What's in a startup? Numbers may hide city's strength
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Matt Harbaugh's head did not explode Tuesday when, while giving a report on regional economic indicators, John G. Craig Jr. put up a chart that showed the Pittsburgh region had few startups.
Mr. Harbaugh, the chief investment officer for Innovation Works, was able to wait until the program was over before he corralled a reporter to say that the number was misleading if one is looking at technology companies.
Startups, Mr. Harbaugh explained with his communications director Terri Glueck at his side, count everything from technology firms to pizza shops.
The statistic is not an accurate reflection of how Pittsburgh is doing when it comes to innovative technologies.
Instead, he pointed to another reference point, a chart that shows how Pittsburgh compares to similar regions when it comes to receiving venture capital. The Pittsburgh Regional Indicators Initiative's Web site, www.PittsburghToday.org, has a series of charts on economic indicators.
The graph on venture capital is the graph that better reflects the high-tech firms that are starting, because venture capital does not back beauty shops, Mr. Harbaugh said.
In that graph, Pittsburgh ranks sixth of the 16 cities.
"California takes 50 percent of all venture capital dollars and deals," Ms. Glueck said.
She said that leaves the rest of the country to fight over the rest.
Mr. Harbaugh said five years ago he would talk to people outside of the region about investing in companies here and explain that Pittsburgh makes sense because of Carnegie Mellon University, the University of Pittsburgh, UPMC, Westinghouse and the companies and engineers that spun off from Westinghouse.
They would agree and then he could talk to them about opportunities to invest in Pittsburgh start up companies.
That has since changed.
"Today you don't even need to have that first part of the conversation," he said. "People are realizing that Pittsburgh is a high quality region."
Mr. Harbaugh said that in the last three years, 55 venture capital firms from outside the region have invested in technology companies here. In 2006 there was an overall investment of $242.43 million by venture capital firms of which all but $41 million came from outside of the region. The investment last year was higher than ever because of $100 million invested in Targe Energy, Inc. which is a coal related business.
Even without that money, last year broke records for venture capital in the region. While $79.59 million was invested here by Venture Capital firms in 2005, even without the Targe Energy deal that was up to $142.43 million last year. By the end of September this year, $155.86 million in venture funds were invested in local companies with $127.46 million coming from outside the area.
"This year there isn't one company that took the venture capital dollars," Mr. Harbaugh said.
He said the companies being financed now, such as Plextronics which makes flexible electronic displays and solar cells, are the future of the region.
Plextronics started out of Carnegie Mellon and in received $13 million in venture capital. This summer it received $30 million in capital and now it employs 60 people.
In the last three years a total of $389.6 million has flowed into the Pittsburgh region from firms out of the area to finance local businesses.
Ms. Glueck said that money stays in Pittsburgh to help the economy here.