Ahead of our TechCrunch City Spotlight: Pittsburgh event tomorrow, I spoke to current Mayor Bill Peduto and Dave Mawhinney, the executive director of Carnegie Mellon University’s Swartz Center for Entrepreneurship. Like many in the Steel City startup community, both share a focus on the historically difficult task of keeping startups in town.
For more on investing in Pittsburgh, be sure to tune in to our City Spotlight on Tuesday, June 29, where we will be joined by Peduto, Duolingo director of engineering Karin Tsai and Carnegie Mellon University President Farnam Jahanian. Register for the free event here.
I asked Peduto and Mawhinney what the single biggest obstacle has been in building out Pittsburgh’s startup ecosystem. Both responded the same way: venture capital. Raising funding is, of course, a hurdle regardless of location, but many VCs have been reluctant to invest in startups outside of traditional hubs like San Francisco and New York.
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“But one of the challenges is getting that capital to come into the community,” said Mawhinney, who leads CMU’s startup efforts. “If you look at how much Uber ATG brought in, how much Argo AI and Aurora — collectively, those three companies, which have all licensed CMU technologies, they’ve all got over $7 billion in collective capital. Not all of it will be spent here, but a lot of it will be spent here. But that doesn’t necessarily trickle down to the next AI startup raising their first $3 million.”
Peduto said growing the VC pipeline has been a focus during his time as mayor.
“I think we’ve been able to convince investors from the coast that the companies don’t need to leave Pittsburgh in order to be highly successful and see their investment pay off,” he told TechCrunch. “However, I believe if we had more venture capital arriving here to help take early-stage companies into that critical next stage of expansion, it would build off itself and it would excel growth in all of the industry cluster, significantly.”
As we began the work of pulling together this week’s event, we surveyed a number of local VCs about their experiences around funding in the growing Pittsburgh ecosystem. Yvonne Campos of Next Act Fund LLC, an organization focused on early-stage funding for women-led startups, reflected concerns raised by Peduto and Mawhinney.
“What we need is more capital — angel funds, venture funds so that entrepreneurs have a variety of funding sources to go to locally,” Campos told TechCrunch. “We definitely need more funding for women-led businesses — women raise about one-third less capital than men-led companies. Not because of the business idea or leader, but because we invest in companies where we have the most comfort — we invest in people that look like us. Nationally, only about 20%-25% of all angel investors are women. We need more women to become active as investors.”
For Kleiner Perkins Partner and CPO (and general Pittsburgh cheerleader) Bing Gordon, the biggest challenge facing the city’s startup community is a lack of talent beyond the sorts of researchers one would expect from a city with world-class schools like Carnegie Mellon and the University of Pittsburgh.
“[Startups] need to import CFOs, product managers, ad sales,” Gordon said. “As a rule, digital companies move more slowly when they’re not in SF, Bangalore or Shanghai. Many I spoke with believed that the pandemic could ultimately serve as a sea change in helping decentralize the startup ecosystem beyond those sorts of well-established hubs.
“We are already seeing all of these effects in play,” Gordon said.
“Larger tech companies and growth-stage startups have opened offices in Pittsburgh to take advantage of the talent here, especially on the technical side,” said Jim Jen, COO of Innovation Works and founding managing director of AlphaLab. “At the same time, Pittsburgh companies have recruited key hires from outside the region and others locally have found remote opportunities while staying in Pittsburgh. The key for Pittsburgh’s continued growth is to continue building the ecosystem so that companies can thrive and grow here and to continue making Pittsburgh a place that people want to live in.”
Peduto said that this had been a focus for his administration, which will end in January 2022 when he leaves office; he was bested by a Democratic challenger in the spring primary.
“It’s incumbent upon local government to create an environment where people want to live,” the mayor said. “Quality of life matters and is a key indicator in building out a 21st-century urban economy. All the different amenities that we add into city government matter. People want to live in a place that provides them with opportunities that don’t involve being at home or being at work.”
Campos added that she expects the next five years to bring a more diversified workforce and varied ecosystem to the city.
“I count on the startup scene being much more diverse — much more experimental and risk-taking,” she said. “Ideas developed that will improve how we live, how we service our customers, how we solve problems, especially as it relates to women’s lives. Hopefully Pittsburgh will be a hub for femtech, fintech, healthcare, longevity and aging — all are perfect for our market.”
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