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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