Robotics and healthcare drive $80M in Pittsburgh Q3 venture capital investment

Fundraising in Pittsburgh is back on track to continue growing, after a dip last quarter. 

Venture capital investments in the region increased by roughly 16% in Q3 compared to Q2. Companies from Pittsburgh and the surrounding suburbs raised $80 million across 16 deals during the last three months, according to the latest Venture Monitor report from PitchBook and the National Venture Capital Association (NVCA). 

That’s due to the growing investment interest in several key sectors prevalent in the Pittsburgh region. Plus, just one deal — a $36.2 million raise by Noveome Biotherapeutics — accounted for nearly half of the total VC investment.

It’s an optimistic signal for Pittsburgh’s long-term investment prospects, according to Seán Sebastian, founding partner of Birchmere Ventures and general partner of Black Tech Nation Ventures.

“I think of Pittsburgh’s venture and entrepreneurship ecosystems as small but mighty,” Sebastian told Technical.ly. “Our region doesn’t yet have the level of investment activity that I think it warrants, but the deals that are getting done are very notable.” 

The year started strong with $238.7 million raised across 17 deals in Q1. Venture capital investments fell drastically in Q2 with $66.9 million raised across 16 deals. The ebb and flow is normal, though,  the number of deals is stuck at a 7-year low.

Quarter-to-quarter values can swing disproportionately due to a few big or small outlier deals, Sebastian said, so “the more important point is the emergence of generative AI as a critical element of virtually all venture-backed companies,” which plays a major role in the region. 

Since gaining popularity in 2022, generative AI has been widely adopted by organizations for a variety of business functions. Some of the industries with the highest reported engagement with generative AI tools include healthcare, energy and technology, according to a report from McKinsey & Company last year. 

Despite Pittsburgh’s promising VC investments, national VC trends show more signs of struggle in the market. 

Noveome Biotherapeutics, Mach9 Robotics led with biggest deals

Startups in the healthcare sector continued to see the most investment this quarter. In Q1 and Q2, medical startups also raised the largest amount of funds in the region. 

As a city with a high healthcare presence, this makes sense. Pittsburgh’s Q3 surge in deal value could be attributed to regional strengths in certain industries, said Rezzan Kose, a venture partner at 412 Venture Fund in Pittsburgh. 

“The increase in Q3 is likely due to a few large later-stage deals in key sectors like [machine learning], robotics and healthcare reflecting investor confidence in established companies,” Kose said. “The timing of deal closures and sector-specific momentum also played a role in driving up total invested capital.” 

Along with the strong ecosystem of those industries, Kose said two other factors set Pittsburgh apart from other regions and impact its investment outlook positively. The lower cost of operations compared to other major cities and the support for local research institutions like Carnegie Mellon and the University of Pittsburgh attract startups and other companies. 

These are the region’s five biggest deals, according to PitchBook data: 

1. Noveome Biotherapeutics, a biopharmaceutical company in South Oakland, raised $36.2 million in later-stage Series E funding in August. The financing will primarily support the advancement of the company’s clinical stage program for the treatment of Necrotizing Enterocolitis, according to a press release from last year. 
2. Mach9 Robotics, a geospatial software development startup in Bloomfield, raised $14.4 million in seed round funding in July. The deal increased the company’s value to $50 million. 
3. Sudoc, a chemical industry startup, raised $10 million in early-stage VC in July. 
4. Rimsys, a regulatory information management platform for medical device companies located in the North Side, raised $5 million in Series AA funding in September. The deal increased the company’s value to $26 million. 
5. FifthWall Solutions, a Wexford-based cyber insurance and risk management company, raised $5 million in Series A funding in August. 

Deals in the Pittsburgh region made up 27% of the total 59 deals in Pennsylvania and 24% of the US total raised, $320.67 million. PitchBook identified zero Pittsburgh startup exits, or founders selling their companies, in the third quarter of 2024. That’s the same as last quarter.

As always, it’s important to note: These figures may vary slightly after publication, as some deals aren’t accounted for until weeks after quarterly VC reports are published, or PitchBook may find errors in its data. 

For example, local robotics startup Skild AI raised a whopping $300 million Series A in July, and it is not on PitchBook’s list. 

As the region’s tech ecosystem continues to grow, investments like in the top five companies this quarter “demonstrate the impact that venture capital can have in accelerating innovation,” said Ven Raju, president and CEO of Innovation Works and managing director of Riverfront Ventures, which was a partial investor in Rimsys this financing round. 

Pittsburgh’s growth contradicts national trend of ongoing struggle

While deal flow in the Pittsburgh region picked up in Q3, that wasn’t the case for VC investments across the US. 

VCs spent $37.5 billion on an estimated total of 2,794 deals across the country in Q3. This was down 2% from Q1’s $38.4 billion and 32% from Q2’s $55.5 billion. 

Startups aim to sway that moving forward, or at least wait out the downturn. 

Venture-backed companies are opting to stay private longer in hopes of a more favorable dealmaking environment, according to PitchBook’s report. Despite this trend, the report projects that the total number of deals this year will be similar to 2023, with total value expected to reach $175.2 billion. 

This would surpass 2020’s total values but remain below the high seen during the zero-interest-rate policy era of 2020 to 2022. 

Q3’s numbers can be attributed to the ongoing disruption of the entrepreneurial ecosystem by the Federal Trade Commission’s focus on mergers and acquisitions, according to Bobby Franklin, president and CEO of trade association NVCA. 

While there are promising signals like lower rates and platform shifts related to AI, PitchBook’s executive vice president of research and market intelligence Nizar Tarhuni still expects the VC landscape to remain uncertain and strained for the time being. 

“The venture markets continue to face significant headwinds,” Tarhuni said, “in a market defined by higher costs of capital, allocation adjustments by [Limited Partners] with other promising exposure sleeves and an inability to drive meaningful distributions.”