The MoneyTree report, by PricewaterhouseCoopers and the National Venture Capital Association, used information from Thomson Financial to determine the five fastest growing regions for venture capital investment.
And where was Pittsburgh?
Second, right behind New Mexico.
Pop City helpfully provided a link to the report itself.
And nice as this is, now for some friendly criticism:
First: When it comes to both the pace of investment and the absolute dollar amounts invested, Pittsburgh has nowhere to go but up. This Yahoo! News story shares the details. The periodic Money Tree report (not the data excerpted for this bit of news) doesn't even include Pittsburgh as one of its default "regions" for benchmarking venture capital investments. "Western Pennsylvania" is part of the "Midwest," which also includes Illinois, Missouri, Indiana, Kentucky, Ohio, and Michigan.
Second: PR surrounding the report, like this very interesting Pop City feature about Pittsburgh's being on the cusp of being an angel "darling," tends to obscure some key data about local capital markets. Pop City buries this nugget in the very last graf. Silicon Valley angel investor John Cornwell says:
Right now, Pittsburgh does not have a critical mass of institutional investors and VCs who are local. When you are dealing with early stage companies, they need a lot of hand-holding. It requires a local presence. To break that geographic barrier, Pittsburgh needs development of a local critical mass of funding capability. As deals are funded locally and you raise serious seeds of $50 million…it’s just a matter of time before you have the big players setting up shop locally.
Meaning, of course, that the big players aren't here yet. I read the Pop City feature as arguing that local angel funders and service firms are regarded by the Silicon Valley investment community as too unsophisticated, on the whole, to justify a serious look. In venture terms, Pittsburgh is not the big leagues. Maybe we're a AAA city (he wrote, hopefully). Maybe we're AA. To move up a notch or two, Pittsburgh needs to do some of the things that San Diego (for example) did 15 or 20 years ago -- welcome outside expertise, and turn up the heat on the native business community.
Third, venture capital investments (and friends-and-family money, angel funding, and so on) don't translate into a lot of near-term job growth. Or, they generate and sustain jobs only indirectly, because lawyers and accountants and printers and food servers, and lots of other people in service businesses feed off of new investment in their clients. The deals noted the MoneyTree report may turn into long-term job growth supported directly by funded companies, but that's a very, very uncertain proposition.
Fourth, the uncertain prospects for funded companies include (i) a very high failure rate, and (ii) the fact that lots of early-stage companies that are founded locally may succeed somewhere else. Highlighting the growth rate and the raw dollars invested is a good thing. Even better would be to highlight the failure rate -- not to pick on losers, but to point out that in a risk-oriented economy, risk-takers often fail, yet they should be praised for taking risks. Couple data on the failure rate with what I hope would be improvement in the rate at which folks who fail in company A (or, for that matter, succeed with company A) get back in the local start-up game with company B.
Both phenomena are natural parts of the national and international entrepreneurial ecology.
So, here's the report that I'd like to see -- but doubt that I will:
1 - Local companies receiving VC and angel funding in 2005 and 2006
2 - Companies on that list that are still operating in 2008
3 - Companies on that list that are still operating locally in 2008
4 - Local companies founded since 2005 or 2006 by people who were employed in 2005 or 2006 by companies on list (1)