Donald Bonk interviews Reed McManigle, mentor in residence at Carnegie Mellon University’s Center for Technology Transfer and Enterprise Creation, as part of the Pittsburgh Tomorrow podcast series. This interview was conducted before COVID-19. The transcript is abridged and edited for clarity.

“We need lead investors here locally. We need gap funding that helps things in the university get to the door. We need early stage funding to get out the door.” —Reed McManigle, CMU Tech Transfer

Donald Bonk: Welcome. We’re here to talk about Pittsburgh’s future. Would you give us a little bit of your background so that folks can understand the context of your remarks?

Reed McManigle: I work in the Technology Transfer office at Carnegie Mellon. I’ve been here for 13 years. Our office is responsible for managing the inventions and intellectual property of the university. In the last two or three years, my role changed. I’m mentor in residence, working with our inventors (primarily faculty and Ph.D. students) who are interested in starting companies.

I came to Pittsburgh in the mid-1980s when everybody else was moving away. I saw it as a chance to have a big impact on Pittsburgh and by extension, nationally. Fairly early on in my time here, I got involved with a new type of economic development focused on technology and entrepreneurship. I worked at the Ben Franklin Technology Center, which many years later became Innovation Works. It was a first state program to focus on technology and entrepreneurship as an economic development strategy instead of smokestack chasing, which was the more traditional economic development mode.

From there, I went to University of Pittsburgh. When the Pittsburgh Life Sciences Greenhouse was set up as another strategy of the state of Pennsylvania to focus economic development on one particular technology sector, I moved over to the Life Sciences Greenhouse and focused on life sciences-based economic development. From there, I did some freelance consulting for a while, working with startup companies and universities, and then came to my current position at Carnegie Mellon.

Bonk: You’ve been here as CMU has become this dominant company creator in the region that’s spinning out companies. When we think about billion dollar companies of Pittsburgh, just as a history back story, the first billion dollar corporation in the world was the United States Steel Company in 1901. That Fortune, $400 million dollars, turned into 26 philanthropies, including what became Carnegie Mellon. Now, we have Duolingo (a billion dollar valued company) coming out from Luis von Ahn, a professor at Carnegie Mellon.

McManigle: It’s interesting that you bring up the U.S. Steel legacy, and in some sense, the spin-off of the foundation community. They have been instrumental in the transformation of Pittsburgh. Many of the economic development programs that I’ve been involved with over the last 35 years have been, in one way or another, supported by the foundation community.

Bonk: Is there anything else you want to let us know, having spent 35 years in economic development in Pittsburgh? Can you give us the secret of the recipe for those folks out there that might not understand how Pittsburgh has become a dominant technology force?

McManigle: The two biggest research universities here, the University of Pittsburgh and Carnegie Mellon, got very involved in economic development, more so than most other universities at an early stage. There’s leadership from the top and also from the ground up. But getting down into how stuff actually happens, there’s a lot of blocking and tackling, using football terms. Working with individual scientists to help them move towards being entrepreneurs, to get to the stage where they have a product that needs funding, and the traditional sources of funding and universities or federal research grants don’t tend to pay for that applied development.

Bonk: There’s a gap.

McManigle: There’s a development gap, and investors won’t fund things at that laboratory stage. So how do you get from that laboratory result to a prototype you could show to a customer? Another factor is the skill level and personalities and people involved. Academic scientists are academic scientists for a reason—because they’re really good at science. Right? They’re not business people. They’re not entrepreneurs. They’re incredibly busy people. They’re always out hustling for grants or supervising their students or sitting on committees or editing journals. They’re like, oh, in your spare time, why don’t you save our community by starting a company?

Compared to when I started in this field 35 years ago, there’s this huge support infrastructure within and outside the university to help our scientists go down that path of being an entrepreneur. We have programs for the faculty members, for their Ph.D. students. We have matchmaking with entrepreneurs. We have this dating service that connects the entrepreneurs to the scientist. We connect them with investors. We connect them with counseling of how to go after a type of federal grant for small businesses to get over some of those hurdles. There’s a lot more support resources than there were 35 years ago, but still, when you get down into the weeds of it, it’s a hard thing to pull off.

Bonk: Now we really want to dive into Pittsburgh’s future. What would it take from your perspective to make Pittsburgh the greatest city or one of the greatest cities in the world?

McManigle: One of the areas we can work on as a community is being more entrepreneurial. One of the things I think about is the lack of early stage funding—lack of funding in general. To give you a sense, in my work in the tech transfer office, we’re seeing maybe 50 potential startups a year. We don’t find 50 entrepreneurs to plug into them each year. We don’t have money to put into gap funds to help them through that valley of death. And that’s just part of what’s coming out of CMU.

