Last year, $1.029 billion was invested in 150 unique Pittsburgh tech firms across 176 transactions. Overall dollars were down almost two-thirds from the record $2.962 billion in 2019, but ahead of 2021’s $894.3 million.
That’s according to “Investment in Pittsburgh’s Technology Sector, Trends and Highlights 2013-2022,” which was released by Ernst & Young LLP and Innovation Works on Thursday morning.
“There is cause to be optimistic,” said Ven Raju, IW president and CEO. “For 2022, we saw roughly $1 billion of capital inflow to the industry. There was $127.2 million in dry powder, largely a function of the number of new funds. Having a broad-based ecosystem where we’re not reliant on one sector or segment de-risks us from cyclicality that other regions might experience in times of major headwinds.”
There clearly will be challenges in 2023 due to the uncertain economy, from tech sector layoffs that began nationwide several months ago to forecasts of a recession.
“Needless to say, we’re in choppy waters,” Raju said. But he believes the region remains solid.
The impact of the macro economic environment remains to be seen, but the diversity of industry sectors operating here is a plus for Pittsburgh, as are the different types of funding.
In 2022, for example, of that $1.029 billion invested here, $716.8 million came from venture capital, $248.3 million was corporate, $32.4 million was from seed funds and accelerators and $31.8 million from angels or high-net-worth individuals. Venture capital investments increasing by 21% from $592.2 million in 2021.
Last year, 39% of the companies garnering investment dollars were in the hardware and robotics sector, 38% in software and 23% in life sciences. In terms of percentage, it was the biggest year for software in a decade.
“Over the last few years, we’ve talked a lot about the amount of funding being devoted to hardware and robotics space, but software and life sciences are incredibly strong,” said Leon Hoffman, EY’s Pittsburgh office managing partner. “A big driver of that is the universities we have in Pittsburgh … and a lot of those sectors are long-term investments.”
The region saw a combined $11 billion in university research over the past decade, but some key benchmarks were noted in 2022. The University of Pittsburgh’s total research budget surpassed $1 billion for the first time and Carnegie Mellon University’s research budget — across the Software Engineering Institute, Advanced Robotics for Manufacturing Institute and other grants — totaled $465 million.
Pittsburgh continues to attract outside investment.
“One thing that jumps out at me is, if you look at the last 10 years, there are 300 different VC companies that invested here and, of that, 74 were new to Pittsburgh last year,” Hoffman said. “That’s pretty telling in that we continue to get the story out about how great of an ecosystem we have. VCs across the country and globe are paying attention.”
But both Hoffman and Raju pointed to the comparatively low amount of local money. In 2022, uncommitted funds at VC firms in the Pittsburgh region came to $127.2 million, the report said. Several new venture capital and angel funds were announced in 2020 and 2021, including 412 Ventures, Blue Tree Capital Group, Black Tech Nation Ventures, Magarac Venture Partners and Reinforced Ventures. Some have yet to reach their goals and just because a fund is based in Pittsburgh does not mean all or most of the capital is invested here. Still, the 2022 total was third highest in a decade and it was a big jump over $73.6 million in 2021.
“If you look at comparable markets like Philadelphia, Nashville, Raleigh-Durham, 25% to 30% of overall capital comes from resident sources,” Raju said.
Pittsburgh ranks 24th in population but was No. 14 nationally in deals per million residents in 2022. It was 21st in the total number of funding rounds in the past 10 years.
The data in the report comes from a combination of the PitchBook and private company data collected by Innovation Works Inc. and information reported by Carnegie Mellon University, Duquesne University and the University of Pittsburgh.
