From self-drive to language studying, tech firms within the Pittsburgh space are pushing for preliminary public choices | Firms
PITTSBURGH – The Pittsburgh-based language learning startup Duolingo marked its first public trading on the Nasdaq Stock Exchange in July with terrible towels waving in Times Square.
Two weeks earlier, the self-driving startup Aurora Innovation, based in Lawrenceville and the Strip District, announced its own plans to go public through a merger with a special purpose vehicle, SPAC – a new breed of company created to help Promote startup money and help bring others to the public.
Days after Aurora’s announcement, Cognition Therapeutics, a South Side-based clinical neuroscience company, announced that it had filed its own plan to go public.
As if that wasn’t enough, Stronghold Digital Mining, a Venango County-based company that will work to turn waste coal-fired power plants into crypto hubs, announced its IPO in July. And the brothers behind Rice Energy Inc., who were based in Canonsburg until the takeover by EQT in 2017, launched their first SPAC in 2020 and presented a second in June.
Pittsburgh corporations seem to have a moment – they are selling stocks to tap the money that is playing in the public markets.
The rush isn’t just happening in Pittsburgh as a persistent bull market is causing investors to look for new investment opportunities for their money. According to data from Renaissance Capital, a research group based in Greenwich, Connecticut, filings for IPOs are up 172% compared to the same period last year.
By mid-August 2021, 316 IPOs had already been submitted, compared to 260 in all of 2020 and 203 in 2019. There were also 406 SPAC IPOs that year.
According to Renaissance Capital, IPO proceeds increased 170% to $ 96.3 billion in mid-August 2021, compared to $ 78.2 billion for full 2020. In 2019, proceeds were $ 46 billion.
Healthcare has been the most active sector over the past 12 months, accounting for 43% of stock market listings. Technology was the second most active at 29%.
“The trend has recently turned away from Silicon Valley,” said Mark Thomas, president of the Pittsburgh Regional Alliance, a member of the Allegheny Conference on Community Development.
“We haven’t been on the front end of that in the past,” he said. “I think things will change in the future.”
The self-driving startup Aurora Innovation plans to use its driverless technology in trucks and cars.
There are rumors in Pittsburgh that more registrations are coming in, including from the self-driving startup Argo AI.
Dave Mawhinney, executive director of the Swartz Center for Entrepreneurship at Carnegie Mellon University, estimates that up to 10 more local companies could go public in the next year.
Pittsburgh may be following a national trend, but many who are involved in the local tech ecosystem say the wave of listings is also a product of deliberate efforts to expand the area’s tech landscape.
With more incubators helping startups grow and more venture capital funds to financially support these founders, many said Pittsburgh’s goal is to make itself a destination for entrepreneurs.
“I think it really speaks to the work that has been done to revitalize this region over the past few decades and it’s starting to pay off,” said Zach Malone, co-founder and partner at Magarac Venture Partners, an investment firm that opened in Pittsburgh in March . The company is affiliated with Draper Triangle Ventures, another fund in the region.
“Nothing was built overnight, but slowly more companies were started, more started, more talent stayed here,” he said.
Fortunately for Pittsburgh, Malone said, the kinds of technologies that are getting attention these days are already being developed here – things like artificial intelligence and self-driving technology.
Duolingo – which closed its first day of trading on July 28 at $ 139 per share, well above its offering price of $ 102 – had the added benefit of a pandemic that made people study and learn from home work. According to an SEC filing, learners using the voice app grew 34% year over year in 2020. The number of paying subscribers grew 84% year over year.
“I think some of our high profile companies, like Aurora, like Duolingo, obviously, would probably have gone public regardless of the markets at the time. But the market’s appetite for exciting new ventures has just driven that, ”said Sean Sebastian, a partner at two local investment firms: Black Tech Nation Ventures and Birchmere Ventures.
“It’s an interesting opportunity for Pittsburgh to show off a bit, basking in the reflected glory of the duolingos and auroras,” he said.
This isn’t the first wave of public listings for local businesses, though it may feel like it, said Catherine Mott, an angel investor and founder of BlueTree Allied Angels, an investment firm based in Wexford. In technical jargon, angel investors are those who support a company almost at the beginning.
The last surge in IPOs she could point to came more than 20 years ago.
In 1993 and 1994, nine Pittsburgh companies went public each year, according to Post-Gazette reports from that time. The next year, seven companies filed their filings, and by October 1996 eight more reverse convertibles had launched.
That wave began in 1994 when Fore Systems, a manufacturer of computer networking equipment, nearly tripled its share price six months after it went public, making it one of the top IPOs in the country that year.
Five years later, FreeMarkets Inc., an online auction company, caused another stir when its shares jumped from a market price of $ 48 to a year-end price of $ 341.
The initial high of successful stock market listings quickly subsided. In 1999, five years after going public, Fore Systems was sold to Marconi, a UK-based telecommunications and engineering company that was later downsizing. FreeMarkets was acquired in 2004 by Silicon Valley-based Ariba Inc., a software and services company.
“What I’m worried about is that we had FreeMarkets, Fore Systems, and Respironics – [a medical supply company that went public and later merged with Philips]said Mrs. Mott. “We had this wave and then nothing for 20 years. Will that happen again? “
Ride the wave
In their view, Mott said, there aren’t many other options for companies to attract large investments as they grow to repay their investors.
To make this repayment, often referred to as an “exit” in tech jargon, companies typically go public or are acquired by a larger company.
With the numbers rising – both Duolingo and Aurora were valued well over $ 1 billion at the time they went public – it can be difficult to find a competitive takeover bid.
“At every stage you grow, you collect more money,” said Mott. “So you have to prove in every phase that you can continue on this path with this high probability of generating a return for your investors.”
Often times, an IPO is built into the growth plans of such companies, with employees receiving equity as part of their compensation. So if companies successfully go public, many of their employees can get high paydays as a reward for signing up in the risky early days.
Whether or not more public listings, most people agree that paying attention to the IPOs that have already taken place will bring more investors, founders, and money to the region.
For example, the founders of FreeMarkets set up a venture capital fund in 2006 to invest in new businesses.
James Swartz, an entrepreneur and founder of venture capital firm Accel Partners, was one of Facebook’s earliest institutional investors, Mawhinney said. Partly due to his success in venture capital, he was able to reinvest in Pittsburgh and found the Swartz Center for Entrepreneurship in 2015 with a $ 31 million donation.
In response to the current focus on promoting innovation, the Pittsburgh Regional Alliance is recruiting a “startup tsar” to market Pittsburgh to the companies that are already growing here, Thomas said.
On a page of founders in Silicon Valley decades ago, Mott said this will create wealth for investors and employees.
“If you create that kind of wealth … people will put it in more startups and that will make a difference. New wealth likes to create more wealth. “
© 2021 PG Publishing Co. Visit post-gazette.com. Distributed by Tribune Content Agency, LLC.