We also have maybe twice that number of undergraduate and master’s student startups each year. There’s this tremendous pipeline of things coming up, and the ability of the community to support them doesn’t even match up with the local pipeline, much less with people coming in from out of town. For example, if you look at Innovation Works, which is one of the most active early stage funders in the country, they can fund maybe a dozen or so companies a year, maybe two dozen.

That’s not even the pipeline coming out of CMU, much less Pitt, much less in the broader community. If you look beyond that to series A venture capital funds, we have almost none in Pittsburgh. Most of the money is coming from out-of-town investors.

We need lead investors here locally. We need gap funding that helps things in the university get to the door. We need early stage funding to get out the door. We need more entrepreneurs and we need experienced product managers and salespeople and so on.

When I first started working in this field, it was next to impossible to recruit somebody from the coast to come to Pittsburgh for a startup company, no matter how good the company was. They would say, “I’m not moving my whole family here, risking it, everything on your startup company. And then what if your company goes belly up? Who else is in the community? I’m going to have to move my family again if this fails.”

It’s changed tremendously now that there actually is an ecosystem of companies. When they’re recruiting, I could say, “Well, look at this whole ecosystem. You can move from company to company here in Pittsburgh, without having to relocate.”

That’s one area: entrepreneurship. Another area is sustainability. That applies not just in an environmental sense, but sustainability in terms of how our culture is working. How is our society working?

We can’t have just the rock star entrepreneurs and techno geeks getting all the gain in society. We need to raise everybody’s output. We need to get it all out into the preschools and so on and make sure that everybody’s participating in this economy. And that has not happened enough. Lots of people are being left out.

We’re competing on a global stage, not just with Cleveland and Austin, but with China. To do that, we have to have all hands on board. We have to get everybody in our society contributing to the best of their ability. Right now, too many people are being left out through some sort of societal social Darwinism kind of approach. It’s like if you’re not making it in society, it’s your fault. If we have that kind of perspective, the whole community at large is not going to be competitive.

I saw a chart earlier today showing the 30-year history of R&D spending in the United States, the European countries, and China. The slope of the curve in China is dramatic. The U.S. is almost flat.

Bonk: Is there a program, a project or an idea that would be a moonshot for Pittsburgh?

McManigle: One of the ways that we as a society and as a community will look at opportunities is sort of a thumbs up, thumbs down. This is good. It’s ready to go. It has a nice ribbon attached to it. Let’s fund it. Whereas, to get things to the point where they are nicely packaged up and it has all the management team, and has all the prototypes, and has the customer relationships—that’s where we need the help.

If we get things to the point where they have all those things in place, we can go find money. But the hard work of getting to that point takes more than a thumbs up, thumbs down, you’re ready, you’re not ready. If we think they’re not ready, let’s figure out how to help them.

Bonk: If you were in leadership, a governor or a mayor, are there three priorities that you would focus on that would be transformative for Pittsburgh’s future?

McManigle: I mentioned sustainability. That’s both an outcome and an opportunity that, ready or not, we’re moving towards a decarbonized future that’s going to be smart, robotic. We need the large, government entities to buy in a big way. And we need to capture the things that are hard. We can’t let this solar manufacturing thing, for example, go to China. It would be great if we could capture that kind of manufacturing in Pennsylvania, in Pittsburgh.

The default at this point in world history is, this is probably going to China. That’s what happened with the last generation of photovoltaics. If we don’t have ways of funding the things that need more money to get to a demonstration scale, pilot scale, we’re going lose these opportunities and miss out on another generation of technology.

I’m going to tie that together with another theme and talk about Pittsburgh and our history, and our sort of unique position in the sense that we have all this technology, but we also have this manufacturing legacy and skill set, and we also have affordability of living. If you look at a place like San Francisco, it’s not affordable to live there.

It’s more difficult for them to be a manufacturing hub because they can’t afford to pay their manufacturers, or the manufacturing people can’t afford to live there.

If we’re looking at things like the Advanced Robotics Manufacturing Initiative, we need to find ways to bring together the history of Pittsburgh as manufacturing center with affordability, where we can have that, and say we’re going be the manufacturers of the future.

In software we have great strengths; we’re the number one computer science school in the world. But you can do software from anywhere. It’s tougher to find places in the world where you have that technology leadership and the manufacturing capabilities, and affordability where you can do that.

Bonk: I love how you’ve tied these themes together. You know, the connection between entrepreneurship, sustainability and manufacturing, which are touchstones of all of Pittsburgh’s history. Thank you for this discussion. You’ve touched on so many important points that people need to hear.