Investing in Pittsburgh's Technology Sector - Innovation Works

Building momentum Investing in Pittsburgh’s technology sector Trends and highlights, 2009—2013

Growing companies, attracting capital, building our future Ernst & Young LLP and Innovation Works, Inc. are pleased to present our second annual review of investment trends and highlights for the Pittsburgh region’s growing technology sector. This report reviews the investment activity from 2009 to 2013 for our region, analyzing the companies attracting capital and the funding sources that support their growth – including venture capital firms (VCs), angel investors (angels), corporate/strategic investors, seed funds, public offerings, accelerators and other sources of funding. The last five years have shown positive momentum for technology companies in the Pittsburgh region. During the period from 2009 to 2013, our region saw a strong increase in the amount of capital invested and continued growth in the number of companies attracting investment. It also showed an improvement in our relative position compared to other regions around the country in attracting outside investment. The software sector, including consumer and enterprise software, garnered the largest share of investment in our region in 2013, followed by energy, medical devices, biotechnology, healthcare IT, electronics and advanced materials. The diversity of these sectors speaks to the broad base of technical talent in the Pittsburgh region, as well as the strengths of our region’s universities and corporations. As Pittsburgh aspires to become a global leader in tomorrow’s most promising fields, it is critical that we nurture our entrepreneurial ecosystem to support high-growth, innovation-led companies. We have a strong base to build upon, including a combination of unique assets: our world-class research institutions and the right mix of early-stage and mature companies that are breaking new ground on challenges of global importance. As we continue on that journey forward, we hope that this report provides you with useful insights into the state of the local technology community and venture capital ecosystem and inspires new ways to propel it forward.

Lynette Horrell Managing Partner, Ernst & Young LLP

Rich Lunak CEO, Innovation Works, Inc.

Investment in Pittsburgh’s technology sector | Trends and highlights

Five-year growth in capital outpaces the nation According to Dow Jones & Company VentureSource, venture capitalists invested $33.1 billion in 3,480 US deals in 2013, a 1% increase in dollars and a 5% decrease in the number of deals from 2012. The Pittsburgh region attracted over $338 million from venture capital firms, angel investors, strategic investors, accelerators, seed funds and public offerings in 148 deals. This represents a 2% increase in dollars invested but a 10% decline in the total number of investments from 2012.

In 2013, more than

$338 million was invested in Pittsburgh technology companies via IPOs, VCs, angels, seed funds and other sources.

Since the 2009 recession, the Pittsburgh region has experienced a 113% increase in dollars invested and a 31% increase in the number of investments comparing favorably to other benchmark cities. Our local research universities, including Carnegie Mellon University, Duquesne University and the University of Pittsburgh, continue to serve as strong deal flow generators. Their substantial research activities and excellent academic programs provide the region with a steady flow of new technology and highly skilled talent. As shown in the charts below, Pittsburgh investment performance from 2009-2013 continues to improve and compares favorably to national trends.

Continued growth in Pittsburgh company investment compares favorably to national trends. Pittsburgh Technology Company Financing: 2009-2013

US Venture Financing: 2009-2013

165

3,600

3,649

148 127 113

$159.1 2009

$407.7 2010

123

$317.2 2011

Amount Invested ($million)

2,489

$332.8 2012

3,480

2,738

$338.7

$21,400

$25,500

$36,200

$32,770

$33,080

2013

2009

2010

2011

2012

2013

Amount Invested ($million)

Number of Deals

Source: data supplied by Dow Jones Venture Source and Innovation Works.

Number of Deals


March 2014

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Sector diversity, with strengths in software and medical devices The Pittsburgh region is not characterized by a single area of technical strength, but rather a diversity of sectors in which regional companies are developing innovative products. The region benefits from its highly educated workforce across multiple engineering disciplines – from computer science to electrical, biomedical, energy and materials. Among the 249 companies that attracted funding during the 2009-2013 period, the largest number came from the software and information technology sector – including enterprise and consumer software, electronics, robotics, telecom and IT infrastructure — which comprised 57% of companies receiving funding. The second largest sector was the life sciences/healthcare sectors – including medical devices, healthcare IT, biotechnology/drug development, and healthcare services — which comprised 25% of the companies receiving funding. While 57% of the companies receiving funding were from the software/IT sector, these companies received only 44% of the investment dollars in the same period. Conversely, the life sciences/healthcare sector received nearly 30% of the investment capital, a disproportionate amount compared to the number of companies. The single largest recipient of investment dollars from 2009 to 2013 was the medical device sector.

