Pittsburgh`s Technology Investment Landscape

A snapshot of
Pittsburgh’s technology
investment landscape
Trends and highlights, 2011—2015
Growing number of deals and
investors is promising
Ernst & Young LLP and Innovation Works, Inc. are pleased to present our fourth annual review of investment trends and
highlights for the Pittsburgh region’s technology sector. This report reviews the investment activity in our region from 2011 to
2015, analyzes the companies attracting capital and tracks the funding sources that support their growth — including venture
capital firms (VCs), angel investors (angels), corporate/strategic investors, seed funds, accelerators, public offerings and other
sources.
The Pittsburgh region’s technology sector is attracting a growing number of investors, as evidenced by a 46% increase in the
number of investment deals closed between 2011 (123 deals) and 2015 (179 deals). Last year, nine VCs made their first
investment in our region, joining more than 100 firms across the country that have invested over the past five years. Pittsburgh
remains one of the top regions for deal activity in the country, ranking fifth in deals per capita among the largest metro areas in
the country. A key driver to attracting investors has been our region’s ability to generate strong investment returns (primarily
through sales to strategic acquirers). For the five-year period ending in 2015, our technology sector generated $7.7 billion in
exit proceeds, including an impressive $5 billion in 2015.
While the number of deals remained strong, the $279.6 million total invested in the region in 2015 marks a decline from the
$437.8 million invested in 2014. Although 2015 remained the fourth-highest year for the total VC dollars invested since 2001,
the decline in overall investment dollars was primarily driven by a smaller number of large VC and angel deals as compared
to 2014.
Our region continues to demonstrate deep sector diversity, with software, medical devices, biotechnology, health care IT,
energy and robotics leading the way – much of it fueled by our world-class research universities. In addition, our region is
increasingly attracting the likes of Google, Uber, Apple, Facebook, Bosch and others who are strengthening our region’s
technology ecosystem by establishing offices and research centers in southwestern PA.
As we look toward even greater levels of success, we must continue to nurture the assets that help propel our entrepreneurial
community and shape its future. In particular, we must expand the network of local investors and attract more attention from
investors outside of southwestern PA. More of our companies need to successfully reach the milestones and commercial
traction metrics that facilitate larger rounds of growth capital and propel the companies past the point of early exit. We need
continued funding and commercialization of research. And we need to continue to expand the networks of grassroots support
organizations, mentors and infrastructure that will nurture the next generation of diverse high-growth companies.
We hope this report provides you with useful insights into the state of the local technology community and venture capital
ecosystem and inspires new ways to move it forward.
Lynette Horrell
Pittsburgh Office Managing Partner,
Ernst & Young LLP
Rich Lunak
CEO, Innovation Works, Inc.
Investment in Pittsburgh’s technology sector | Trends and highlights
Another active year for VC
investment in Pittsburgh
Nationally, 2015 was another very active year for
venture capital financing. The $72.5 billion invested
represents a 24.5% increase over the $58.2 billion
invested in 2014, and the largest single-year total
since 2000. At the same time, the number of
investment rounds decreased 4.7% from 4,089 in
2014 to 3,896 in 2015. This highlights a continued
increase in the average round size buoyed by megarounds into companies like Uber, Lyft, SoFi, Airbnb
and Space Exploration Technologies, which each
closed private financing rounds of $1 billion or more.
Locally, VCs invested $217.4 million into 35
Pittsburgh area deals in 2015, a 35% decrease from
the prior-year total. This was largely driven by a
smaller number of large financings ($15 million or
more) in 2015. It is worth noting that 2014 was
also an exceptionally active year, with the largest
investment total since 2001.
$280 million
was invested in Pittsburgh technology
companies in 2015.
$217 million
was invested by venture capital firms –
the fourth-highest total since 2001.
Funding for Pittsburgh companies from venture capital firms ($ millions)
39
35
31
35
31
$189.3
$227.2
$124.0
$332.9
$217.4
2011
2012
2013
2014
2015
Amount anvested ($million)
Number of \eals
Source: Dow Jones VentureSource and Innovation Works
March 2016
1
Venture investment drives growth
The $279.6 million in funding raised
by Pittsburgh companies in 2015
represents a decline of 36% from
the $437.8 million raised in 2014.
Last year, the region saw a reduced
number of large VC financings and
sizeable angel rounds led by family
offices and placement agents.
Funding for Pittsburgh companies by type of investor ($ millions)
$437.8
$3.8
$28.2
$332.8
$317.2
$72.9
$4.7
$6.3
$279.6
$299.9
$34.1
$29.3
$4.9
$23.4
$66.7
The five largest deals in 2015
had total value of $131.9 million,
compared to $197.4 million for the
five largest deals in 2014.
