Categorized As:Business Growth
Capital and Ideas to Grow PHL's Startup Community
When it comes to growing a region’s entrepreneurial ecosystem, the basic formula for success is the same – a healthy population of smart and ambitious people, technical and professional resources to support them while they develop ideas, and capital to help turn those ideas into viable enterprises. It’s how regions fare on these three key elements that differs.
In general, Greater Philadelphia has been seen as doing increasingly well on the first two counts but not as well on the third. Recent years have seen steady growth in the region’s population of entrepreneurs and knowledge workers, much of it driven by our globally-connected network of universities and high-tech and life-science industries. But capital at critical moments has been harder to come by, and the city has seen potentially valuable startups move on to greener pastures.
This need and opportunity has led to the recent launch of StartupPHL, a public/private initiative that focuses on providing seed capital and advancing ideas to support area entrepreneurs. Last week, Mayor Nutter announced that First Round Capital would manage and contribute to a new $6 million seed fund and revealed initial winners of the StartupPHL call for ideas to grow Philadelphia’s entrepreneurial community.
There’s no question that Philadelphia has missed out on recent startup opportunities because of the lack of capital. First Round founder Josh Kopelman, a Gladwyne native, Wharton grad, and one of the nation’s top tech investors, estimates that the city lost a billion dollars of market value creation within the past few years just through the departure of local startups AdMob, Invite Media, Warby Parker and Milo.
But the city is hardly alone. “Five years ago, New York had zero seed funds as well. We spent a lot of time talking to them,” said Artisan Mobile CEO and Philly Startup Leaders President Bob Moul. The 2008 financial crisis spurred New York into action, he said. “Suddenly a lot of people were looking for jobs. That was their impetus. So the city took the lead, started the seed fund, and today there’s a plethora of seed funds and startup money.”
StartupPHL’s seed fund will attempt to replicate that success. Through the Philadelphia Industrial Development Corporation (PIDC), the city has put three million dollars into the fund; Kopelman’s First Round will match that money and manage it. “They’ll make the investments – seed-stage investments in companies ready to take it to the next stage,” said Luke Butler of the Office of the Deputy Mayor for Economic Development. Investments averaging about $500,000 each – enough to significantly boost a young venture – will be made over the next three years, and recipients will be required to stay in the city for 18 to 24 months.
Meanwhile, StartupPHL’s other approach is a call for ideas competition to support the entrepreneurial community in Philadelphia. Out of more than 115 submissions, StartupPHL has awarded an initial round of six five-figure grants to a range of organizations and partnerships for programs or services that will boost Philadelphia’s entrepreneurial capacity. Recipients will include the Greater Philadelphia Chamber of Commerce (to create a directory of resources for entrepreneurs), Ben Franklin Technology Partners (to support internships at startups for college students), the Center for Culinary Enterprises in West Philadelphia (to run workshops for aspiring culinary entrepreneurs), and other programs targeted at high school students, education entrepreneurs, and aspiring tech workers in need of job training.
These creative programs join a growing number of networks and opportunities in the region to connect would-be moguls with experts in management, marketing and money matters. “I can’t impress on people how many programs there are available for entrepreneurs every single week – all sorts of learning opportunities,” said Moul. “Two years ago we had very few – and I think we now have half a dozen or more.”
The diversity of the first round of call for ideas winners (there will be another round in the fall) reflects the city’s desire to support all of its residents, not just those who happen to be at universities or in the tech business, said Butler. “Our perspective as the government is to support small entrepreneurs of all types,” he said. “This isn’t a purely tech-focused effort.”
At the same time, there’s no question that StartupPHL has a particular interest in capitalizing on the city’s growing population of young knowledge workers and aspiring business owners. “There are some emerging hubs of that kind of activity – in Old City, in University City, in Fishtown. Stuff is popping up all over the place,” Butler said. “We’ve had steady population growth for the last six years or so, turning around 60 years of decline. So it’s all about how we attract new people to the city and support the people who are already here.”
The alignment of StartupPHL’s two-pronged approach with the two priority strategies for starting businesses identified in the World Class Business Growth GPS released earlier this month is no coincidence. Moul, who was involved in the development of StartupPHL, also served as co-chair of the World Class Greater Philadelphia Business Growth strategy team.
“Those are priorities that were established by the World Class initiative,” said Butler. The World Class GPS highlights the need to strengthen entrepreneurial networks and increase the availability of growth capital as priority strategies to spur new business starts and early-stage growth in the region.
Moul said he’s excited by the city’s move to increase access to capital and strengthen local networks of entrepreneurs. He credits the Economy League’s World Class strategy development effort with keeping these priorities at the forefront of the conversation about regional business growth. “The connections, the relationships, the opportunities to collaborate, those are tremendously valuable,” said Moul. “Teeing up the critical strategic issues we should be dealing with and keeping that conversation going is a huge role, and a great value-add by the Economy League.”