Pittsburgh Companies Receiving Funding - By Tech Sector - 249 Total 2009-2013

Consumer Software 23%

Enterprise Software 23%

Telecom 1% IT Infrastructure 1% Medical Device 10%

Energy 9% Electronics 6%

Consumer Products 4% Advanced Materials 5%

Biotechnology 7% Healthcare IT 6%

Dollars Invested in Pittsburgh Technology Companies By Tech Sector - $1.6b Total 2009-2013

Electronics 16%

Enterprise Software 10%

Medical Device 17%

Telecom 2% Healthcare Services 3%

Energy 10%

Healthcare IT 3%

Consumer Products 9% Consumer Software 5% Robotics 8%

Biotechnology 7%

Advanced Materials 7%

Source: data supplied by Dow Jones Venture Source and Innovation Works. 2

Healthcare Services 2%

Robotics 3%


IT Infrastructure 3%

Number of Investment Rounds in Pittsburgh Companies by Stage of Development 165

113

148

3

127

123

3

1

2

1

104

42

59

70

65

2009

2010

Profitable

In 2013, the overall number of investment rounds decreased slightly from 2012. The number of rounds in pre-revenue companies was comparable to the previous year, with the decrease coming primarily from deals in later-stage, revenuegenerating companies.

91

71

50 2011

Revenue

58

56

2012

2013

Pre-Revenue

Funding for Pittsburgh Companies by Type of Investor ($ millions)

$407.7 $140.6

$332.8 $317.2

$6.3 $4.5 $159.1

$20.4 $36.3

$29.3 $92.3

$4.7

$66.7

$95.4

Although the majority of funding provided to Pittsburgh technology companies from 2009 to 2013 came from venture capital firms, angel investors continue to be a strong funding source. Also, 2013 marked the first major technology company IPO in our region since 2010.

$4.7 $21.7 $63.4

$205.8

$189.3

Angels emerging as a major source of funding

$338.7

$34.1

$6.3 $96.3

Early-stage deals continue to attract funding

$227.2 $153.6

$28.8 $27.7 2009 IPO

2010

Seed Funds and Accelerators

2011

2012

Corporate and Other

2013 Angels

VC

Number of Investment Rounds in Pittsburgh Companies by Type of Investor 165 148* 127* 113

123

48

36

23

59 42 50 16

12

19 59

11 40

43

38

30 22 2009 * Includes IPO

IPO

28

32

2010

2011

Seed Funds and Accelerators

35

31

2012

2013

Corporate and Other

Angels


VC

Seed fund and accelerator activity increases While the total amount of capital provided by venture capital firms was large, such firms accounted for only a minority of the number of deals in Pittsburgh. On average, nearly 65% of all Pittsburgh regional technology company financings from 2009 to 2013 consisted of smaller rounds led by angels or seed funds/accelerators. The number of rounds led by seed funds and accelerators continued its upward trajectory, increasing 23% from 2012 to 2013. However, deals led by VCs dropped by 11%. March 2014