$92.3
$33.9
$4.7
$21.7
$332.9
$54.2
$227.2
$189.3
$217.4
$124.0
2012
2011
IPO
2014
2013
Seed ^unds and Yccelerators
Corporate and gther
2015
Angels
VC
Source: Dow Jones VentureSource and Innovation Works
Seed funds, accelerators and
angels are most active investors
The total number of financing
rounds in 2015 was comparable
to 2014 and marks the highest
total in at least a decade. Seed
funds and accelerators were
responsible for the largest
number of deals again in 2015,
with angel investors also making
a strong contribution. The
number of investment rounds
has grown 46% since 2011.
Number of investment rounds by type of investor
165
148*
123
48
59
36
23
12
43
19
59
177
179
62
73
15
16
61
55
38
32
35
31
39
35
2011
2012
2013
2014
2015
IPO
Seed ^unds and Yccelerators
Corporate and gther
Angels
* Includes IPO
VC
Source: Dow Jones VentureSource and Innovation Works
2
Investment in Pittsburgh’s technology sector | Trends and highlights
Pittsburgh offers a diverse array
of industry verticals
The Pittsburgh region continues to attract capital to a diverse array of industries. In the 2011-2015 time period, 292
companies received funding totaling nearly $1.7 billion.
The distribution of funding across industries was similar to past five-year time periods. Approximately 56% of the companies
receiving funding came from the information technology sector (enterprise and consumer software, electronics, robotics,
telecom and IT infrastructure). Life sciences (medical devices, health care IT, biotechnology/drug development and health
care services) made up 23% of the companies receiving funding.
Pittsburgh companies receiving funding - by tech sector - 292 companies
2011-2015
Consumer koftware
20.9%
Enterprise koftware
22.6%
Medical \evices
9.2%
Robotics
4.8%
Energy
7.2%
Telecom
0.3%
IT anfrastructure
1.7%
Healthcare kervices
2.1%
Biotechnology
5.8%
Electronics
6.5%
Consumer
hroducts
Advanced Healthcare 6.2%
eaterials
IT
6.5%
6.2%
Dollars invested in Pittsburgh technology companies - by tech sector - $1.7b total
2011-2015
Energy
11.6%
Electronics
11.3%
Medical devices
17.3%
Enterprise
software
10.9%
Telecom
0.9%
Healthcare IT
1.6%
Healthcare services
IT infrastructure
1.6%
3.3%
Consumer
software
9.8%
Advanced
materials
7.0%
Consumer
products
8.9%
Biotechnology
7.6%
Robotics
8.3%
Source: Dow Jones VentureSource and Innovation Works
March 2016
3
The local supply of venture capital
funding still growing
The chart below estimates the annual supply of uncommitted funds at venture capital firms in the Pittsburgh region. This
analysis considers the timing of new fund closings and assumes that a firm will commit 25% of a new fund’s capital during
each of the first four years post-closing. If a fund is managed by partners who are located outside of the Pittsburgh region,
the amount of the fund’s capital that is “located” in Pittsburgh is determined by multiplying by the percentage of the fund’s
partners who are located in the region.
The local supply of venture capital funds increased for a fourth straight year and stands at its highest level since 2006.
During 2015, Birchmere Ventures, Draper Triangle Ventures, iNetworks and SWAT Capital all held closings on additional
committed capital.
The continued increase in available venture capital in Pittsburgh is an encouraging trend given the critical role our local VC
community plays in supporting regional entrepreneurs. However, Pittsburgh’s estimated pool of capital available in 2015
($126.6 million) is only slightly larger than the median US fund size of $125 million. Nationally, venture capital funds raised
a total of $35.2 billion across 320 funds in 2015, representing a $0.9 billion increase (2.6%) over the $34.3 billion raised
across 386 funds in 2014.
Supply of Pittsburgh-based venture capital
Estimate of uncommitted capital at Pittsburgh-based VC firms ($ millions)
$136.6
$126.6
$120.5
$88.2
$81.1
$65.9
$48.3
$29.3
$18.0
$7.1
2006
2007
2008
2009
2010
2011
2012
2013
Source: Innovation Works and Pittsburgh VCs
4
Investment in Pittsburgh’s technology sector | Trends and highlights
2014
2015
Strong exit activity in Pittsburgh
The value of US venture capital-backed merger and acquisition transactions totaled $53.6 billion in 2015, marking a 34%
decrease over the $81.2 billion in transaction value in 2014.
Technology company exits in the Pittsburgh region compared very
favorably to national trends. In 2015, 11 technology companies in
the Pittsburgh region were acquired for total disclosed deal values of
$5 billion, including the $4 billion acquisition of iGate by Capgemini.
The 2015 transaction activity marks a dramatic increase over the 11
companies acquired for disclosed values of less than $100 million
in 2014.
The companies acquired spanned a variety of industries including IT
services, health care IT, medical device and autonomous vehicles.
