VC numbers for Q2 show big growth in national dealmaking, but Pittsburgh struggles to keep up

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

Venture capital investments have surged across the country this year so far as states and cities reopened for business, but Pittsburgh still lags behind.

The second quarter data, released July 14 from the PitchBook-NVCA Venture Monitor, showed a total investment of $75 billion across 4,302 deals nationally. So far this year, venture-backed companies have raised $150 billion, which is over 90% the 12-month total for 2020, indicating unprecedented venture capital success should these trends continue. It indicates a strengthening economy as the pandemic wanes, as well as changing investment trends.

“U.S. venture investment levels continue to rise as mega-deals [worth $100 million or more] become more common and nontraditional investor participation in VC becomes standard. As the industry looks toward the second half of the year, investors are evaluating whether this level of dealmaking will persist and what its broader impact might be,” said John Gabbert, founder and CEO of PitchBook, in a statement. “The robust exit market of the last 24 months has returned record amounts of liquidity to LPs and more exits happening across the VC ecosystem is a broadly optimistic sign for the health of the venture market going forward.”

The mid-Atlantic region alone saw just over $14.9 billion invested over 752 deals. Pittsburgh, however, brought in a paltry $40.36 million total across only 11 deals with local tech companies.

Those numbers may be surprising given the tech industry’s growth here over the past decade, and recent resolutions and program funding from community leaders and organizations to continue that momentum as the economy rebounds. Still, the data shows that concerns about Pittsburgh’s lack of capital for startups and growth companies compared to other tech ecosystems in the region might be justified.

The second quarter numbers are not only far behind the rest of the country, but down from the city’s first quarter data as well, which saw a total of $62.95 million invested across 26 tech companies here. There’s also been a significant year-over-year drop in venture capital for Pittsburgh, too, after the city attracted $76.65 million over 24 deals in the second quarter of 2020.

This suggests that this year, the city will likely not surpass 2020’s 12-month total of $583.21 million across 108 local companies.

The biggest deal in Pittsburgh this quarter as a $12 million Series A round for Lawrenceville-based Edge Case Research, a company specializing in safety platforms and products for autonomous technology. Also leading the quarter was an $8 million angel investment in BluPanda, a Strip District business focused on healthcare management automation. DeltaTrainer, Apollo, and Innovu each raised $4 million in seed, Series A and later stage venture capital funding, respectively.

The Venture Monitor did not include an $11 million Series B round raised by North Side-based IRA industry tech company IRALOGIX earlier this June. That number brings the total second quarter venture capital to $51.36 million, still behind the previous quarter.

Five of the 10 top deals this quarter were in healthtech or life sciences — including Lipella Pharmaceuticals, ALung and Epistemix in addition to BluPanda and Apollo — perhaps indicating increased investors interest in that sector following renewed focus on it during the pandemic.

There is an argument, too, that Pittsburgh’s local venture capital community might bring new support in the near future as nascent firms like Black Tech Nation Ventures and 412 Venture Fund build out their portfolios.

National Venture Capital Association Research Director Michael Chow said the lack of Q2 investment doesn’t necessarily mean Pittsburgh isn’t being supported.

“Venture-backed companies located in Pittsburgh like Knopp Biosciences, BlueSphere Bio and Gecko Robotics could very well have enough money on hand that they don’t feel a need to raise capital right now,” he told Technical.ly via email. “All three of these companies raised capital in December 2019 or later, so capital is definitely still being invested into the area. Another sign of the health of Pittsburgh’s VC ecosystem is the terrific year it had in terms of exits in 2020 with $4.1 billion in exit value, a new annual record.”

But the partial successes and potential explanations behind these new numbers remain bittersweet, as there was little representation in recent deals from Pittsburgh’s more dominant robotics and autonomous technology sectors. Worse yet, while the second quarter deals were spread across angel, seed and early-stage investments, a news release for the Venture Monitor noted that the second half of the year is expected to see numbers grow more for late stage ones — a disappointing prediction for a city with a higher proportion of startups and tech giants compared to its growth companies, with the major exception being Duolingo.

These numbers show that despite promises from community members old and new to reinvigorate Pittsburgh as a global hub of innovation, companies and ecosystem leaders here might need to devote more time and energy to bringing outside funding to the city, and encouraging local wealth to put its money into startups.