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The supply of indigenous venture capital is improving The chart below estimates the annual supply of uncommitted funds at venture capital firms in Pittsburgh. This analysis considers the timing of new fund closings by VC firms in the Pittsburgh region, and assumes that a firm will commit 25% of a new fund’s capital during each of the first four years post-closing. Furthermore, if a fund is managed by partners who are located outside the Pittsburgh region, the total amount of the fund’s capital that is “located” in Pittsburgh is determined by applying the percentage of the fund’s partners who work in the region. According to this analysis, during the past decade, Pittsburgh’s supply of indigenous venture capital decreased from 2006 to 2011 as a result of a decline in the actual number of resident venture firms, a reflection of national trends, reduced fund sizes and the remaining surviving funds broadening their geographic reach. In 2012 we saw this trend begin to reverse with several funds being launched, including Birchmere’s fourth fund and the Pittsburgh Life Sciences Greenhouse launching its Accelerator Fund. During 2013 Draper Triangle held a first closing on its third fund and Innovation Works held a first closing on its inaugural fund. Funds that were founded in our region such as Adams Capital (20 years), Birchmere Ventures (18 years) and Draper Triangle (16 years) have been the mainstay of our regional venture capital ecosystem, investing not only capital, but mentorship, guidance and support to hundreds of the region’s early-stage technology companies. While the 2012 and 2013 increase in supply of available capital in our region is a positive sign, it is still a relatively modest amount of available capital relative to the region’s growing supply of technology companies. By comparison, Pittsburgh’s total pool of available capital in 2013 ($71.9 million) would equal only 58% of the median 2013 US fund size of $125 million. Nationally, venture capital funds raised a total of $19.7 billion across 229 funds in 2013, representing a 10% decrease in the dollar amount raised, but a 15% increase in the number of funds raising capital.

Supply of Pittsburgh-based Venture Capital Estimate of Uncommitted Capital at Pittsburgh-based VC Firms ($ millions) $136.6 $120.5 $87.7

$81.1

$71.9

$70.0 $48.3 $29.3 $18.0

2004

2005

2006

2007

2008

2009

2010

$7.1 2011

Source: data supplied by Innovation Works and Pittsburgh VCs

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2012

2013

Strong five-year track record of technology company exits US venture capital-backed M&A activity experienced a 14% decline in 2013 to $36.9 billion. The number of transactions also declined 9% to 413. However, the fourth quarter experienced a 17% increase to $12 billion and 115 transactions, the highest dollar amount and number of transactions of any quarter in 2013.

34 companies $3+ billion Total value

During the five-year period from 2009 to 2013, the Pittsburgh region saw 34 exits, totaling more than $3 billion in value. While the region experienced a reduced volume of exits in 2013 (8 transactions) compared to 2012 (11 transactions), 2012 was a particularly robust year for deal activity. The total disclosed values of the companies exiting in 2013 totaled $638 million including the valuation of ExOne at the time of its IPO.

(Disclosed and undisclosed)

Since DynaVox’s 2010 initial public offering, the region has experienced a dry spell in technology IPOs, until 2013 when The ExOne Company [Nasdaq: XONE] sold shares in an IPO raising $95 million. The ExOne Company is a provider of 3D printing machines, printed products and services to industrial customers.

Representative deals DynaVox

Vocollect

Vivisimo

The ExOne Company

IPO 2010

acquired by

acquired by

IPO 2013

TrueCommerce acquired by

HighJump Software 2010

Intermec

IBM

2011

2012

Tollgrade Communications

Carnegie Learning

BodyMedia

acquired by

acquired by

acquired by

Apollo Group

Jawbone

Golden Gate Capital

2012

2013

2011

medSage Technologies

M*Modal

Black Locus

BPL Global

acquired by

acquired by

acquired by

acquired by

Philips Medical

MedQuist Holdings

The Home Depot

Qualitrol

2010

2011

2012

2013

March 2014

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Firms making recent investments in Pittsburgh companies Pittsburgh region Adams Capital Management AGSM Alphalab Audrey’s Kitchen Birchmere Ventures BlueTree Allied Angels Bradford Capital Partners Draper Triangle Ventures Eagle Ventures Grouse Ridge Capital The Hillman Company Idea Foundry iNetworks Advisors Innovation Works Meakem Becker Venture Capital Newlin Investment Company Pittsburgh Equity Partners Pittsburgh Life Sciences Greenhouse Smithfield Trust Stonewood Capital Management Swallow Point Ventures Woodland Partners

California and Western region Accel Partners A-Grade Investments ARCH Venture Partners Bright Capital Correlation Ventures CrunchFund El Dorado Ventures ePlanet Capital Floodgate Foundation Capital Gentry Venture Partners Google Ventures Harrison Metal Capital

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Health Evolution Partners Horizon Ventures InCube Ventures Kern Whelan Capital Kleiner Perkins Caufield & Byers Lightspeed Venture Partners Longitude Capital Lovell Minnick Partners Menlo Ventures Montage Ventures Norwest Venture Partners ONSET Ventures