While exits create liquidity for investors, our region sometimes loses
out on seeing the impact of larger growth-stage financings that could
propel these companies to the next stages of growth, maturity and an
eventual larger exit.
Period from 2011-2015:
48 companies
$7.7 billion
Total value
(disclosed and undisclosed)
Representative deals
M*Modal
The ExOne Company
acquired by
IPO
2013
One Equity Partners
2012
Millennium Pharmacy
Systems
iGate
acquired by
acquired by
Capgemini
PharMerica
2015
2014
Carnegie Learning
BodyMedia
Powered Analytics
Aesynt
acquired by
acquired by
acquired by
acquired by
Apollo Group
Jawbone
Target
Omnicell
2012
2013
2014
2015
BlackLocus
BPL Global
LightSide Labs
Blue Belt Technologies
acquired by
acquired by
acquired by
acquired by
The Home Depot
Qualitrol
Turnitin
Smith & Nephew
2012
2013
2014
2015
Vivisimo
Mobile Technologies
Ottomatika
acquired by
acquired by
IBM
Facebook
RedPath Integrated
Pathology
2012
2013
acquired by
acquired by
Delphi
PDI
2015
2014
March 2016
5
Firms making recent investments
in Pittsburgh companies
Pittsburgh region
Adams Capital Management
AGSM
Alphalab
Audrey’s Kitchen
Birchmere Ventures
BlueTree Allied Angels
BlueTree Venture Fund
Bradford Capital Partners
Draper Triangle Ventures
Eagle Ventures
Grouse Ridge Capital
The Hillman Company
Idea Foundry
iNetworks Advisors
Innovation Works
Meakem Becker Venture Capital
Newlin Investment Company
Pittsburgh Equity Partners
Pittsburgh Life Sciences Greenhouse
PLSG Accelerator Fund
Riverfront Ventures
Smithfield Trust
Startbot
Stonewood Capital Management
Swallow Point Ventures
SWAT Capital
Woodland Partners
California and Western region
Accel Partners
A-Grade Investments
ARCH Venture Partners
Breakout Labs
Bright Capital
Camp One Ventures
Correlation Ventures
CrunchFund
El Dorado Ventures
ePlanet Capital
Floodgate
Foundation Capital
Gentry Venture Partners
Google Capital
Google Ventures
6
Harrison Metal Capital
Health Evolution Partners
Horizon Ventures
InCube Ventures
JAFCO Co., Ltd.
Kern Whelan Capital
Kleiner Perkins Caufield & Byers
Lightspeed Venture Partners
Longitude Capital
Lovell Minnick Partners
Menlo Ventures
Montage Ventures
Norwest Venture Partners
ONSET Ventures
Pacific Venture Group
Prelude Ventures
Prescient Capital
Qualcomm Ventures
Rincon Venture Partners
Riverwood Capital
Sand Hill Angels
Silicon Valley Bank
Silverton Partners
SJF Ventures
Tech Coast Angels
Tenaya Capital
Trident Capital
TriplePoint Capital
Investment in Pittsburgh’s technology sector | Trends and highlights
New England region
Advanced Technology Ventures
Bain Capital Ventures
Castanea Partners
FourWinds Capital Management
GE Healthcare
GE Ventures
Harbor Light Capital Partners
Highland Capital Partners
Nexus Medical Partners
North Atlantic Capital Corp.
Polaris Venture Partners
Saturn Management
Spectrum Equity Investors
Summit Partners
Volition Capital
New York region
Blue Cloud Ventures
Enhanced Capital Partners
ff Venture Capital
General Atlantic
Golden Seeds
Great Oaks Venture Capital
ICV Capital Partners
Insight Venture Partners
KKR
Level Equity
Morgan Stanley
New York Angels
Northwood Ventures
Ogden Capital
Prospect Capital Corporation
Radius Ventures
Red Swan Ventures
Rose Tech Ventures
TechStars
The NPD Group
The Vertical Group
Union Square Ventures
Warburg Pincus
Philadelphia region
Comcast Ventures
Cross Atlantic Capital Partners
Delaware Crossing Investor Group
Edison Ventures
First Round Capital
Innovation Ventures
Mid-Atlantic Angel Group Fund
NewSpring Capital
Novitas Capital
Originate Ventures
Osage Partners
Quaker Partners
Robin Hood Ventures
Baltimore/Washington, DC region
Midwest region
Allos Ventures
Arboretum Ventures
Ascension Health Ventures
Capvest Venture Fund
Chrysalis Ventures
CID Capital Inc.
