Pittsburgh Mayor Bill Peduto on Duolingo IPO & Venture Capital

Pittsburgh's Transformation: From Steel City to Startup Hub

Historically recognized as the Steel City, Pittsburgh is currently experiencing a significant shift, increasingly becoming a destination for startups rather than traditional steel manufacturing. This transition has been actively championed by Mayor Bill Peduto since he assumed office in 2014. He recently addressed attendees at TechCrunch’s City Spotlight: Pittsburgh event, detailing both the opportunities and obstacles facing entrepreneurs who are considering establishing and operating businesses in Western Pennsylvania.

A National Trend and the Need for Investment

This evolution mirrors a broader trend occurring throughout the United States, with cities increasingly looking to small businesses, particularly tech startups, to stimulate revitalization and innovation. However, as Peduto emphasizes, a substantial need for increased venture capital exists. The region also faces challenges in both attracting and retaining skilled professionals, a point also raised by CMU President Farnam Jahanian during the same event.

Mayor Peduto will conclude his tenure in January 2022, following a primary election loss to Ed Gainey.

The following is an edited transcript of key discussion points from the interview.

Advice for Entrepreneurs Considering Pittsburgh

What advice would you offer to entrepreneurs contemplating a move to Pittsburgh?

My primary recommendation would be to locate yourselves in a city that can consistently supply the talent your company requires, ensuring a robust pipeline of skilled workers.

Andrew Carnegie strategically positioned his operations along Pittsburgh’s rivers due to his ability to source iron ore from Minnesota and coal from West Virginia, utilizing the waterways and railways for efficient export. When selecting a city for your venture, prioritize locations where the necessary talent pool already exists, eliminating the need to relocate personnel.

Pittsburgh’s riverfronts remain a valuable asset. However, today’s essential resources are Carnegie Mellon University and the University of Pittsburgh. Our focus is on fostering a city that offers both a high quality of life and an affordable cost of living, enabling individuals to own homes. We aim to create a city that is sufficiently compact to facilitate progress, yet large enough to garner global attention.

Cities embodying these characteristics can be found across the nation, though they are typically not located on the coasts. Instead, consider cities like Nashville, Charlotte, Austin, and Pittsburgh.

Addressing Pittsburgh’s Missing Piece

While Pittsburgh undeniably possesses both talent and livability – it’s a truly beautiful city – what crucial element is currently lacking?

The primary deficiency is access to venture capital.

A prevailing mindset among coastal investors is the belief that companies must relocate to the coast to ensure success. This often results in unnecessary expenses, unrelated to the core technology, such as inflated rent and living costs. This perception drives many venture capitalists to overlook promising ideas originating outside of California or New York.

Furthermore, there’s a gap in securing funding during the critical second phase of development. Pittsburgh has successfully established a framework for launching startups, including various funding sources beyond traditional angel investors. However, entrepreneurs often struggle to obtain this crucial second round of funding, leading to the failure of promising ventures before they can reach a pivotal stage.

The Dilemma of Limited Funding

What guidance would you provide to entrepreneurs with a viable idea and business plan who are compelled to relocate due to a lack of VC funding?

This presents a significant challenge. Luis von Ahn of Duolingo had the option, and potentially greater financial incentives, to move Duolingo away from Pittsburgh. However, he chose to remain, driven by a sense of pride in contributing to the city’s growth. We must compensate for any financial disparities by emphasizing the exceptional quality of life. This extends beyond affordability; it encompasses the overall lifestyle offered by this region, which many find superior to the saturated environments of the coasts.

Hopeful Signs for Continued Growth

As an outsider, I recognize the parallels between Pittsburgh and cities like Detroit, Columbus, Austin, and Nashville, all emerging as startup hubs. However, sometimes this growth appears superficial. What aspects of Pittsburgh give you confidence that this growth will be sustained for years, even decades to come?

The development of a comprehensive ecosystem surrounding these startups is key. This ecosystem was absent just ten years ago. Previously, an individual working at a company like Google in Pittsburgh would have limited opportunities for parallel career advancement without leaving the city. Now, a robust structure exists, particularly in the cleantech sector.

We are witnessing growth in renewable energy, a fact that often surprises people. Allegheny County, where Pittsburgh is located, actually has more jobs in the renewable energy sector than in coal, gas, and oil combined. With the Biden administration’s commitment to investing in previously overlooked areas, this trend is poised for further expansion. Within sectors like advanced manufacturing, robotics, artificial intelligence, and life sciences, we are seeing broader opportunities rather than concentrated ones.

This represents a significant change that I have observed over the past 30 years. The key difference now is that individuals are no longer coming to Pittsburgh for a single job and then leaving. They are coming to Pittsburgh and staying, launching their own companies, or finding continuous career advancement.

The Impact of Duolingo’s Success

Finally, let’s discuss Duolingo. Their recent IPO filing is noteworthy, and we had the opportunity to interview their Director of Engineering, Karin Tsai, prior to the quiet period. What are your hopes for Duolingo’s public offering, and how will it impact Pittsburgh?

On a personal level, as a friend of Luis and having witnessed the exponential growth of his team, I couldn’t be prouder. To see this expansion originate and flourish right here in Pittsburgh is truly remarkable.

Firstly, the IPO provides recognition within the tech industry, demonstrating that a company of this magnitude – a billion-dollar enterprise – can be founded, nurtured, and thrive as a public corporation in Pittsburgh.

Secondly, it attracts top talent to the city. Thirdly, Duolingo is a company dedicated to making a positive impact on the world, not only through its language learning technology but also through its commitment to equitable and accessible education for all, fostering a better society. This is a source of pride for all Pittsburghers.