Pacific Venture Group Prescient Capital Rincon Venture Partners Sand Hill Angels Sequoia Capital Silicon Valley Bank Silverton Partners SJF Ventures Tech Coast Angels Tenaya Capital Trident Capital TriplePoint Capital


New England region Advanced Technology Ventures Bain Capital Ventures FourWinds Capital Management GE Healthcare Harbor Light Capital Partners Highland Capital Partners Nexus Medical Partners North Atlantic Capital Corp. Polaris Venture Partners Saturn Management Spectrum Equity Investors Summit Partners

New York region Enhanced Capital Partners ff Venture Capital General Atlantic Golden Seeds ICV Capital Partners Insight Venture Partners Morgan Stanley New York Angels Northwood Ventures

Ogden Capital Radius Ventures Rose Tech Ventures TechStars The NPD Group The Vertical Group Union Square Ventures Warburg Pincus

Philadelphia region Comcast Ventures Cross Atlantic Capital Partners Delaware Crossing Investor Group Edison Ventures First Round Capital Innovation Ventures Mid-Atlantic Angel Group Fund

NewSpring Capital Novitas Capital Originate Ventures Osage Partners Quaker Partners Robin Hood Ventures

Baltimore/Washington, DC region Midwest Allos Ventures Arboretum Ventures Ascension Health Ventures Capvest Venture Fund Chrysalis Ventures CID Capital Inc. Crimson Hill

Hopewell Ventures Mutual Capital Partners River Cities Capital Funds Salix Ventures Seneca Partners Silicon Pastures West Capital Partners

ABS Capital Partners Active Angel Investors Columbia Capital LLC Horizon Technology Finance New Atlantic Ventures

March 2014

New Enterprise Associates New Markets Venture Partners Oxford Finance Corporation Square1 Bank Virginia Active Angel Network

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Pittsburgh compares favorably to benchmark regions Silicon Valley reigns supreme as the top region for attracting venture capital investment, with New England as a distant second. The Pittsburgh region continues to outpace traditional mid-western benchmark regions, but is still lagging some of the better known, second-tier entrepreneurial communities in the nation. The benchmark regions for this comparison were selected primarily based on similarities in geography, demographics and industrial mix. Several additional regions were selected based on their strong and emerging technology sectors. The Pittsburgh region showed improvement in both the annual amount of investment per capita and deals per million residents from 2009 to 2013. The Pittsburgh region showed a 34.6% increase in venture investment dollars per capita from 2009 to 2013 and improved from 12th place to 8th place in a ranking among 18 different benchmark regions. Several of the regions ranking ahead of Pittsburgh – including Boston, Minneapolis, Baltimore and Raleigh-Durham - are home to significant life sciences clusters which tend to support larger investment rounds on average.

Investment Dollars per Capita $710.8 $678.1

Boston, MA-NH $337.6

Austin-San Marcos, TX Raleigh-Durham-Chapel Hill, NC Denver, CO New York, NY Baltimore, MD Minneapolis-St. Paul, MN-WI Pittsburgh, PA Cleveland-Lorain-Elyria, OH Philadelphia, PA-NJ Kansas City, MO-KS Cincinnati, OH-KY-IN Charlotte-Gastonia-Rock Hill, NC-SC St. Louis, MO-IL Detroit, MI Indianapolis, IN Milwaukee-Waukesha, WI Richmond-Petersburg, VA

$464.8

$234.2 $230.7 $175.4 $149.6 $150.8

$69.2 $96.1 $96.7 $93.2 $114.9 $74.2 $55.1 $72.2 $41.4 $65.4 $78.3 $44.5 $90.5 $43.2 $59.8 $40.9 $15.9 $35.2 $31.8 $24.6 $19.0 $13.7 $136.5 $4.6 $19.5 $0.1 $6.9

$0.0

$100.0

$200.0

2013

$300.0

$400.0

$500.0

$600.0

Source: data supplied by Thomson Reuters ThomsonOne database and US Census.

