It looks like Pittsburgh’s high-tech future is shaped by the people who inherit its industrial history.
Since the new strategic plan launched in 2021, the Richard King Mellon Foundation — Pittsburgh’s richest foundation with more than $3 billion in endowments — has been driven by a for-profit purpose aligned with its philanthropic vision. has invested over $3.3 million in startups, with at least another $1 million invested. In early 2023, the next round of Social Impact Investment (SII) will be launched.
This is part of a larger 10-year plan to invest $50 million in start-ups that align with the Foundation’s top priorities of economic development, economic mobility, health and wellbeing, and conservation.
“We can take risks that traditional capital markets cannot,” Sam Reiman, director of RK Mellon, told Technical.ly. “Once our major investments are returned, that money will come out again to fund new PRIs” or program-related investments in line with the foundation’s charitable giving.
“It’s just a virtuous circle.”
These types of foundation investments are new to Pittsburgh and represent only a small percentage of the foundation’s total charitable giving, but they represent a valuable source of domestic funding for founders looking to expand the industry of the future. .
Emphasis on impact, not just profit
For the most part, RK Mellon offers convertible bonds (a type of loan that converts to equity) to mission-driven startups that traditional VC funders might miss. Nadir Nunez, executive his director of startup his incubator Ascender, said this is a boost for local and regional entrepreneurs and a big change for the city’s largest foundation.
As with any fundraising, Nuñez said the devil is in the details and there is room for negotiation based on the startup. She believes RK Mellon offers opportunities for companies rooted more in influence than in profit.
“The type of company you build is different if you can expect a 7x to 10x return on your investment,” she said.
Courtney Bragg, co-founder of Fabric Health, said her Philadelphia-based startup, which offers healthcare consultations at local laundromats, won last year’s SII pitch competition, giving away $500,000 in prize money. I saw you got it.
This funding helped accelerate Fabric’s expansion into Southwest Pennsylvania. A positive impact “in Allegheny County and/or Westmoreland County” is the provision of RK Mellon grants (excluding conservation efforts) and a way to ensure that social benefits stay local.
Fabric Health at a Philadelphia laundromat. (Photo credit: Fabric Health)
Bragg said a PRI like the one offered by RK Mellon isn’t something most investors use, but he agrees with Nuñez’s point that funding offers start with a person-to-person conversation.
“We have partnered [official Pennsylvania healthcare marketplace] unfolding pennies [statewide]said Bragg. “We wanted to use the first year to understand enrollment numbers across Philadelphia. We are keeping an eye on the situation in Pittsburgh and excited to expand. It catalyzed our abilities and made it possible.”
Pittsburgh Tech Council President Audrey Russo estimates that about 70% of Pittsburgh’s technology and life sciences venture capital funding comes from outside the region. And these outside investors are interested in ROI, not generating public benefit.
“I meet with venture capitalists every day,” Russo said. “They aren’t saying, ‘How can we help your ecosystem?'”
From past to present
FortyX80, the non-profit arm of the Pittsburgh Tech Council, received $100,000 from RK Mellon last year to launch the ApprentiPGH technical training program. Nuñez’s Ascender has received major funding from RK Mellon, including $3.1 million in operational support over the past six years, and an additional $100,000 in 2021 to facilitate RK Mellon’s Social Impact Investing pitch event. rice field.
A variety of groups benefit from the Foundation, including universities, economic development agencies, and workforce development nonprofits. In 2022, the Andy Warhol Museum will raise $15 million over the next three and a half years from RK Mellon to fund the “Pop District,” a six-block redevelopment adjacent to the museum’s North Side. announced that it had received funds containing dollars. position.
Fortyx80’s Tarelle Irwin speaks at the November 2022 event celebrating the launch of Apprenti PGH’s Cybersecurity Apprenticeship Program. (Photo credit: Pittsburgh Tech Her Council)
Even though, historically, it has been the city’s larger institutions that have benefited from the foundation’s charitable contributions, an increasing proportion go directly to start-ups. Case in point: Entries for the second round of RK Mellon’s Social Impact Pitch competition closed last fall, and the next round of startup winners will be announced in his early 2023.
Investing in new start-ups was part of a larger vision to differentiate local economies in tangible ways, when Richard King brought together business leaders to launch the Allegheny Conference on Community Development in the 1940s. Similar to the vision I had in He worked with the government to create the city’s Urban Redevelopment Authority.
These efforts and associations led to Pittsburgh’s first “Renaissance” downtown Pittsburgh, leading to the all-out redevelopment of neighborhoods like Lower Hills, but today they are home to thriving black neighborhoods and cultural centers. Desolation is seen as a cautionary tale about how not to ‘reinvigorate’ an area that doesn’t care about the people who live there.
Investing in technical jobs
Today, the foundation’s vision and spending are equally ambitious, but primarily focused on original industrial sites. Centrally located a few miles from downtown, the 178-acre Hazelwood Green development site was once the site of He LTV Steel’s coke plant. RK Mellon, along with the Heinz Foundation, the Claude Worthington Benedum Foundation, and the McCune Foundation, in 2002 he purchased a Hazelwood Green estate under the name Almono LP for $10 million. (The McCune Foundation sold its stake to RK Mellon in 2016.)
The vision is for research teams and spin-off companies from nearby Universities of Pittsburgh and Carnegie Mellon to create and manufacture the industries of the future, much like the companies pitching in the Social Impact Pitch competition, while also creating and manufacturing the industries of the future. To create and provide jobs in the neighborhood. A resident of Hazelwood. In 2021, RK Mellon announced his $2.6 million grant to 16 organizations to boost job creation in “new economy” jobs.
“RK Mellon is fundamentally investing in the soup-to-nut academic and technology transfer ecosystem,” said InnovatePGH, a public-private partnership funded by RK Mellon to support the Pittsburgh Innovation District initiative. said Sean Luthor, executive director of “I see them investing in the new Mellon University of Science here in Auckland. [talent] Pipeline to Hazelwood Green’s new robotics assets. And that’s what makes Pittsburgh’s unique brand value statement in the fiercely competitive global race to be the economic leader of the 21st century. ”
A view of downtown Pittsburgh from the Hazelwood Green development in 2017 (Photo credit: Carnegie Mellon University)
In 2021, RK Mellon donated $150 million to Carnegie Mellon to fund an advanced robotics manufacturing center in Hazelwood Green. And in November, the University of Pittsburgh received his $100 million to begin the creation of the Pitt BioForge facility in Hazelwood Green. This facility will develop cell and gene therapies.
“The steelmaking practices here were devised by visionaries who discovered new ways to harness technology to make Pittsburgh a world leader in manufacturing. It was created by people who work and maintain families to create new opportunities for the whole population,” RK Mellon’s Rayman said at the time. “And that’s exactly what’s starting again here today.”
Lyman and others at the Foundation are quick to draw parallels between these long-term investments and the Foundation’s past investments, such as early seed funding for Carnegie Mellon University’s computer science program in the 1960s. increase.
“If you look at the investments we are making in Hazelwood, AI, computer science, robotics, biotechnology, advanced additive manufacturing, and more, Pittsburgh has the potential to own or be a leader in the industries of the future. I think there is,” Lyman said.
“I feel like there is a limited window here to really position the city and region to participate in some of these new industries.”
-30-