Crimson Hill
Drive Capital
Hopewell Ventures
Mutual Capital Partners
River Cities Capital Funds
Salix Ventures
Seneca Partners
Silicon Pastures
Techstars Mobility
West Capital Partners
ABS Capital Partners
Active Angel Investors
Columbia Capital LLC
Horizon Technology Finance
New Atlantic Ventures
New Enterprise Associates
March 2016
New Markets Venture Partners
Oxford Finance Corporation
Square1 Bank
Updata Partners
Virginia Active Angel Network
Vital Venture Capital
7
Pittsburgh one of the most active
cities for venture investment
In a comparison of venture investments in the 40 largest Metropolitan Statistical Areas in the United States in 2015,
Pittsburgh, which ranked 23rd in population in 2015, ranked 18th in venture capital investment dollars per capita and 5th
in deals per million residents, behind only notable tech hubs Silicon Valley (San Jose and San Francisco), Austin and Boston.
The disparity in these two rankings reflects the fact that Pittsburgh did not see many of the exceptionally large financings
that propel the dollar totals upward for the highest-ranking metro areas.
Dollars invested per capita (millions) – 2015
San Francisco-Oakland-Hayward, CA
San Jose-Sunnyvale-Santa Clara, CA
Boston-Cambridge-Newton, MA-NH
San Diego-Carlsbad, CA
Austin-Round Rock, TX
Los Angeles-Long Beach-Anaheim, CA
Seattle-Tacoma-Bellevue, WA
New York-Newark-Jersey City, NY-NJ-PA
Denver-Aurora-Lakewood, CO
Washington-Arlington-Alexandria, DC-VA-MD-WV
Baltimore-Columbia-Towson, MD
Atlanta-Sandy Springs-Roswell, GA
Chicago-Naperville-Elgin, IL-IN-WI
Charlotte-Concord-Gastonia, NC-SC
Minneapolis-St. Paul-Bloomington, MN-WI
St. Louis, MO-IL
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
Pittsburgh, PA
Nashville-Davidson-Murfreesboro-Franklin, TN
Portland-Vancouver-Hillsboro, OR-WA
Cleveland-Elyria, OH
Miami-Fort Lauderdale-West Palm Beach, FL
Cincinnati, OH-KY-IN
Orlando-Kissimmee-Sanford, FL
Dallas-Fort Worth-Arlington, TX
Columbus, OH
Indianapolis-Carmel-Anderson, IN
Kansas City, MO-KS
San Antonio-New Braunfels, TX
Phoenix-Mesa-Scottsdale, AZ
Houston-The Woodlands-Sugar Land, TX
Sacramento-Roseville-Arden-Arcade, CA
Detroit-Warren-Dearborn, MI
Riverside-San Bernardino-Ontario, CA
Tampa-St. Petersburg-Clearwater, FL
Providence-Warwick, RI-MA
Milwaukee-Waukesha-West Allis, WI
Virginia Beach-Norfolk-Newport News, VA-NC
Las Vegas-Henderson-Paradise, NV
Jacksonville, FL
$4,596.4
$3,223.6
$1,138.9
$393.5
$386.1
$340.4
$319.6
$309.5
$196.0
$163.7
$160.1
$149.1
$110.6
$107.7
$105.7
$90.7
$85.3
$83.4
$75.8
$68.7
$52.0
$48.6
$44.2
$41.5
$31.0
$29.0
$26.7
$25.7
$23.0
$21.4
$21.1
$19.8
$18.7
$13.5
$12.6
$10.1
$5.9
$5.2
$2.0
$0.1
Source: Thomson Reuters ThomsonOne Database and US Census
8
Investment in Pittsburgh’s technology sector | Trends and highlights
Number of venture rounds per million residents – 2015
San Francisco-Oakland-Hayward, CA
San Jose-Sunnyvale-Santa Clara, CA
Boston-Cambridge-Newton, MA-NH
Austin-Round Rock, TX
Pittsburgh, PA
San Diego-Carlsbad, CA
Seattle-Tacoma-Bellevue, WA
Nashville-Davidson-Murfreesboro-Franklin, TN
Los Angeles-Long Beach-Anaheim, CA
New York-Newark-Jersey City, NY-NJ-PA
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
Washington-Arlington-Alexandria, DC-VA-MD-WV
Denver-Aurora-Lakewood, CO
Portland-Vancouver-Hillsboro, OR-WA
Baltimore-Columbia-Towson, MD
St. Louis, MO-IL
Atlanta-Sandy Springs-Roswell, GA
Columbus, OH
Cincinnati, OH-KY-IN
Cleveland-Elyria, OH
Chicago-Naperville-Elgin, IL-IN-WI
Minneapolis-St. Paul-Bloomington, MN-WI
Indianapolis-Carmel-Anderson, IN
Providence-Warwick, RI-MA
Miami-Fort Lauderdale-West Palm Beach, FL
Phoenix-Mesa-Scottsdale, AZ
Sacramento-Roseville-Arden-Arcade, CA
Charlotte-Concord-Gastonia, NC-SC
Dallas-Fort Worth-Arlington, TX
Houston-The Woodlands-Sugar Land, TX
Detroit-Warren-Dearborn, MI
Orlando-Kissimmee-Sanford, FL
Tampa-St. Petersburg-Clearwater, FL
Milwaukee-Waukesha-West Allis, WI
Las Vegas-Henderson-Paradise, NV
Kansas City, MO-KS
San Antonio-New Braunfels, TX
Jacksonville, FL
Virginia Beach-Norfolk-Newport News, VA-NC
Riverside-San Bernardino-Ontario, CA
205.7
193.6
86.4
52.0
39.5
30.3
30.0
22.9
22.5
21.7
18.8
18.6
18.2
17.5
15.1
14.6
12.6
12.0
11.6
8.7
8.7
8.3
7.1
6.8
5.4
5.3
4.9
4.6
4.0
4.0
4.0
3.9
3.1
2.5
1.9
1.9
1.7
0.7
0.6
0.5
0.0
50.0
100.0
150.0
200.0
250.0
Source: Thomson Reuters ThomsonOne Database and US Census
March 2016
9
Pittsburgh’s universities are
a strong source for deal flow
Combined research budgets of Pittsburgh