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$700.0

2009

$800.0

Pittsburgh outpaces other regions in deals per capita While a comparison based on investment dollars shows room for improvement, Pittsburgh boasts a large volume of earlystage investment deals. A comparison of the number of reported investment rounds per million residents reveals Pittsburgh as the 3rd most active community among benchmark regions.

Number of Reported Venture Rounds per Million Residents Boston, MA-NH

94.0

101.3

62.7 64.0

Austin-San Marcos, TX Pittsburgh, PA

52.5

31.7 42.7 39.3

Raleigh-Durham-Chapel Hill, NC Denver, CO Philadelphia, PA-NJ

20.6

Cleveland-Lorain-Elyria, OH

26.7

18.2

New York, NY

15.5

7.8

Baltimore, MD Cincinnati, OH-KY-IN

9.0

23.9 23.7 25.3 23.6

Minneapolis-St. Paul, MN-WI St. Louis, MO-IL

30.2 31.7 26.9

21.4 19.6 17.4

14.0 9.3 12.8 14.2 11.9 7.2 9.8 17.0 9.6 12.8 8.1 5.5

Milwaukee-Waukesha, WI Kansas City, MO-KS Detroit, MI Indianapolis, IN Charlotte-Gastonia-Rock Hill, NC-SC Richmond-Petersburg, VA 0.0

20.0

2013

40.0

60.0

80.0

100.0

2009

120.0

Source: data supplied by Thomson Reuters ThomsonOne database and US Census.

March 2014

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Pittsburgh’s universities are a catalyst for innovation The Pittsburgh region has a concentration of research and education assets that are nearly unmatched and fuel the region’s start-up ecosystem. In 2013, the University of Pittsburgh ranked 6th among US universities in terms of National Institutes of Health (NIH) funding received. The latest U.S. News and World Report rankings rated Carnegie Mellon University as the top graduate school for Computer Science. With over $1 billion in cutting-edge research conducted in our major research universities and another $835 million in energy-related work done through the National Energy Technology Laboratory, these resources provide a vital source of innovative ideas and talent to fuel our region’s start-up community.

Combined Research Budgets of Pittsburgh Research Universities ($ millions)

$1,068.0

$1,067.4

2011

2012

$1,049.2

Pittsburgh’s major research universities, including Carnegie Mellon University, the University of Pittsburgh and Duquesne University, have collectively budgeted over $1 billion in research expenditures in each of the previous three years. The overall university research budget has grown 17% from 2009 to 2013.

$984.3

$900.4

2009

2010

2013

Patent Generation and Licenses from Pittsburgh Research Universities 96 79

82

61 46

322

106

197

244

280

2009

2010

2011

2012

Licenses, Options and Other Agreements

Technology development and commercialization in Pittsburgh’s research ecosystem has accelerated over the past five years. The number of patents issued to universitydeveloped technologies has doubled between 2009 and 2013, and the number of technology licenses, options and agreements has increased by more than 200% over the same period. The universities generated over 80 spinout companies in the last five years through direct licensing activity.

2013 Patents Issued

Source: data supplied by Carnegie Mellon University, Duquesne University and University of Pittsburgh.

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2013 Pittsburgh investment highlights The following were among the Pittsburgh companies completing funding rounds in 2013:

ALung Technologies, Inc.

www.alung.com CEO: Pete DeComo Investors: Allos Ventures, Audrey’s Kitchen, Birchmere Ventures, Blue Tree Allied Angels, Eagle Ventures, Fifth Third Bank, Innovation Works, Pittsburgh Life Sciences Greenhouse, West Capital, private investors

ALung Technologies, Inc. is commercializing the Hemolung® System, an artificial lung that provides a new and innovative therapeutic intervention that will replace or supplement the mechanical ventilator in the Intensive Care Unit (ICU). The Hemolung™ will provide 50%-75% of a patient’s respiratory need, thus allowing the lungs to heal with the promise of eliminating intubation, sedation and mechanical ventilation (MV). By doing so, use of the Hemolung™ System will impact a reduction in the hospital length of stay and significantly reduce the incidence of ventilator associated pneumonia, thereby resulting in a reduction in the total cost of care for patients with respiratory failure.

