms who say on regulatory filings that their headquarters are in New York: Bitcoin miner Stronghold Digital Mining, which has the bulk of its operations in Venango County, and life sciences firm Cognition Therapeutics, which was founded in Pittsburgh and most of its employees work at its South Side lab space.
IW explained that the report uses publicly available sources for some data and builds on that to show the companies and deals that significantly impact the region. The data in the report comes from a combination of sources — funding rounds and other venture capital information from PitchBook, private company data collected by IW and information reported by Carnegie Mellon University, Duquesne University and the University of Pittsburgh.
For Lunak, who has led IW since 2005, the report likely marks his last full year at the helm. Last month, he announced plans to retire, IW aims to have a candidate pool of successor candidates identified by summer. He believes the report shows the region’s tech sector is well-positioned for more growth and pointed to several $70 million funding rounds surfacing in early 2022.
“Just think back, you could count on one hand the number of companies that a decade ago raised $10 million or more,” Lunak said. “Now it’s a much more regular occurrence. It’s a very different environment.”
He was also pleased that no industry sector dominated locally in terms of receiving funding last year.
“We have a tendency, because the deals have been so big, to focus on autonomous and robotics, but there’s still a strong foundation of other companies and other sectors that are doing great things here, including biotech and software,” Lunak said. “Whether you look at dollar investment or the number of deals, it paints a similar picture in terms of that diversity and that’s the sign of a healthy tech sector, one that’s not tied specifically to one area. A lot of stuff is happening below those headlines but awareness is not as high as with the bigger transactions.”
