Why You Should Start a Company in... Philadelphia

It used to be, if you were serious about starting a tech company, you went to Silicon Valley. But emerging entrepreneurial hubs around the country are giving startup aspirants options. In this series, we talk to leading figures in those communities about what makes them tick. Here, part nine in our series.

When you look around the country, you see that second-generation entrepreneurs play a big role in thriving communities. They serve as mentors, cheerleaders and early capital sources. Philadelphia is an exception to the rule. Because despite a Web 1.0 legacy of hits like CDNow (acquired by Bertelsmann in 2000 for $117 million), Half.com (acquired by eBay in 2000), e-commerce company GSI ($1.55 billion market cap) and VerticalNet (valued at $12 billion in 1999), the city is mainly driven by first-generation entrepreneurs and few of them have hit a serious scale or impact yet.

But what Philadelphia's current startup scene lacks in experience it makes up for in enthusiasm. Blake Jennelle, a self-appointed leader of the community, founder of Philly Startup Leaders and a serial entrepreneur (Anthillz, TicketLeap), calls it a "self-help ethos." That sounds about right for a place known as the City of Brotherly Love.

Josh Kopelman, managing partner at First Round Capital, spoke with Fastcompany.com about what makes Philadelphia's startup scene unique.

What makes Philadelphia a great place for new businesses?

You know, it's called the City of Brotherly Love and I actually think they mean it when it comes to startups. Philly is small enough and intimate enough that most of the entrepreneurs actually know each other. There's an unbelievable sense of community.

Launching a startup is really hard and emotionally trying and there are a bunch of great networks and communities that build a really tight net and support groups. Philly Startup Leaders has hundreds of thousands of entrepreneurs actively helping each other. It's a really interesting community in that way.

Are there particular types of startups that do better in Philadelphia than others?

It's both the pharma or life sciences kind of startups just because you have all the big companies here, whether it's GlaxoSmithKline or others. And also, some of the businesses that can be bootstrapped.

One of the neat parts about Philadelphia is its geography. It's affordable, it's livable, there are 80-plus universities and it's really an hour away from New York, but the cost of living here and the lifestyle here are really great.

Comcast is nearby. Is that a factor in the startup scene, in terms of funding or a client?

You know, Comcast now is the sort of largest broadband portal, one of the largest players in media and entertainment. They've actually started a venture fund, but also now a seed stage fund, where we've invested with them in three companies and it's great because they are now really playing an active role in the startup ecosystem.

Does Philadelphia breed or attract entrepreneurs?

In the last big boom, Philly had more than a fair share of representation from VerticalNet to Safeguard Scientifics, the Intent Capital Group to Half.com, to CDNow, to GSI—those are all Philly-based companies.

But in general, I'd say that it currently sort of breeds most of its entrepreneurs. And the real hook—I think the universities will be an attraction magnet. There are 80-plus universities in the area, from Villanova, Penn, Saint Joseph's, Drexel, Temple, to Bryn Mawr. There are just so many schools in the area that I think the universities are going to be a strong sort of attracting ground for raw talent rather than [for] relocating entrepreneurs in their 30s.

What kind of talent comes out of those universities for startups—business or tech talent?

Well, I mean there are both, right? You know, University of Pennsylvania is an engineering school, but they have Wharton on the business side. And this year is the first year that, this past week, Wharton held a preview for this—the students are going to be coming next year, and they held a lot of breakout groups. And from what I've heard, this year was the first year in a long time that there were more people interested in learning about the entrepreneurship track than the investment-banking track.

What is happening that's going to make the ecosystem sustainable going forward?

I think you're seeing the emergence of programs, like Boulder has TechStars and San Francisco has Y Combinator. Philly now has DreamIt, which is a strong program. Many of these companies that have participated have received venture financing or additional financing beyond that.

Pennsylvania also has an interesting program called the Ben Franklin Technology Partnership, where the government is actually writing seed stage checks and they are actually among the most active venture investors in the country. So I think whether it's the sort of grassroots community, like Philadelphia Startup Leaders, it's incubators like DreamIt or it's government, I think everyone together is sort of playing their role.

Is there a particular profile of a Philadelphia entrepreneur that's unique from other cities' entrepreneurs?

You know, my sense is they tend to be scrappier, just by necessity. Philadelphia doesn't have the same funding ecosystem yet that other cities have. But we've seen an influx of even seed stage capital. Next Stage Capital raised a fund, MentorTech Capital raised a fund, ETF Ventures raised a funds, FirstRound Capital is headquartered here. So, you know, we're beginning to see an influx of venture players.