Aquion Energy, Inc.

www.aquionenergy.com CEO: Scott Pearson Investors: Advanced Technology Ventures, Bill Gates, Bright Capital, Foundation Capital, Kleiner Perkins Caufield & Byers

Aquion Energy, Inc. is fundamentally changing the economics of power generation and distribution by developing and commercializing a safe, reliable and affordable energy storage solution from nontoxic components as simple as saltwater. Based on the research of Carnegie Mellon University Professor Jay Whitacre, Aquion’s proprietary Aqueous Hybrid Ion (AHI) battery overcomes the pitfalls of conventional energy storage technologies. AHI systems will enhance the electrical grid by providing flexible, emissionsfree capacity that optimizes existing generation assets and enables broad adoption of renewable energy technologies.

ATRP Solutions

www.atrpsolutions.com

ATRP Solutions invents, develops and manufactures polymer-based ingredients which improve the performance and environmental impact of products in personal care, cosmetics, home care, mining and oil and gas markets. Those ingredients are made possible by a revolutionary polymer synthesis process called atom transfer radical polymerization (ATRP). As the world’s leader in ATRP technology, ATRP Solutions works every day to produce new, intelligent ingredients to make our lives and our world better.

CEO: Patrick McCarthy Investors: Innovation Works, angel investors

March 2014

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2013 Pittsburgh investment highlights Branding Brand Branding Brand powers mobile commerce sites and apps for over 200 of the world’s leading retailers, including American Eagle Outfitters, Costco and Ralph Lauren. Founded in 2008 by three friends from Carnegie Mellon University, the company launched a mobile platform at the end of 2009 to seamlessly extend brands into optimized experiences for smartphones, tablets and in-store. It is now the largest m-commerce provider to the Internet Retailer Top 500.

www.brandingbrand.com CEO: Chris Mason Investors: CrunchFund, eBay Enterprise, Insight Venture Partners, Lead Edge Capital

Cohera Medical, Inc.

www.coheramedical.com CEO: Patrick Daly Investors: Bradford Capital Partners, Innovation Works, Kern Medical LLC, Pittsburgh Life Sciences Greenhouse

Cohera Medical, Inc. is a leading innovator and developer of absorbable surgical adhesives and sealants that improve patient care and quality of life. Cohera has entered the European market with its first product offering, TissuGlu® Surgical Adhesive, which Cohera’s researchers designed to help plastic and aesthetic surgeons to eliminate or reduce fluid accumulation and the need for post-surgical drains in abdominoplasty (tummy tuck) and other large flap surgical procedures. TissuGlu Surgical Adhesive is resorbable, biocompatible for internal use, uses no human or animal-based ingredients and forms a strong bond between tissue layers.

Complexa, Inc. www.complexarx.com CEO: Joshua Tarnoff Investors: BlueTree Allied Angels, Innovation Works, Mid-Atlantic Angels Group, Pittsburgh Life Sciences Greenhouse, Scientific Health Development, Upstart, angel investors

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Complexa, Inc. is a platform biopharmaceutical company focused on discovering and developing reversible endogenous anti-inflammatory agents for the treatment of metabolic and inflammatory-based diseases. The company’s human pathway signaling discoveries have revealed new classes of drugs that are based on naturally-occurring nitro-fatty acids. With over 100 published works, Complexa has strong preclinical proof of concept data in multiple disease categories with initial focus placed on acute and chronic kidney diseases. Complexa’s lead compound CXA-10 is expected to enter human trials in early 2014.


Epiphany Solar Water Systems

www.epiphanysws.com CEO: Tom Joseph Investors: Consol Energy, Innovation Works

Epiphany Solar Water Systems (SWS) was founded in 2009 when Tom Joseph and Henry Wandrie first developed a simple and inexpensive method of purifying water using concentrated solar energy. Since its conception, Epiphany SWS has completed fabrication of various successful beta units to provide drinking water globally and treatment of Marcellus Shale gas well-produced water locally. Pilot field testing of units with Consol Energy was successfully completed in 2012 and 2013, with pilot production market launch scheduled for early 2014. This successful pilot production launch will lead to full-scale production in the second half of 2014 with deployments in different shale gas regions with several Oil & Gas operators. Epiphany maintains their continued long-term vision to support the shale gas industry, as well as providing pure drinking water globally.

