The Foundation of It All

Pittsburgh entrepreneurs owe a debt to the dead.

Specifically, to the mutton-chopped industrialists who built the city in the late 19th and early 20th centuries, giants like Andrew Carnegie, Andrew Mellon, Henry Heinz and others. They and their families created foundations which now pour money into economic development programs that boost entrepreneurship. It’s old money helping to build a new economy.

Thanks to its industrial past, mid-sized Pittsburgh has a disproportionate number of large, wealthy foundations, most of which concentrate spending in the city, Allegheny County and southwestern Pennsylvania. They give Pittsburgh the second-highest amount of foundation dollars per capita in the country.

Many of those dollars go to programs to foster entrepreneurship.

Robert Vagt, president of the Heinz Endowments, the city’s second-largest foundation, said his organization has given $135 million over the past eight years to startup incubators such as Idea Foundry, an incubator which has helped launch more than 85 tech companies; the Pittsburgh Life Sciences Greenhouse, which is devoted to biosciences; and Innovation Works and AlphaLab, its tech startup accelerator.

Each $1 of investment has yielded a return of $3 to $4, Vagt said. “I do think our role is to go where the markets don’t,” he added, explaining that the foundations look for programs with high potential to increase the quality of life, but aren’t attracting enough government or private support.

While the foundations support a wide range of programs and causes and none are devoted exclusively to entrepreneurship the way the Kauffman Foundation is, they have helped build the infrastructure that supports Pittsburgh’s economic resurgence.

No one has benefited from the foundations as much as the two biggest engines of economic development in the area, Carnegie Mellon University (which was founded by philanthropist Andrew Carnegie) and University of Pittsburgh.

In 2010, according to the Foundation Center, Pitt and CMU ranked first and second, respectively, among foundation grant recipients in the city with Pitt receiving 113 grants worth $18.7 million and Carnegie Mellon with 62 grants totaling $9.4 million.

The schools use the foundation money to expand offerings, attract academic and research stars and fund programs to promote entrepreneurship. For example, in 2012, the Richard King Mellon Foundation awarded Pitt $22 million for its four-year-old Center for Energy.

Today’s entrepreneurs are more likely to idolize Jobs or Brin than Carnegie or Westinghouse, but they shouldn’t forget the guys with the muttonchops who helped them on their way.

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