Pittsburgh VC is (still) looking up, with a strong Q4 to end 2022

Editor’s note: These figures may vary slightly, as some deals aren’t accounted for until weeks after quarterly VC reports are published.

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Data released by PitchBook and the National Venture Capital Association in their 2022 PitchBook-NVCA Venture Monitor report on Thursday shows that the region ended the year on a high note.

Following a standout Q3 that saw $171.53 million raised across 24 deals, according to the new report, local companies brought in $224.65 million across 17 deals in Q4. However, this data contains a discrepancy: The Q4 report conflates RoadRunner Recycling’s $20 million Series D extension round from November with its original $70 million Series D from January, purporting the waste management tech company raised one $90 million raise in November. A RoadRunner rep confirmed to Technical.ly it had raised just $20 million in Q4.

That means Pittsburgh companies only raised a total of $154.65 million in Q4. So while Q4 didn’t really surpass the standout Q3, it still makes for an impressive tally: Overall, 2022 saw $593 million raised across 93 deals, compared to 2021’s disappointing $309 million across 98 deals. Those local 2021 figures had put Pittsburgh significantly behind the unprecedented VC activity happening then on a national scale, as investors took advantage of cheap money and favorable monetary policy that’s since shifted.

The national view looks a little different in 2022. Following the free-flowing investments of 2021, PitchBook researchers noted a national decline in spending in the last year, naming factors such as the continued impacts of the COVID-19 pandemic, interest rates and global conflicts.

The Venture Monitor’s executive summary acknowledges 2022 couldn’t compete with 2021 nationally, either: “In raw numbers, 2022 was a great year for the VC industry, with most indicators of market activity at or near record highs. When graded against any year other than the stratospheric 2021, industry activity was extremely strong.”

“Although earlier stage deal activity and fundraising totals show remarkable resiliency in 2022, the overall slowdown in annual VC activity reflects the sizable headwinds presented by ongoing macroeconomic factors, rising interest rates and frozen avenues for startup liquidity,” noted PitchBook CEO and founder John Gabbert in a statement accompanying the report’s release. “Unable to justify the sky-high valuations seen in 2021 and retreating from the ‘growth-at-all-costs’ mindset seen in recent years, many investors are pulling back until the ecosystem returns to a more palatable normal.”

Biggest deals

Here are Pittsburgh’s 10 largest deals in Q4 2022:

• RoadRunner Recycling — But again, this data featured a discrepancy: The recycling tech company raised $20 million in November, not $90 million.
• WATT Fuel Cell — The  Mount Pleasant company raised a reported $82 million in December.
• Maitri — The medical cannabis firm raised $18 million in November.
• Innovu — The Canonsburg B2B company raised a reported $16 million in Q4, which appears to combine the figures in two SEC filings for Innovu from March and December.
• Honeycomb Credit — The crowdfunding loan platform raised $7 million. When Technical.ly reached out for details on the raise in December, CEO George Cook declined to comment because the raise is ongoing.
• ERIN Technologies — The Employee Referral Invitation Network raised a $5 million round with plans to triple headcount, CEO Mike Stafiej told us in October.
• Liquid X, Pittsburgh Knights, HEARTio and Resilient Lifescience are each cited in the report as raising $1 million.

Cause for optimism

In the fall, Pittsburgh VCs told Technical.ly the city was in a good position to withstand any possible economic storms, even though the region’s venture market is still relatively new. This has been attributed to Pittsburgh’s strength in healthcare, biotech, autonomy and robotics. The sentiment was echoed by Zach Malone, partner at Magarac Venture Partners, who said this week that such strengths are why he believes Pittsburgh will see more and more VC pumped into the startup ecosystem.

“Due to the strength of this region’s artificial intelligence, healthcare [and] the amount of talent coming out of the top universities in our city, inevitably it’s going to have an impact on attracting financing by starting very attractive companies,” Malone said of local entrepreneurs. “That will happen in spite of macroeconomic conditions.”

How much funding remains to be seen, of course. But with caution and hope for the future, Malone thinks Pittsburgh remains in a good position in terms of market viability.

“There’s just momentum,” he said. “No matter what happens nationally, it’s going to continue to build locally.”

Atiya Irvin-Mitchell is a 2022-2024 corps member for Report for America, an initiative of The Groundtruth Project that pairs young journalists with local newsrooms. This position is supported by the Heinz Endowments.