What kind of exits do you see in Philadelphia?

I think that the last time the exit market came around, Philadelphia did very well with multiple IPOs, with billions of dollars. Even today, GSI is a strong billion-dollar-plus market cap. That said, I'd say that the current crop of Philadelphia area companies are on the earlier side of the cycle, but the fact that they're early doesn't mean that the exits won't be there—it might mean they're a little bit farther away.

Image: http://www.flickr.com/photos/vic15/ / CC BY 2.0

For more from this series:

  • Why you Should Start a Company in...Austin
  • Why you Should Start a Company in...New York
  • Why you Should Start a Company in...Los Angeles
  • Why you Should Start a Company in...Chicago
  • Why you Should Start a Company in...Boston

Laura Rich is a freelance writer and co-founder of Recessionwire.

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  • Joe Stubblebine

    Great article! As one of the co-founders of JobCircle.com, Philadelphia's largest independently owned job board & career fair company, I can say with confidence that over the years, I have interacted with some true market leaders and entrepreneurs, and we have some great companies in this area! Sometimes we feel like Philadelphia can get lost between the chatter of New York and DC, and we're not a "west-coast" place to be, but I think we're all bound together with a love and a pride for our region, for our city, and for the success of the people who live and work here. (Go Phils 2010!)

    My company is now trying to pioneer another first for the region: SocialMediaPlus – the first large-scale Social Media Business Summit in Philadelphia, on May 25th at the PA Convention Center.

    SocialMediaPlus will be the Mid-Atlantic's largest business summit for professionals interested in learning about the latest in Social Media and web 2.0 technology. We're anticipating 1000 attendees, 50 exhibitors and 28 sessions led by over 40 of the best and brightest local and national technology, marketing, sales and Social Media leaders. You can check us out at http://www.SocialMediaPlus.com or reach out to me at @joestubblebine

  • Charles Jr

    What a terrific article about the start-up and entrepreneurial spirit alive in the Philadelphia area.

    And not just with the big guys who receive front-page news: there are a lot of us working behind the scenes, blogging, using WordPress, creating businesses to help other people, surviving in the 2008 - 2010 Worldwide Economic Meltdown.

    And for many business people who feel they went out into the forest, slew the dragon, earned their degree at one of our terrific colleges or universities, and then settled in to live happily ever after... there is still hope. Clearly the tools you learned "back then" don't work today now that the lush forest has become the overgrown Internet Jungle.

    We're working hard to help in that area and welcome all of Philadelphia's businesses (hey, and those from other places as well!) to see how we can help at http://bit.ly/4VOQbF

    Why should you start a company in Philadelphia - because the climate for change is here, the support structure is strong, people in Meetups are ready to support you, and heck: we're having a great time!

    Charlie Seymour Jr
    (Living in a suburb of Philadelphia, earned my MBA at Wharton of the University of Pennsylvania)

  • Ryan Meinzer

    I moved my company from Tokyo to Philadelphia at the end of 2009 - for every reason Blake and Josh explained. Not to show off (although I wouldn't deny a feature in Fast Company!), but to prove a point, here's a case in point of something that never could have been accomplished anywhere but the City of Brotherly Love:

    1st Month: Technically Philly offered a write-up (http://bit.ly/90K6vu); PlaySay Inc. hits 4,000 users with 3,000 products sold

    2nd Month: Philly Startup Leaders asked me to present at their annual "Founders Factory" event (http://bit.ly/61bg1x)...sold out event featured in the Philadelphia Inquirer (http://bit.ly/61bg1x)

    3rd Month: The PlaySay Team of 20+ is put together; PlaySay Inc. now expanding into new languages each month, largely for free leveraging non-paid university interns (BBA & MBA from Wharton, and of course my alma mater Temple)

    4th Month: Asked to showcase at the Mid-Atlantic Mobile Monday DEMO (http://bit.ly/b5ovjr), the Wharton Sustainable Venture Investment Competition (http://bit.ly/9KOnul), and the Wharton Entrepreneurship Conference (http://bit.ly/99okpM)

    5th Month: Angels and VCs are knocking on PlaySay Inc.'s doors...THANK YOU Philadelphia!

    Briefly, PlaySay empowers busy people to learn their dream language on the go. Anytime. Anywhere. On any mobile device. We turn cell phones into sexy walking, talking foreign language teachers. Try it at http://playsay.com.