For startup businesses in Pittsburgh, 2016 was a very good year.
Overall investment in startups ballooned 34.6 percent to $376 million from $280 million in 2015, according to a new report by Innovation Works Inc. and Ernst & Young LLP.
In addition, venture capital investment rose 8.1 percent last year to $235.1 million from $217.4 million in 2015, bucking a nationwide decline in the funding stream, which is usually among the larger funding sources available to startup companies.
“The big takeaway is Pittsburgh was up in all categories,” Innovation Works CEO Rich Lunak said.
The data were contained in an annual report released Tuesday by North Shore-based small business accelerator Innovation Works and the Pittsburgh office of tax accounting consultant Ernst & Young, which has offices Downtown.
The report showed robust increases in every investor category, with the angel and corporate sectors more than doubling investments since 2015. Angel investors are usually high net worth individuals who invest in startup companies and private enterprise to generate corporate funding for strategic purposes.
Driving the increases in strategic corporate investing was a national business trend of contracting for research and development work, which previously had been done internally, Mr. Lunak said. As an example, earlier this month, San Francisco-based Yelp Inc., an online consumer connection for restaurants and other businesses, bought Oakland-based Nowait Inc., which is a complementary business that allows consumers to get in line electronically for restaurants.
Yelp made a strategic investment in Nowait of $8 million last year, before acquiring the company for $40 million cash.
Established businesses nationwide have grown increasingly reliant on outside contractors to build capabilities and expand services, fueling one of the fastest-growing segments in startup investment locally, Mr. Lunak said. Corporate investment in startups rose to $66.4 million in 2016 from $23.4 million in 2015 — a five-year record — while angel investment rose to $69.6 million last year from $33.9 million in 2015.
Nationwide, venture capital investment shrunk 32.2 percent to $52.3 billion in 2016 from $77.3 billion in 2015.
The Pittsburgh region posted its second-best year for investment in 2016 since 2008.
Finally, the number of patents and licenses, options and other agreements for intellectual property both rose in 2016, reflecting the research and commercialization strength of Carnegie Mellon University, the University of Pittsburgh and Duquesne University, Mr. Lunak said.
Last year, 145 patents were issued to researchers at the three universities, up 18 percent from 122 in 2015, while the number of licenses rose 12 percent to 334 in 2016 from 297 in 2015.
Kris B. Mamula: kmamula@post-gazette.com or 412-263-1699.
First Published: March 14, 2017, 1:01 p.m.
