Pittsburgh’s standing in the race to attract startup business has improved as the locus of early investment continues to migrate away from Silicon Valley, according to a new report on international startup growth.
Startup Genome ranked Pittsburgh 13th among the world’s emerging startup ecosystems in a study released Tuesday, up from 23rd place last year. Emerging ecosystems are considered to be in the early stages of growth, unlike dominant hubs such as Silicon Valley and New York City. Detroit topped the list of emerging ecosystems.
Jason Griess, ecosystem director at InnovatePGH, noted that Pittsburgh’s improvement in the rankings stems primarily from big exits at companies with a significant local presence, even as a comparative lack of early-stage capital continues to dog the Steel City.
In the past year alone, Duolingo, Aurora, Stronghold Digital Mining and Cognition Therapeutics have gone public. Major acquisitions created additional momentum.
“The basic takeaway is that startups can stay in Pittsburgh and scale to the point where they can have a successful exit,” Griess said. “And that's an important thing to understand because people often think about Silicon Valley, New York, [and] Boston as being big enough from a talent perspective, big enough from an investment perspective, [preventing them from moving] into another city in order to get to a successful exit.
“Proving that we can do that here in Pittsburgh is, I think, a big part of establishing ourselves as a competitive startup ecosystem.”
Over the past decade, Silicon Valley’s global share of early-stage investment dollars has declined by half, from 25% to 13%, according to the Startup Genome report. Because such funding is a leading indicator of where technology will develop, researchers said, “this trend suggests that the growth of tech elsewhere will continue to be faster than in Silicon Valley.”
Griess said that if Pittsburgh can capture more of those gains, it will attract a more dynamic range of businesses that can pull more workers into the region. Studies have determined that digital business models will create the majority of global economic value within the next decade.
“There is a resilience that you get as a community when you have many small, medium-size and scaling companies in one geographic region,” Griess said. And he added, “The people who are already here will find themselves having access to more jobs in and around the tech community."
“Not all jobs are full-stack software development jobs," he continued. "And when other businesses thrive, businesses that support those companies will also see an increase in their prosperity.”
Still, Griess noted that startups in Pittsburgh tend to have an especially difficult time accessing capital early on. In fact, the Startup Genome study finds that local companies typically raised just $50,000 in seed funding between the second half of 2019 and the end of 2021, falling 13 times short of the global average of $671,000.
The region also lagged the rest of the world in attracting venture capital, drawing just $1.5 billion in such investments between 2017 and 2021. The international average stood at $4.5 billion during the same period.
But Pittsburgh matched other places in financing companies that advance past the seed round, according to the new research. It shows that the median series A haul in the region amounted to $4.7 million between the second half of 2019 and the end of 2021, the exact same as the global average.
“We're trying to understand how to grow our local investment community in that seed stage so that people don't have to leave the city or look at investors in different places to get that crucial funding where they're scaling fast,” Griess said. He said that InnovatePGH is examining the problem with the area’s startup accelerators, university entrepreneurship offices, and other business support organizations.
“The key message here is that we are seeing momentum, and we are seeing growth and acceleration of momentum,” he said of Pittsburgh’s No. 13 spot in the new rankings. "But we're not done, and there are a lot of opportunities for people to get engaged in this work. And if they want to, my door, my phone, my DMs are always open.”