Forever, Inc. www.forever.com CEO: Glen Meakem Investors: CGreat Oaks Venture Capital, Clearwater Capital Management, JEMS Venture Capital, Meakem Becker Venture Capital, Tribeca Venture Partners, private investors

Forever, Inc. owns and manages FOREVER.com, the world’s first Permanent Digital Family Archive — a place to pass down a family’s most important stories, values and traditions to future generations. Permanent Members upload cherished photos, children’s artwork, scrapbook pages and soon videos, recipes, and more. FOREVER.com allows families to easily organize, share and preserve the stories of their loved ones and is backed by the FOREVER™ Guarantee Fund to ensure these memories last for generations. FOREVER was founded in 2012, by Glen Meakem, who previously founded and led B2B e-commerce success, FreeMarkets, to a record-breaking IPO and multibillion dollar valuation.

NoWait, Inc.

www.nowaitapp.com CEO: Ware Sykes

NoWait, Inc. is revolutionizing the casual dining industry, growing sales and improving operations for restaurants, and allowing consumers to have better experiences and save time in their lives. Founded in Pittsburgh, with offices in New York and Pittsburgh, NoWait is realizing tremendous growth. NoWait has seated 33 million diners to date, and is in thousands of restaurants across the US.

Investors: Alphalab, Birchmere Ventures, Innovation Works, Novel TMT, Sand Hill Angels,

March 2014

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2013 Pittsburgh investment highlights Rinovum Women’s Health

www.rinovum.com CEO: Stephen Bollinger Investors: Blue Tree Allied Angels, Cardio LLC, Innovation Works, Pittsburgh Life Sciences Greenhouse, Thirteen Ventures

Rinovum Women’s Health® is a women’s and couples’ health company dedicated to bringing products into the market that will enhance women’s and couples’ lives and empower them to take charge of their health. While developing their first product The Stork®, they discovered that couples are faced with a multitude of issues related to nutrition, fertility, access to physician care and general health. They have products in development and products that are available today, that are clinically proven, easy-to-use, economical, and safe, for couples to address some of their known and unknown fertility issues today. The lead product available for couples today is The Stork. The Stork assists couples in optimizing their reproductive goals with respect to two of the largest target populations in family planning couples: individuals committed to building a family and patients’ diagnoses with infertility issues who have not been able to participate or have been unsuccessfully addressed with existing alternatives today. The Stork supports Building Families Naturally® with and without a physician’s care in the privacy of the couple’s home.

Seegrid Corporation

www.seegrid.com CEO: Anthony Horbal Investors: Innovation Works, private investors

Seegrid Corporation provides simple, affordable, flexible vision-guided automated guided vehicles (AGVs) to the material handling industry. Seegrid robotic industrial trucks, flexible AGVs, are revolutionizing the movement of materials in manufacturing and distribution environments with risk-free automation. Seegrid AGVs optimize workflow processes by increasing productivity and reducing costs, creating economic and operational advantages. Flexible AGVs deliver a rapid return on investment, improve facility safety, and reduce equipment and product damage. Seegrid’s vision-guided technology transforms industrial vehicles into unmanned, automated pallet trucks, tow tractors and walkie stackers that operate without the need for wire, laser, tape or magnet. Seegrid was recently named Manufacturer of the Year by the Pittsburgh Business Times.

Thar Pharmaceuticals

www.tharpharma.com CEO: Raymond K. Houck Investors: Audrey’s Kitchen, Ashaway Ltd, FJ investments LLC, Innovation Works, Sitara Investments LLC, Ventry LLC, angel investors

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Thar Pharmaceuticals transforms intravenous (IV) drugs into oral drugs, improving their clinical performance and economic benefits. Thar’s oral drugs eliminate the reimbursed cost of IV administration and thus reduce overall healthcare costs. Since Thar starts with FDA approved IV drugs, they already know the safety, efficacy and market success of the drug. Their approach significantly reduces risk and improves speed to market. Thar’s lead product is a composition-ofmatter patent protected oral version of an existing $2 billion revenue IV-only cancer drug used to treat breast, prostate, lung and multiple myeloma cancer patients. Thar is currently completing its Phase I human trial on its novel oral version of the drug.


