WHY IS THIS IMPORTANT?
Research has shown that new business creation is the primary driver of job growth, with nearly all net job creation in the US since 1980 occurring in firms less than five years old. Entrepreneurship spurs the creation of new ideas and new markets, adds resources to communities by expanding tax bases, and acts as a driving force for innovation. A region’s ability to offer an attractive and dynamic environment for entrepreneurs greatly influences the vitality of its business community and its overall economy.
HOW DO WE CURRENTLY FARE?
Starting & Growing Businesses
Small Business Employment
Federal R&D Funding
Selling to the World
While the number of new establishments has increased in six out of 11 counties in our region since 2011, the region’s growth rate was the slowest among the 10 largest U.S. metros.
PERCENT CHANGE IN NUMBER OF BUSINESSES BY COUNTY (2011-2015)
WORLD CLASS STRATEGIES
STRENGTHEN ENTREPRENEURIAL NETWORKS
STRENGTHEN ENTREPRENEURIAL NETWORKS
The core elements of a healthy entrepreneurial economy are talent, ideas, and capital. Especially for first-time entrepreneurs, information about how to start a business and access market opportunities is crucial. Seed funding and risk capital, whether in the form of loans or investments, are required to nurture a startup through the delicate initial stages of growth. And talent drives the whole enterprise, starting with entrepreneurs who have the skills and will to keep nurturing and adapting an original idea into a successful business. Insufficient supply of any of these elements can cause a promising idea to wither on the vine.
Having this entrepreneurial infrastructure in place alone, however, is not enough. The most dynamic entrepreneurial economies are defined and supported by strong networks that tie entrepreneurs together and contribute to a growing pool of serial entrepreneurs. Observers of thriving entrepreneurial ecosystems note that the most successful ones build upon a robust entrepreneurial infrastructure with strong networks to develop a culture of entrepreneurship that encourages ambition, values risk-taking, and favors information exchange over secrecy. Research and practice is increasingly focusing on the importance of strengthening networks and connections between entrepreneurs, investors, service providers, and support organizations.
BUILDING A SUSTAINABLE PIPELINE OF ENTREPRENEURIAL TALENT IN THE REGION
While the entrepreneurial community appears to be growing in Philadelphia, it still lacks a critical mass of experienced executives with startup experience. Compared to other top entrepreneurial regions, Greater Philadelphia has a relatively small pool of serial entrepreneurs and CEOs that have progressed from one endeavor and moved on to form or invest significantly in a second or third venture – an important cycle for establishing a thriving innovation economy. Successful innovation centers develop and attract serial entrepreneurs who, having had success in previous endeavors, will reinvest time and resources in new ideas and companies. Providing new and seasoned entrepreneurs with opportunities to network and collaborate may help lead to changes in the way that our entrepreneurial and innovation communities are viewed both within and outside of the region. Increasing internship opportunities at startup companies and integrating entrepreneurship into high school and college curricula can boost the amount of young talent in the region that consider entrepreneurship as a viable and rewarding path.
MAKING SUPPORT SERVICES, PEER NETWORKS, AND RESOURCES EASY TO ACCESS
The region has a healthy network of formal and informal organizations that support entrepreneurship. But the large number of entrepreneurial support organizations and level of duplication among some of them in our region can produce another barrier for first-time entrepreneurs trying to find the best and most appropriate resources to help them grow. This points to a need for greater coordination and division of labor among entrepreneur-focused intermediary organizations that will help raise awareness of available services. The region’s existing entrepreneurial infrastructure investments and support efforts would realize an even greater impact if better aligned with a deeper understanding of Greater Philadelphia’s cluster strengths and opportunities.
INCREASING AVAILABILITY OF GROWTH CAPITAL
INCREASING AVAILABILITY OF GROWTH CAPITAL
Availability of early-stage risk capital – from seed to venture funding – is always a central concern and challenge for entrepreneurs and the policymakers trying to support them. A lively chicken-or-egg debate exists as to whether a critical mass of venture capital is a prerequisite for a vibrant entrepreneurial ecosystem or rather a sign of that success. Either way, a real or perceived lack of available risk capital can cause local entrepreneurs to decide to relocate. It is clear that existing funding gaps cannot solely be closed through institutional or public dollars, particularly given the budget challenges faced across all levels of government. The shared focus needs to continue to be around leveraging and growing the pool of available early stage risk capital to attract private investment further downstream. Eventually, a critical mass of entrepreneurs with promising business ideas is what will grow the pool of venture capital resources based in the region.
While finding adequate early stage risk capital is a challenge for all entrepreneurs, the path to commercializing many ideas and technologies coming out of academic or private research is often defined by larger and higher-risk capital requirements over longer periods of time. This dynamic holds especially true for many life sciences discoveries that start from basic research, require proof of concept support, and then may need multiple rounds of significant venture capital. Over the past decade, the gradual migration of available venture capital to less risky stages of investment has left larger gaps – or Valleys of Death – at earlier phases of startup development.
ATTRACTING PRIVATE VENTURE FUNDS TO GREATER PHILADELPHIA
A strong pool of serial entrepreneurs in a region attracts venture capital – both the physical location of firms and the funding that they provide. Successful clusters are not only able to pull funding from firms located elsewhere, but they are seen as a place where venture capital firms need to be. Per the new StartupPHL fund, the public sector can serve as a partner in the establishment of new privately-managed early-stage and venture funds.
SCALING EXISTING SEED AND EARLY-STAGE FUNDS IN THE REGION
While establishing a stronger venture capital presence here may be a worthwhile long-term endeavor driven by a greater concentration of entrepreneurial talent, focusing on maintaining and growing strategic early-stage and proof of concept funds can help to leverage later-stage investments and generate more innovation and entrepreneurial success stories. Part of this will entail advocating for government resources to capitalize pre-seed and seed investment pools.
TARGETING FOREIGN MARKETS FOR RISK CAPITAL INVESTMENTS
Increasingly, opportunities for new pools of risk capital are originating overseas. The ability of regional institutions, investors, and economic development officials to build relationships and connections in leading foreign markets, in particular China, can position the region for recurring investments. If Greater Philadelphia can offer attractive points of entry for foreign investment, the region will have a leg up on peer metros. Developing prospectuses that make the case for investment in support of the region’s leading industries and establishing a set of ambassadors in regions with high concentrations of venture capitalists to inform and sell investors on Greater Philadelphia businesses can increase exposure.