Rich Lunak and Innovation Works continue to change the startup world


Rich Lunak, president and CEO of Innovation Works, has been the struggling entrepreneur trying to raise money, secure customers, get products out and hire the right team to execute.

Lunak’s company went from a three-person startup to an acquisition by McKesson Corp., the nation’s 16th largest company. That business grew to employ about 2,000 people and generate hundreds of millions of dollars in revenue. Today, the tables are turned as he leads Innovation Works’ efforts to support the entrepreneurial technology community.

“I’m actually an entrepreneur that’s benefitted from support. (Innovation Works is) a program that was started in Pennsylvania over 30 years ago. Back when I was building a health care robotics company here in Southwestern Pennsylvania, Innovation Works gave us funding and assistance that we probably wouldn’t have survived and been around without,” he says.

Lunak’s story isn’t unusual. Most people who are employed by or have partnered with Innovation Works have walked in his shoes.

“We need that in order to have that street credibility to an entrepreneur who walks in the door for help,” he says.
Innovation Works is the most active seed and early-stage investor in the Pittsburgh region, and last year PitchBook named it the third most active investor in the U.S. It runs Riverfront Ventures, an early-stage venture capital firm where Lunak is one of three managing directors.

Innovation Works also has two nationally-ranked accelerators, AlphaLab and AlphaLab Gear, and since 2000, its companies have raised over $2 billion of follow-on investment. AlphaLab and AlphaLab Gear Demo Day, held twice a year, draws more than 1,000 people and hundreds more watch online. Lunak says the most recent Demo Day, which “is like a rock concert for entrepreneurs,” drew 40 investors from China who brought their own translator, as well as others from across the U.S.

AlphaLab Gear, which is less than five years old, has spawned other programs and services like Startable Pittsburgh and the AlphaLab Gear International Hardware Cup. It also sparked other regions to develop similar accelerators.

A new model for an emerging trend

The idea for AlphaLab Gear began around 2008. Lunak and his team recognized fundamental changes in the way people built hardware products from high-profile successes like Square Inc., MakerBot and Fitbit.

Software engineers already were deploying new products on Amazon Web Services and the cloud with immediate access to global markets and scalable infrastructure.

People rethought the traditional waterfall method for product development — a sequential design process where progress flows downwards — in favor of the agile approach. Agile starts with a simplistic design. After weekly or monthly sprints on small modules, project priorities are evaluated and tests are run. Bugs are discovered and customer feedback is incorporated before the next sprint.

The same revolution started in hardware, Lunak says. Entrepreneurs had access to new tool sets like 3-D modeling, 3-D printing, fabrication labs and open-source hardware. The build cycle shortened and became less expensive. Developers could put prototypes into customers’ hands faster.