The Efficiency Network

www.tensaves.com CEO: Troy Geanopulos Investors: Adams Capital, Innovation Works, angel investors

®

security technologies www.wombatsecurity.com CEO: Joe Ferrara Investors: Audrey’s Kitchen, Blue Tree Allied Angels, Idea Foundry, Innovation Works, Pittsburgh Equity Partners, angel investors

The Efficiency Network (TEN) is a next-generation Energy Services Company (ESCO) that partners with a wide spectrum of building owners to deliver energy and water cost savings. TEN has developed proprietary technologies and a variety of customer-centric, straightforward contracting models that streamline high-efficiency retrofits for existing buildings, all while generating guaranteed cost savings for their customers. TEN is committed to reducing the cost and complexity of energy efficiency, thereby helping both large and small customers feel confident and prepared to implement projects. TEN is based in Pittsburgh with satellite offices in Baltimore and Philadelphia.

Wombat Security Technologies Wombat Security Technologies provides information security awareness and training software to help organizations teach their employees secure behavior. Their SaaS cyber security education solution includes a platform of integrated broad assessments, as well as a library of simulated attacks and brief interactive training modules. Wombat’s software training solutions reduce employee susceptibility to cyberattack, even phishing attacks, by over 80%. They are helping medium to large enterprises around the world in industry segments such as finance, technology, banking, higher education, retail and consumer packaged goods to strengthen their cyber security defenses.

March 2014

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Methodology The data in this report comes from a combination of the Dow Jones VentureSource and ThomsonOne databases; private company data collected by Innovation Works, Inc.; and information reported by Carnegie Mellon University, Duquesne University and the University of Pittsburgh. The investment rounds tracked in these datasets were completed by companies in the Pittsburgh region from January 1, 2009 to December 31, 2013. For the purpose of this report, equity investments, convertible note investments and initial public offerings were counted as “venture” investments. The geographic boundary of the Pittsburgh region used in this report corresponds to the Pittsburgh Metropolitan Statistical Area (MSA), as utilized by the U.S. Census Bureau. Similarly, benchmark geographic regions were defined based on MSA boundaries. Throughout this report, the terms “deal” and “round” are used interchangeably, and refer to a single reported round of funding. Companies may complete more than one fundraising round in a single year, in which case each round is counted as a separate “deal.”

About EY

About Innovation Works

EY is a leader in helping to take companies public worldwide. With decades of experience, our global network is dedicated to serving market leaders and helping businesses evaluate the pros and cons of an IPO. We demystify the process by offering IPO readiness assessments, IPO preparation, project management and execution services, all of which help prepare you for life in the public spotlight. Our Global IPO Center of Excellence is a virtual hub which provides access to our IPO knowledge, tools, thought leadership and contacts from around the world in one easy-to-use source. www.ey.com/ipocenter (http://www.ey.com/ipocenter)

Innovation Works, Inc. (IW) invests capital, business expertise and other resources into high-potential companies with the greatest likelihood for regional economic impact in the Pittsburgh region. IW is the single largest investor in seed-stage companies in this region and is one of the most active seed-stage investors in the United States. Nearly three-quarters of all recent venture-funded companies in the Pittsburgh region had previously received funding from IW. Innovation Works is an initiative of the PA Department of Community and Economic Development and is funded by the Ben Franklin Technology Development Authority.

EY’s worldwide Strategic Growth Markets Network is dedicated to serving the changing needs of high-growth companies. For more than 30 years, we’ve helped many of the world’s most dynamic and ambitious companies grow into market leaders. Whether working with international mid-cap companies or early-stage venturebacked businesses, our professionals draw upon their extensive experience, insight and global resources to help your business succeed. www.ey.com/sgm (http://www.ey.com/sgm)

For more information, please visit: www.innovationworks.org

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EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. © 2014 Ernst & Young LLP. All Rights Reserved. BSC No. 1402-1205105 ED none. www.ey.com

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