research universities (millions)
$1,068.0
2011
$1,067.4
2012
$1,049.2
2013
$974.3
$973.8
2014
2015
Pittsburgh’s major research universities,
including Carnegie Mellon University, the
University of Pittsburgh and Duquesne University,
continue to serve as strong sources of funding for
research and technology development. In 2015,
the University of Pittsburgh ranked 6th among
US universities in terms of National Institutes of
Health funding received. The most recent U.S.
News and World Report rankings rated Carnegie
Mellon University as the top computer science
graduate school.
Source: Carnegie Mellon University, Duquesne University and
the University of Pittsburgh
Technology development and commercialization
in Pittsburgh’s research universities saw another
year of solid performance with 122 patents
being issued and 297 licenses, options and other
agreements granted in 2015. The universities
have generated 94 spin-out companies in the
last five years through direct licensing activity
and considerably more through indirect spin-out
activity.
Patent generation and licenses from Pittsburgh
research universities
128
122
96
79
82
A strong indicator of future commercialization
244
280
322
activity is the filing of an “Invention Disclosure”
2011
2012
2013
by a university researcher. This is the first step
Licenses, gptions and gther Ygreements
in seeking patent protection for an invention
and assessing its commercial potential. During Source: Carnegie Mellon University, Duquesne University and
the University of Pittsburgh
2015, the universities received 785 Invention
Disclosures, a 46% increase over 2014 resulting in
a cumulative total of 2,709 Invention Disclosures over the past five years.
333
297
2014
2015
Patents assued
Additionally, Pittsburgh’s local universities have created numerous resources to promote company formation, including
entrepreneurship curricula and clubs, incubators, business plan competitions, funding programs and a variety of other
commercialization services.
10
Investment in Pittsburgh’s technology sector | Trends and highlights
Growth in Pittsburgh’s technology economy took many forms in 2015: direct investment, company
acquisitions, expansion of operations from some of the world’s biggest names in tech, and new
campus initiatives to further increase commercialization and entrepreneurship. In quotes, press
releases and news articles, here’s a snapshot of the region’s progress from some of the people
making deals happen or reporting on them.
Oculus VR Inc. will be joining a growing tech community in Pittsburgh. With roughly 400
employees locally, Google is expanding into a second office building at Bakery Square in
Larimer/Shadyside. Apple is taking space in a new office building in Oxford Development
Co.’s 3 Crossings development in the Strip District, while ride-sharing pioneer Uber has
created an advanced technologies center in the same neighborhood.
Pittsburgh Post-Gazette
January 19, 2016
“Pittsburgh has a wealth of strong software
engineering talent, both from the universities
and within the startup ecosystem — that’s
why we opened Google’s office here 10 years
ago and why we’re still here and growing today.
People outside of the region are learning that
Pittsburgh is a creative, collaborative, let’s-getstuff-done type of city. We’re excited by the
growth of the local technology scene and glad
to be part of it.”
Elizabeth Schwab
Google Public Affairs Manager
“Bosch is focused on creating
solutions for a connected life. The
Pittsburgh region has served
as an exciting, tech-focused
hub where we have formed
successful collaborations –
especially with local world-class
universities and startups – to
help bring the next generation of
connected innovations to market.”
Mike Mansuetti
President, Robert Bosch LLC
Tata Consultancy Services (TCS) joins a growing group of major technology companies moving
to the Pittsburgh region in recent years… This groundbreaking collaboration with a multinational
company headquartered outside the U.S. marks a new chapter in the region, joining a rich
ecosystem of entrepreneurship supported and catalyzed by (Carnegie Mellon). “I’m very
pleased to welcome TCS to Pennsylvania,” said Pennsylvania Governor Tom Wolf. “This is an
exciting time as we see more and more companies establish and expand their presence in the
state. Carnegie Mellon has been especially adept in attracting cutting-edge businesses to and
near its campus, which helps to drive economic growth.”
