The Pittsburgh region recently received a ray of sunshine amid the COVID-19 clouds when Innovation Works and partner Ernst & Young released their annual regional investment report and analysis. Innovation Works (IW) is part of the statewide network that provides seed investment and expert assistance. It also operates the AlphaLab and AlphaLab Gear startup accelerators. IW also interacts in numerous ways with the University of Pittsburgh as a mentor and partner for Pitt innovation projects as they mature and spin out of the University.
The region set a new record for startup funding attracting nearly $3 billion in investment in 2019, a staggering 500 percent increase over the previous year. Although the number of startups funded dipped slightly to 139 from 147 in 2018, that only meant that the funding rounds on average were larger.
Corporate investors paced the year investing a whopping $1.7 billion, largely in computer vision and other autonomous driving and robotics startups. But venture capital was also up nearly 400 percent year-over-year to nearly $750 million. Encouragingly, 39 entities made their first investment in a Pittsburgh startup in 2019, showing that outside interest in the region’s growing tech clusters is accelerating.
Click here to access the full report.
The Innovation Institute caught up with Larry Miller, Innovation Works’ managing director for the life sciences, for a discussion of the report’s findings with a focus on the life sciences sector.
Innovation Institute: What an amazing year for the region’s technology community 2019 turned out to be from an investment perspective. Was this a flash in the pan, or is there something more going on?
Larry Miller: There is no question there were some large deals that put some extra juice in this year’s numbers, but when you consider that these deals represent the fruition of many years and decades of research and development in the robotics and autonomous driving space, it signifies to me that the cluster is beginning to reach a critical mass.
Even if you were to take some of those large corporate deals out, we would still be talking about a record year. Importantly, when you look at the data from a trailing three year average standpoint, what you see is a nice steady upward slope, so this year’s results reflect a steady positive trend.
Innovation Institute: Turning more specifically to the life sciences, what do the 2019 numbers show?
Larry Miller: The report shows that the region had a record number (75) of seed and accelerator funding events in 2019, a significant number of those in the life sciences. That means that the pipeline for future angel and Series A rounds, or corporate investment, is growing for these life science startups.
Innovation Institute: What are some of the IW portfolio companies in the life sciences that we should be keeping an eye on?
Larry Miller: In the medical device space you have companies like those that have a tie to Pitt’s research and/or people that IW has invested in such as ALung Technologies, which is in the middle of clinical trials for its artificial lung device. Forest Devices has developed breakthrough technology to diagnose strokes. PECA Lab’s synthetics cardiac devices have provided life-saving products for infants born with Right Ventricular Outflow Tachycardia (RVOT). In the personalized medicine and machine learning space you have companies like Ariel Precision Medicine that is developing gene sequencing to uncover genetic factors driving disease and using AI to match the patient data with historical treatments to provide decision support. In the therapeutic space you have Peptilogics, which is creating treatments for antibiotic resistant infections, and Complexa Inc., which is developing treatments for inflammatory and fibrotic diseases, both of which are in clinical trials.
This is just scratching the surface. There are too many to mention in a blog post. All we need is for a few of these to deliver disruptive clinical procedures and outcomes in order to start shrinking the gap identified in the Brooking Institution report (Pittsburgh: Rise of an Innovation City) between the amount of research that happens here and the expected growth that should be occurring in the region’s life science sector.
Innovation Institute: You mention the Brookings' report. One of the building blocks that it identifies as necessary for the Pittsburgh life science industry cluster to reach a critical mass is improved infrastructure. How is the region responding?
Larry Miller: There are concrete steps that are happening to address the gaps identified by Brookings. I would start by pointing out the much more robust support for startups at Pitt. You have things like the First Gear program and the Pitt Innovation Challenge (PInCh) and the Randall Family Big Idea Competition, along with entrepreneurs in residence and other resources that for the most part didn’t exist five years ago. It is no surprise that Pitt has seen such a dramatic rise in the number of spinouts over the past several years.
Then you have the maturing of UPMC Enterprises and the commitment it has made to invest $1 billion over the next four years into life science startups including the start up of a pharmaceutical company. That’s like having a venture capital fund sitting right on top of the Pitt-UPMC clinical and academic research machine. It’s a powerful combination.
Innovation Institute: What else is happening that gives you hope for the growth of the life science sector in Pittsburgh?
Larry Miller: There are a growing number of related resources such as the Pittsburgh Health Data Alliance (PHDA) which brings together Pitt, UPMC and Carnegie Mellon, each with their unique strengths and applying them around the digital health, precision medicine and machine learning space.
And finally we are starting to get some of the physical infrastructure in place for sustainable growth of the sector. The Fifth and Forbes corridor through Oakland is going through a dramatic re-shaping, and UPMC has started constructing the first of three new research hospitals, as well as the Immune Therapy and Transplant Center, in partnership with Pitt, which will include space for industry collaborators. So I believe there will be more regional investment, expertise, partners and space to create the next great life sciences companies right here in Pittsburgh.
If you are a Pitt faculty or student with a research innovation for which you would like to explore its commercial potential, the Innovation Institute is offering upcoming opportunities for funding and mentoring.
The Michael G. Wells Health Care Competition and Kuzneski Innovation Cup combined offer more than $60,000 in awards to assist in the commercial application of your research.
