From Autonomous Driving to Language Learning, Pittsburgh Area Tech Firms Rush To IPOs | Business
PITTSBURGH – With Terrible Towels rippling in Times Square, Pittsburgh-based language learning startup Duolingo marked its first day of public listing on the Nasdaq Stock Market in July.
Two weeks earlier, stand-alone start-up Aurora Innovation, headquartered in Lawrenceville and the Strip District, announced its own intention to go public through a merger with an acquisition company focused on special, or PSPC – a new kind of company formed to raise money and help reach others.
Days after Aurora’s announcement, Cognition Therapeutics, a South Side-based clinical-stage neuroscience company, said it had filed its own plan to make an initial public offering.
As if all that weren’t enough, Stronghold Digital Mining, a Venango County-based company that will work to turn waste coal plants into crypto hubs, filed a request in July to go public. And the brothers behind Rice Energy Inc., which was based in Canonsburg until it was acquired by EQT in 2017, launched their first SPAC in 2020 and introduced a second in June.
Pittsburgh companies, it seems, have a moment – selling stocks to tap into the money at stake in the public markets.
The rush isn’t just happening in Pittsburgh, as an ongoing bull market is pushing investors to look for new places to put their money. Initial public offering filings are up 172% from the same period last year, according to data from Renaissance Capital, a Greenwich, Connecticut-based research group.
Already, 316 IPOs were filed in mid-August 2021, compared to 260 for the whole of 2020 and 203 in 2019. This year, there were also 406 SPAC IPOs.
At $ 96.3 billion, IPO proceeds were up 170% in mid-August 2021, compared to $ 78.2 billion for all of 2020, according to Renaissance Capital. In 2019, revenue totaled $ 46 billion.
Healthcare has been the most active sector over the past 12 months, accounting for 43% of public listing activity. Technology was the second most active at 29%.
“The trend has moved away from Silicon Valley more recently,” said Mark Thomas, president of the Pittsburgh Regional Alliance, an affiliate of the Allegheny Conference on Community Development.
“We haven’t historically been at the forefront of this,” he said. “I think things will change in the future. “
Autonomous startup Aurora Innovation plans to put its driverless technology in trucks and cars.
In Pittsburgh, there are rumors that more filings are coming, especially from standalone startup Argo AI.
Dave Mawhinney, executive director of the Swartz Center for Entrepreneurship at Carnegie Mellon University, estimated that up to 10 other local companies could file for an IPO next year.
Pittsburgh may be following a national trend, but many people involved in the local tech ecosystem say the surge in listings is also the product of intentional efforts to develop the region’s tech landscape.
With more incubators to help startups grow and more venture capital funds to financially support these founders, many have said Pittsburgh aims to become a destination for entrepreneurs.
“I think this really reflects the work that has been going on for a few decades to boost this region and it’s starting to pay off,” said Zach Malone, co-founder and partner of Magarac Venture Partners, an investment firm started in Pittsburgh. in March. The company is linked to Draper Triangle Ventures, another fund in the region.
“Nothing is built overnight, but slowly there have been more companies created, more founded, more talent remains here,” he said.
Luckily for Pittsburgh, Malone said, the types of tech that are gaining attention these days are already being built here – things like artificial intelligence and autonomous driving technology.
Duolingo – which closed its first day of trading on July 28 at $ 139 per share, well above the offering price of $ 102 – had the added benefit of a pandemic that has caused people to learn and learn. work from home. Learners using the language app increased 34% in 2020 from the previous year, according to an SEC filing. The number of paying subscribers increased 84% year over year.
“I think some of our more high-profile companies like Aurora, like Duolingo, obviously, would probably have gone public by that time, regardless of the markets. But the market’s appetite for exciting new ventures has just spurred it on, ”said Sean Sebastian, partner of two local investment firms: Black Tech Nation Ventures and Birchmere Ventures.
“It’s an exciting opportunity for Pittsburgh to show a bit, to bask in the reflected glory of the Duolingos and Auroras,” he said.
This is not the first wave of public listings of local businesses, although it may sound like it, said Catherine Mott, angel investor and founder of BlueTree Allied Angels, a Wexford-based investment firm. In industry parlance, angel investors are those who support a business almost from the very beginning.
The last wave of public offerings she was able to report dates back more than 20 years.
In 1993 and 1994, nine Pittsburgh companies filed for IPO each year, according to Post-Gazette reports at the time. The following year, seven companies applied and by October 1996 eight more had made initial share offers.
This wave began in 1994 when Fore Systems, a maker of computer networking equipment, saw its stock price almost triple six months after its IPO, ranking it among the best IPOs nationwide this year. -the.
Five years later, FreeMarkets Inc., an online auction company, gained new momentum when its shares went from an initial public offering price of $ 48 to a year-end close of $ 341. .
The initial peak of successful public registrations quickly dissipated. In 1999, five years after its IPO, Fore Systems was sold to Marconi, a British-based telecommunications and engineering company, which then cut its staff. FreeMarkets was purchased in 2004 by Ariba Inc., a software and services company based in Silicon Valley.
“What worries me is that we had FreeMarkets, Fore Systems and Respironics – [a medical supply company that went public and later merged with Philips]said Ms Mott. “We had this wave and then nothing for 20 years. Is this going to happen again? ”
Surf the wave
From his perspective, Mott said, there aren’t many other ways for companies attracting big investments as they grow to repay their investors.
To make this repayment, often called an “exit” in tech industry jargon, companies typically file for an IPO or are bought out by a larger company.
As the numbers grow – Duolingo and Aurora were valued at over $ 1 billion when they went public – it can be difficult to find a takeover bid that can compete.
“With each step you grow, you collect more money,” Mott said. “So at every step you will have to demonstrate that you can continue on this path of this high probability of generating a return for your investors. “
The IPO is often part of these companies’ growth plans, with employees taking equity capital as part of their compensation. So when companies successfully go public, many of their employees can earn big salaries, which rewards them for signing up in the risky early days.
More public listings or not, most people agree that the focus on IPOs that have already taken place will attract more investors, founders and money to the region.
The founders of FreeMarkets, for example, created a venture capital fund to invest in new businesses in 2006.
James Swartz, entrepreneur and founder of venture capital firm Accel Partners, was one of the first institutional investors on Facebook, Mawhinney said. In part thanks to his success in venture capital, he was able to reinvest in Pittsburgh, creating the Swartz Center for Entrepreneurship with a donation of $ 31 million in 2015.
Reacting to the current focus on promoting innovation, the Pittsburgh Regional Alliance is recruiting a “startup czar” to market Pittsburgh to companies already growing here, Thomas said.
Taking a page from the founders of Silicon Valley decades ago, Mott said it would create wealth for investors and employees.
“When you create that kind of wealth… people put it back into more startups and that’s what will make the difference. New wealth likes to create more wealth.
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