Press release from CMU announcing $35 million gift to the university from TCS, a leading global
IT services and consultation organization based in Mumbai
March 2016
11
The (University of
Pittsburgh) is undertaking
sweeping changes in
how faculty research is
turned into new products
and services, with broad
implications for Pitt and
the local economy. The
new vision is a regional
economy fueled by
academic research, new
product development
and commercialization
— an economic engine
that has a chance
to eclipse steel and
medicine in the annals
of Pittsburgh history while
enhancing the university’s
educational role.
Pittsburgh Business Times
February 27, 2015
“Pittsburgh is ripe for
business investment.
A growing innovation
sector, access to top
local talent and proximity
to world-class research
institutions are all reasons
why we chose to make
our home here. In
our case, Pittsburgh’s
history as a leader in the
computer science and
robotics space sealed
the deal.”
John Bares
Director, Uber Advanced
Technologies Center
12
“Pittsburgh is really important to Smith &
Nephew, so not only are they committed to
keeping operations here, but they expect it to
expand. They’re bullish on Pittsburgh. It’s a
huge win for the region because we’re gaining
an international company that never had a
(significant) presence here before.”
Craig Markovitz
COO & Co-founder BlueBelt Technologies
Pittsburgh Business Times, regarding the company’s
October 2015 acquisition by Smith & Nephew
“Faros Properties is a private real estate investment company
focused on long-term, private investment opportunities in
cities with high concentrations of intellectual capital. The
highly educated work force is the reason we started investing
in Pittsburgh several years ago, and the reason we continue to
invest in this city. We have committed over $250M in the past
3 years to the region and we remain highly encouraged by the
future of the technology sector and the city as a whole.”
Jeremy Leventhal
Managing Partner, Faros Properties, LLC
“The Airstream’s parked in Pittsburgh… and we’ve wrapped
up a week-long set of events for founders, investors and the
broader tech community. I didn’t come into Pittsburgh with
any expectations or assumptions -- I was blown away; they’ve
got a good thing going here. I’m considering making
an angel investment in at least three Pittsburgh
companies ($100K+ revenue, reasonable valuations,
clean term sheets and incredibly smart founders).”
Paul Singh
Former Partner 500 Startups, founder of Disruption Corp. currently touring
North America with Results Junkies to meet entrepreneurs, report on start-up
companies, and make angel investments in promising communities
Investment in Pittsburgh’s technology sector | Trends and highlights
2015 Pittsburgh investment highlights
The following were among the Pittsburgh companies completing significant funding rounds in 2015:
4moms
Acrobatiq
Aethon
4moms is dedicated to making innovative baby
products that make life easier for parents.
Acrobatiq empowers educators to improve
student learning outcomes using its adaptive
platform, courseware library and professional
services, informed by the science of learning and
breakthrough use of learning data.
In health care and manufacturing settings,
Aethon automates internal logistics with its
TUG autonomous mobile robot, enabling the
transportation, delivery and tracking of supplies
and materials throughout the enterprise.
www.acrobatiq.com
www.aethon.com
CEO: Eric Frank
CEO: Aldo Zini
Investors: Bill & Melinda Gates Foundation,
Carnegie Innovations, Draper Triangle Ventures,
Hearst Ventures
Investors: Draper Triangle Ventures, Innovation
Works, Mitsui, Radius Venture Partners, Robert
Bosch Venture Capital, Trident Capital
ALung Technologies, Inc.
Avere Systems
Bossa Nova Concepts
ALung Technologies is a leading developer of
advanced medical devices for treating respiratory
failure.
Avere’s hybrid cloud solutions allow companies
fast access to data and compute resources
anywhere in the cloud.
Bossa Nova develops autonomous robots to
re-invent retail operations by capturing data that
helps store staff work smarter.
www.alung.com
www.averesystems.com
www.bnrobotics.com
CEO: Pete DeComo
CEO: Ron Bianchini
CEO: Martin Hitch
Investors: Allos Ventures, Audrey’s Kitchen,
Birchmere Ventures, BlueTree Allied Angels,
BlueTree Venture Fund, Fifth Third Bank,
Innovation Works, Pittsburgh Life Sciences
Greenhouse, PLSG Accelerator Fund, Riverfront
Ventures, West Capital Advisors
Investors: Lightspeed Ventures, Menlo Ventures,
Norwest Venture Partners, Tenaya Capital,
Western Digital Capital
Investors: Innovation Works, Riverwood Capital
LLC, Private Investors
Cognition Therapeutics
Cohera Medical
Complexa
Cognition Therapeutics is a clinical stage drug
discovery company developing new therapeutics
to treat patients suffering from Alzheimer’s
disease and other neurodegenerative disorders.
