As the chief strategy officer for Pittsburgh-based Carnegie Foundry LLC, Michael Lutzky is looking for partners who know what the future of automation in heavy industry will look like, the timetables it'll take to get it there and an understanding of what innovations will be needed to make such advances even possible in the years to come.
Turns out, he didn't have to look that far to find one.
On Jan. 26, the Carnegie Foundry — a venture studio that is looking to work with those who are developing robotics and AI-based intellectual property coming out of Carnegie Mellon University to then turn those ideas into products and eventually standalone companies — announced it secured an investment from and partnership with Pittsburgh-based United States Steel Corp. to accelerate and scale automation technology in the industrial space.
The collaboration will tap into U.S. Steel's (NYSE: X) more than 100 years of innovation-related experience in the steelmaking industry to help the Foundry best identify and invest in startups and founders in Pittsburgh who are looking to find ways to advance industrial might, mostly as it might relate to automation.
Or, in other words, lessons of success learned from Pittsburgh's industrial past will be used to help build its industrial future.
"For us, we started with an introduction, and then it was a process from there of us explaining our vision, our strengths, assets and capabilities, where we wanted to take Carnegie Foundry and industrial automation over the next five to 10 years, and U.S. Steel sharing some of their aspirations, their goals and needs," Lutzky said. "Honestly, I think that we realized that we have more opportunity to make an impact in the same spaces that U.S. Steel is operating in, and they realize that we might be able to offer them more innovation value, more access to automation capabilities than they may be seeing in other places, certainly enough to start the relationship the way that we did."
The deal comes a few months after the venture studio landed its first investment from specialty vehicle and equipment manufacturer Oshkosh Corp. (NYSE: OSK), which is when Carnegie Foundry CEO and Co-Founder Robert Szczerba said the Foundry had a valuation of $100 million.
U.S. Steel and the Foundry declined to disclose the total size of the investment, but Lutzky said that sums ranging from $5 million to $20 million are "not very large" relative to U.S. Steel's or Oshkosh's industry size and their respective aspirations. Lutzky also added that there's still a lot of diligence required on the Foundry's part to ensure the startups it invests in prove to be worthwhile for its founding partner investors.
"One of the great things about partners like U.S. Steel and Oshkosh is we can really hone in better and not in a vacuum, but actually with leaders in these industrial sectors who know exactly down to the most granular minutia what problem they need to solve, what the true value is of solving that problem, and of course, what they're willing to take to do it," Lutzky said. "There's a lot of innovation, both in robotics and software, that comes from the outside in, and we can look at some of the examples in Pittsburgh specifically and see that the most successful or the most well-known stories that are most often told are with maybe capital coming in from the outside to fund an idea or a concept or an innovation."
At the Carnegie Foundry, Lutzky said bringing in more weight from industrial knowledge bases or industrial needs will allow it to better scale the emerging companies and ideas that come through the organization. It's also looking to fill a funding void that exists for many who are looking to grow a business in Pittsburgh but who lack the necessary capital and expertise to do so.
According to Lutzky, the opportunities the Foundry is looking to offer will ideally lead to success stories for years to come. The Foundry is hoping to launch eight to 10 of these companies in and around the Pittsburgh area over the next four to five years.
"Every dish has a recipe and a formula, and having looked around and seeing how other people are preparing their companies, we have tried to tweak our recipe and our process to make sure that we have everything we need, or at least more of what we need to assure success on the other side," Lutzky said. "Success on the other side is an innovation that works, that gets to market, that is attractive and has demand and adds value in the long run. Trying to create this virtuous cycle, you're going to support American industry and industrial companies. The sooner that you can bring them in to inform what you do, how you do it, the better chance you have of being successful on the other side."
