As startups grapple with funding uncertainty from the federal government, many are looking to venture capital to fill the gap.
In Pittsburgh, 182 companies raised funds last year, up from 136 in 2023. That included $999 million from traditional venture and $900 million from other sources, including corporate backers.
The $1.89 billion sum was nearly half the region’s record $3 billion raised in 2023, which was led by outsized autonomous vehicle fundraising, according to an annual report by Ernst and Young and Innovation Works. It also lags behind coastal cities and other metropolitan areas of a similar size.
Although the average deal size here jumped from $12 million to $16 million in 2024, coastal markets average closer to $25 million, said Ven Raju, CEO of the regional investor Innovation Works.
“Our pipeline could conceivably be much more robust if we had more in terms of resident capital sources,” especially for early-stage companies, he said.
An exception to that idea is Skild AI, which raised $300 million last summer without demonstrating a product. The Carnegie Mellon University spinout has said it plans to build a general purpose brain for robots.
Mr. Raju described Skild as an anomaly.
Going to California
Half of the region’s raises last year came in the life sciences sector, according to the report. Autonomous trucking firm Aurora also led the charge, alongside health tech startup Abridge, which is already deployed in hospitals around the country.
Both companies, however, maintain significant offices in San Francisco — close to the kinds of Silicon Valley investors that continue to lure startups from around the country.
A team of recent graduates from CMU and the University of Pittsburgh plan to join them.
After winning this week’s McGinnis Venture Competition at CMU, the team behind the AI software startup Solstis said they plan to relocate to the Bay Area, where they’ll be closer to the fastest ideas in artificial intelligence and their lead investor, Afore Capital.
Co-founder Samika Sanghvi said they raised $500,000 in a single week from the San Francisco-based fund, valuing Solstis at $7 million. An additional $60,000 from the CMU competition will help them afford the higher cost of living in California, she said.
“The whole thing happened in four days,” Ms. Sanghvi said of Afore’s investment. “The conversation, the offer, the signing of the letters — the speed at which it went was insane. And that's when we knew: SF is where we have to be.”
Other entrepreneurs in this year’s competition were more optimistic about the chances of growing their companies in Pittsburgh.
Chibi Dumebi-Kachikwu, whose online thrifting platform Thursday Thrift won the undergraduate portion of the competition, said he wanted to follow in Duolingo’s footsteps.
“A lot of people start here and move to Silicon Valley,” the 22-year-old CMU senior said. “I want to let people know that Pittsburgh can do it.”
Thursday Thrift is trying to raise $2 million, he said.
Navigating a new environment
The McGinnis competition, launched 13 years ago in honor of Respironics founder Gerald “Jerry” McGinnis, is presented almost like an episode of Shark Tank, where about a dozen local investors grill entrepreneurs on their product and business strategy.
Mr. McGinnis’ daughter, Alicia, doubled the awarded money this year, telling a crowded room at the Swartz Center for Entrepreneurship to take care of their teams, as well as their businesses.
“Thank you for being entrepreneurs and believing that you can make a difference,” she said Tuesday.
What’s next? This week, Abridge was named one of Fast Company’s top 10 most innovative companies. Skild is reportedly in talks with Softbank to raise another $500 million. All eyes are on Gecko Robotics to become the city’s next unicorn startup worth $1 billion.
There have been losses too, including last year’s unexpected shut down of SpaceX supplier Formlogic, which had drawn capital from around the country for its AI-powered factory approach. The Lawrenceville-based machine shop liquidated its assets last month.
Also on the horizon is an expected decline in federal funding, either funneled through the region’s universities or directly from groups like the National Science Foundation, National Institutes of Health and the Department of Defense, which gave companies like Gecko their start.
As a result, more companies may be forced to give up more control of their company by pursuing venture capital, Mr. Raju said.
“It's not going to be a one for one, there's just not enough venture dollars to do that. But, you know, they will have to kind of navigate in a new environment,” he said.
First Published: March 20, 2025, 12:00 p.m.
Updated: March 21, 2025, 12:01 p.m.