Cohera Medical, Inc. is a rapidly growing medical
device company actively developing surgical
adhesives and sealants.
Complexa is a biopharmaceutical company
that develops therapies for the treatment of
inflammatory and fibrosis-related diseases.
www.coheramedical.com
www.complexarx.com
CEO: Patrick Daly
CEO: Josh Tarnoff
Investors: Bradford Capital Partners, Innovation
Works, Kern Medical LLC, KKR, Pittsburgh Life
Sciences Greenhouse, PLSG Accelerator Fund,
Private Investors
Investors: BlueTree Allied Angels, Innovation
Works, JAFCO, Mid-Atlantic Angels Group,
Pittsburgh Life Sciences Greenhouse, Riverfront
Ventures, Scientific Health Development,
Upstart, Private Investors
www.4moms.com
CEO: Rob Daley
Investors: Bain Capital Ventures, BlueTree Allied
Angels, Castanea Partners, Innovation Works,
West Capital Partners, Private Investors
www.cogrx.com
CEO: Hank Safferstein
Investors: 2M, Ariel Southeast Angel Partners,
Atlanta Technology Angels, Bios Partners,
BlueTree Allied Angels, Cowtown Angels, Dolby
Family Ventures, Golden Seeds, Innovation Works,
Maine Angels, New York Angels, Ogden CAP
Associates LLC, Palm Beach Investment Research
Group, Pittsburgh Life Sciences Greenhouse,
PLSG Accelerator Fund, Scale Investors, Tech
Coast Angels, TMC Corporation
March 2016
13
2015 Pittsburgh investment highlights
Duolingo
First Insight
Identified Technologies
Duolingo is the world’s most popular online
language-learning platform and the most
downloaded education app in the world on both
Android and iOS devices, with over 120 million
learners.
First Insight partners with retailers and
manufacturers to eliminate the high cost of new
product failures by enabling them to design,
select, price and market new winning products.
Identified Technologies helps industrial
companies, particularly in oil/gas, operate more
efficiently and safely through data and analytics
by deploying a proprietary drone to capture data.
www.firstinsight.com
www.identifiedtech.com
CEO: Greg Petro
CEO: Dick Zhang
Investors: Adams Capital Management, Updata
Partners
Investors: AlphaLab Gear, Birchmere Ventures,
Innovation Works, Private Investors
Knopp Biosciences
PECA Labs
RedZone Robotics
Knopp Biosciences works to discover, develop
and deliver breakthrough medicines for
devastating diseases and to improve global
access to health care.
PECA Labs is dedicated to bringing better
medical devices to orphan populations, with
initial focus on the pediatric cardiovascular
system.
RedZone Robotics is in the business of sewer
asset management. Their advanced turnkey
solutions and products provide smart data to
solve pipe problems.
www.knoppbio.com
www.pecalabs.com
www.redzone.com
CEO: Michael Bozik
CEO: Doug Bernstein
CEO: Mike Lach
Investors: Innovation Works, Kramer Capital,
LaunchCyte, Saturn Management
Investors: BlueTree Allied Angels, Innovation
Works, Private Investors
Investors: ABS Capital Partners, Innovation
Works, Smithfield Equity Associates, Private
Investors
www.duolingo.com
CEO: Luis von Ahn
Investors: Google Capital, Kleiner Perkins
Caufield & Byers, New Enterprise Associates,
Union Square Ventures
TM
Rinovum Women’s Health
Seegrid
Thread LLC
Rinovum Women’s Health, LLC. is dedicated
to bringing products into the market that will
enhance women’s lives and empower them to
take charge of their health.
Seegrid, the pioneer and leader in threedimensional vision navigation, provides unique
and revolutionary automation technology for
materials handling.
www.rinovum.com
www.seegrid.com
CEO: Steve Bollinger
CEO: Jim Rock
Thread takes trash from the streets in the
developing world and transforms it into fabric
that is sold, along with the stories and metrics
behind it, to large apparel and accessories brands
that are trying to improve their transparency and
authenticity.
Investors: BlueTree Allied Angels, Innovation
Works, Pittsburgh Life Sciences Greenhouse,
PLSG Accelerator Fund, Thirteen Ventures,
Private Investors
Investors: Giant Eagle Corporation, Innovation
Works, Private Investors
14
Investment in Pittsburgh’s technology sector | Trends and highlights
www.threadinternational.com
CEO: Ian Rosenberger
Investors: BlueTree Venture Fund, DNS Capital,
Draper Triangle Ventures, Innovation Works,
Riverfront Ventures, Private Investors
tm
Treatspace, Inc.
