Pittsburgh Mayor Bill Peduto speaks on Duolingo’s IPO and luring venture capital to the Steel City

Pittsburgh is known as the Steel City, but these days, the city is turning to startups rather than steel. Mayor Bill Peduto led this charge since taking office in 2014. He recently spoke at TechCrunch’s City Spotlight: Pittsburgh event, where he outlined the opportunity and challenges for entrepreneurs considering founding and running their companies in Western Pennsylvania.

This is a trend across the United States, as cities once again turn to small businesses, such as tech startups, to reinvigorate and inspire. But, as Peduto points out, there’s a desperate need for more venture capital. The region also struggles to retain and recruit talent, echoed by CMU’s President Farnam Jahanian, who spoke at the same event.

Peduto is leaving office in January 2022 after losing to Ed Gainey in his party’s primary race.

The following is a transcript of key topics discussed in the interview. The questions and responses have been lightly edited.

What do you say to entrepreneurs looking to move to Pittsburgh?

I would say this, first and foremost: Find a city that can provide you with the talent so that you have a pipeline.

Andrew Carnegie set up along the shores of the rivers of Pittsburgh because he knew he could get iron ore from Minnesota and coal from West Virginia and utilize the rails in the rivers as the way to export his business. So when you’re creating and looking for a city, look for where the talent already is so you don’t have to worry about bringing the talent to the location.

Those river banks are still here in Pittsburgh. But the true iron ore and coal today are called Carnegie Mellon University and the University of Pittsburgh. So as we’re producing all of these engineers and others, our goal is to create a city with the livability of a city where people would want to stay with a cost of living where people can own their own home. And a city where it’s small enough that you can get something done; where you don’t have to get caught up in the city bureaucracy, but it’s large enough that the world will take notice.

What you’ll find is those cities exist throughout the country, but they’re not on the coasts. Instead, they’re cities like Nashville, Charlotte, Austin, and Pittsburgh.

No one would deny that Pittsburgh has the talent and the livability. It’s a beautiful city. I’ve been there a few times myself, and I love it. But what’s missing?

Venture capital.

Part of it is a psychological belief that investors from the coast need to move a company to the coast to guarantee their success. What they’re doing is raising all the incremental costs that have nothing to do with its technology. They’re wasting funds on everything from rent to the cost of food. The belief that you physically have to be located in California or in New York drives many venture capitalists to look elsewhere when a great idea is being discussed.

Another part that’s missing is the critical second phase of funding. Pittsburgh has become reliant upon creating its economic development structure to be able to get a lot of these startups off the ground. And I’m not just talking about angel investors. There’s a number of different ways that companies are being funded that we didn’t have just a few years ago, for that critical second wave of funding. Entrepreneurs are missing out. And investors and VCs are missing out on being able to get into an early-stage company in Pittsburgh after it has started. And without that second round of funding, a lot of these companies die on the vine instead of being able to make it to a critical juncture point.

What do you say to entrepreneurs with a great idea and a good business but need to leave because there is no VC funding?

That’s the hard part. Luis von Ahn from Duolingo had the opportunity, and probably a lot more money, to leave Pittsburgh than to stay in Pittsburgh and create his vision. He did it partly because of pride in being a part of this city. Part of the area we have to make up, when we’re not able to match dollar for dollar, with a different part of the country is going back to that quality of life. It goes much further than just being able to afford a house. It is the actual life that you are given by choosing to live in this area. It is a better lifestyle for many people than what they can find in saturated areas of the coasts.

I’m an outsider. And I’m not going to pretend I know Pittsburgh like a local journalist. I live just north of Detroit, and I see a lot of parallels between Detroit and Pittsburgh, Columbus and Austin, Nashville, and all these cities that are emerging as startup hubs, but sometimes this growth feels like it’s just surface level. What do you see in Pittsburgh that makes you hopeful that this growth will continue for years or decades to come?

It’s that there is now an entire ecosystem around it. We didn’t have that 10 years ago. So somebody who would be coming to Pittsburgh to work at Google wouldn’t have an opportunity to stay in Pittsburgh, to have a parallel advancement. And then to continue in a career path that would leave them to having a very successful career without having to leave Pittsburgh. There is a strong structure now around cleantech.

We’re around renewable energy, which people are surprised when I say that, but there are more jobs in Allegheny County, where Pittsburgh is in the renewable energy field, than coal, gas, and oil combined. The energy industry has shifted and in Pittsburgh — and with the Biden administration committed to investing in the areas that otherwise would be left behind — that opportunity is here to take off. Within each of those different sectors that I talked about earlier, advanced manufacturing, robotics and artificial intelligent life sciences, there is an expanded field instead of the focused field.

That’s a big difference that I have watched. And fortunately, I’ve had a part in over 30 years of seeing it expand. So what I would say to the people, and why it is different now, is that you are no longer coming to Pittsburgh to work one job and then leaving and going somewhere else. People are coming to Pittsburgh, and they’re staying. They’re starting their own companies, or they’re finding unlimited parallel advancement as they continue to go up the ladder.

Let’s finish on Duolingo. They just filed to go public, and we were lucky enough to pre-record an interview with its director of engineering Karin Tsai before the quiet period. What’s your hope with Duolingo going public, and how is that going to change Pittsburgh?

Well, first off, personally, as a friend of Luis and watching him and his team expand exponentially. I couldn’t be more proud for him and to see that expansion occur — with the idea of developing right here in Pittsburgh.

I think the first part of it is the recognition that comes from within the tech industry itself — that a company of this magnitude, a billion-dollar company, can be born, grow and continue to rise as a public corporation in Pittsburgh.

Secondly, it brings top talent to the city. Third, it is a company that is committed to making the world a better place, not simply through their present technology of allowing us to learn a language, but the commitment of this company to invest in education across the board that will be equitable and available to anyone around the world, where education can be utilized to create a better society. That’s something that makes every Pittsburgher proud.