Wombat
Treatspace builds life-saving health networks for
medical practices and hospitals. The Treatspace
Referral Management Platform optimizes care
coordination for quality and cost-minded, highperformance medical practices.
Wombat Security Technologies provides
information security awareness and training
software to help organizations teach their
employees secure behavior.
www.treatspace.com
CEO: Rick Cancelliere
Investors: AlphaLab, Birchmere Ventures,
Innovation Works, Pittsburgh Life Sciences
Greenhouse, SWAT Capital, XMI Holdings, Private
Investors
www.wombatsecurity.com
CEO: Joe Ferrara
Investors: BlueTree Allied Angels, Idea Foundry,
Innovation Works, Level Equity, Pittsburgh Equity
Partners, Riverfront Ventures, Private Investors
March 2016
15
Methodology
The data in this report comes from a combination of the Dow Jones VentureSource and ThomsonOne databases; private
company data collected by Innovation Works, Inc.; and information reported by Carnegie Mellon University, Duquesne
University and the University of Pittsburgh. The investment rounds tracked in these datasets were completed by companies
in the Pittsburgh region from January 1, 2011, to December 31, 2015. Note that changes may occur in this report from
year-to-year due to updates in third-party databases and adjustments made to best reflect the timing of investment for
rounds that have “rolling closes.” For the purpose of this report, both equity investments and convertible note investments
were counted as “venture” investments. The geographic boundary of the Pittsburgh region used in this report corresponds
to the Pittsburgh Metropolitan Statistical Area, as utilized by the U.S. Census Bureau. Throughout this report, the terms
“deal” and “round” are used interchangeably, and refer to a single reported round of funding. Companies may complete
more than one fundraising round in a single year, in which case each round is counted as a separate “deal.”
About EY
EY is a leader in helping to take companies public
worldwide. With decades of experience, our global
network is dedicated to serving market leaders and
helping businesses evaluate the pros and cons of an
IPO. We demystify the process by offering IPO readiness
assessments, IPO preparation, project management
and execution services, all of which help prepare you
for life in the public spotlight. Our Global IPO Center of
Excellence is a virtual hub which provides access to our
IPO knowledge, tools, thought leadership and contacts
from around the world in one easy-to-use source.
www.ey.com/ipocenter
EY’s worldwide Strategic Growth Markets Network is
dedicated to serving the changing needs of high-growth
companies. For more than 31 years, we’ve helped many
of the world’s most dynamic and ambitious companies
grow into market leaders. Whether working with
international mid-cap companies or early-stage
venture-backed businesses, our professionals draw upon
their extensive experience, insight and global resources
to help your business succeed.
www.ey.com/sgm
16
About Innovation
Works
Innovation Works, Inc. (IW) invests capital, business
expertise and other resources into high-potential
companies with the greatest likelihood for economic
impact in the Pittsburgh region. IW is the single largest
investor in seed-stage companies in this region and
is one of the most active seed-stage investors in the
United States. Nearly three-quarters of all recent
venture-funded companies in the Pittsburgh region had
previously received funding from IW. In addition to the
seed fund, Innovation Works, Inc. has two nationally
ranked accelerators: Alphalab and Alphalab Gear. IW
also manages Riverfront Ventures, LLC, an earlystage venture capital fund. Innovation Works, Inc. is
an initiative of the PA Department of Community and
Economic Development and is partially funded by the
Ben Franklin Technology Development Authority.
For more information, please visit
www.innovationworks.org
Investment in Pittsburgh’s technology sector | Trends and highlights
EY | Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in assurance, tax, transaction and
advisory services. The insights and quality services
we deliver help build trust and confidence in the
capital markets and in economies the world over. We
develop outstanding leaders who team to deliver on
our promises to all of our stakeholders. In so doing,
we play a critical role in building a better working
world for our people, for our clients and for our
communities.
EY refers to the global organization, and may refer to
one or more, of the member firms of Ernst & Young
Global Limited, each of which is a separate legal entity.
Ernst & Young Global Limited, a UK company limited
by guarantee, does not provide services to clients. For
more information about our organization, please visit
ey.com.
Ernst & Young LLP is a client-serving member firm of
Ernst & Young Global Limited operating in the US.
© 2016 Ernst & Young LLP, Innovation Works, Inc.
All Rights Reserved.
BSC No. 1602-1844546
ED none.
www.ey.com
This material has been prepared for general
informational purposes only and is not intended to be
relied upon as accounting, tax, or other professional
advice. Please refer to your advisors for specific
advice.
Neither Innovation Works, Inc., Ernst & Young LLP
nor any other member of the global Ernst & Young
organization can accept any responsibility for loss
occasioned to any person acting or refraining from
action as a result of any material in this publication.
On any specific matter, reference should be made to
the appropriate advisor.
© 2016 Ernst & Young LLP, Innovation Works, Inc.
All Rights Reserved.