Philadelphia Sets Sights On Becoming America's Next Big Tech Town

Leave it to a determined community of nerds building tech companies to help the City of Brotherly Love live up to its nickname once again.

The history of Philadelphia is in many ways the story of the "City of Brotherly Love” going from an earnest nickname to an ironic one. Once the capital city of the United States, it was home to the first hospital in the U.S. colonies (Pennsylvania Hospital) and the first American medical school (Penn). Later, it transformed into a major industrial hub, eventually growing to 2 million people before declining in the mid-20th century as crime rose and wealthy citizens fled. North Philly’s race riots in 1964 drove away businesses, and the area has taken decades to recover. By 2006, the homicide rate in Philadelphia shot to the top of the 10 most populous American cities.

Brotherly love, however, has found its way back into Philadelphia over the past few years thanks to a determined community of nerds building technology companies.

“Philadelphia is at a tipping point,” says Sean Blanda, cofounder and writer at the newsblog Technically Philly. “In the early 2000s anyone who moved to Philly was here in spite of the city. In 2012, this has created a diverse community of entrepreneurs who love Philadelphia and want to see it succeed.”

In 2010, Philadelphia-based InviteMedia, an online ad exchange bidding company, sold to Google for $81 million. The next year, sold its Pennsylvania-born social network for $100 million. In the wake of these, startups like Monetate, The Neat Company, and DuckDuckGo have surged in popularity and refused to emigrate to nearby New York or succumb to the vortex of Silicon Valley.

As the costs of starting a web-based company--including the cost and difficulty of software development--have sunk since Web 2.0, university-rife cities like Philadelphia are witnessing a boom in startups. And for perhaps the first time in decades, young people are starting to actually migrate to Philadelphia as a destination.

“The past census has revealed that tens of thousands of college grads have moved into Philly in the past few years,” Blanda says.

Resources for entrepreneurs, such as coworking spaces (cheap places to sit with a laptop and write code), incubators (like Dreamit Ventures, a competitive program that gives up to $25,000 and office space to budding tech companies), and investment dollars (from both venture capital funds and successful startup founders now making angel investments), are dripping into the area.

“Like many cities, Philly has seen a significant increase in all aspects of the startup lifecycle--start, growth, exit,” says DuckDuckGo founder Gabriel Weinberg. “I think we're riding the global trend here, but also we've had great community leaders as well.” He continues: “Our community is very tight-knit, which means it is very easy to connect with the top people in the scene.”

On the other hand, tech community members like Phin Barnes, a principal at First Round Capital, frequently move from Philadelphia to capture opportunities in New York. “The downside is classic,” Barnes says. “Actors can be born anywhere, but in order to flourish you either come to New York to be on Broadway, or go to L.A. to be in Hollywood. There's a higher likelihood to find all the things you need to succeed.”

The same thing happens to Philadelphia’s talent pool. Rising startups like Warby Parker and Coursekit have left Philly in past years in favor of big dollars in the Big Apple. “On the other hand,” Barnes says, “the proximity to major metro is real. The university system is really strong. You have tons of young people trying new ideas, thinking about what's next. There are VCs there, and they are good. There's just fewer than in New York.”

Philly entrepreneurs say it’s easier to be a big fish in a small pond than to stand out in crowded tech scenes like New York. New York entrepreneurs say it's easier to find the exact fit for a company in a larger tech scene. Though it’s never that easy.

But while consumer Internet and media businesses tend to migrate to Internet and media capitals, Philadelphia’s startup scene is starting to take root in industries that are core to its economy.

“What places like Philly... where startups are happening but aren't ‘startup towns’ need to think about is, ‘What else are we great at?’ And build startups around it,” Barnes says. “Philly has lots of pharma, so it makes sense to build a startup community around pharma and biotech. Startups are so competitive, you have to take every advantage you can.”

For example, retail commerce-focused Monetate has gained traction in Big Retail, landing accounts with Philadelphia-based GSI Commerce, Urban Outfitters, and QVC. “That's because they're all in their backyard,” Barnes says.

RJMetrics, a data analysis startup, recently wrote that it’s “doubling down on Philadelphia” because it’s inexpensive--and therefore less risky to run a company. And with community events like Philly Tech Week and Philly Tech Meetup coalescing area startups, a critical mass of capital is magnetizing around Philadelphia-specific industries.

And though talent may always tend to rush toward sexier cities like New York and San Francisco, the City of Brotherly Love is gathering a group of entrepreneurs who genuinely love Philadelphia. “Philly is the greatest city in the country,” Blanda says. “This city is real life. It has real problems and real people, which give us all a tremendous opportunity to make a dent.”

Follow the conversation on Twitter using the tag #USInnovation.

[Image: Flickr user James Loesch]

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  • This article makes the typical rookie mistake of conflating "being an entrepreneur" with "selling your company."

    Let me rephrase: "Philadelphia is a great place to be a parent. Jo and John Blow's daughter moved out just this past May!"

    Yes, selling your company is a thing that happens, just like kids moving out of home, but that's not what parenting — or entrepreneurship — means.

    Props for interviewing good subjects, especially Sean Blanda. No props at all for conflating venture funding and exits with entrepreneurship.

  • Great article, and one that I must agree with. My company, SevOne, recently expanded our presence in Philadelphia (now on the corner of Broad and Chestnut) to help draw from the tremendous tech talent in the city. We opened our space with 30 people back in March, and will probably double that by year's end. Forbes recently listed SevOne as #33 on their list of most promising companies in America. We're proud to have a presence in the rapidly growing Philadelphia tech scene.

  • Anthony Coombs

    Nice article Shane. While I agree that Philadelphia has tremendous potential, let me caution people that the majority of the companies featured in the article are based in the Philadelphia suburbs and not Philadelphia itself. DuckDuckGo, Monetate, QVC, and Neat are all based outside of the city. I attended a great Philly Startup Leaders event during Philly Tech Week where this exact issue was addressed. I believe that unless the city makes it more attractive to found a startup inside of the city (lower the 4% city tax rate or eliminate it for less than two year old companies) and incentivize startups to stay in the city, you won't see the change expressed in the article. The Philadelphia region is definitely on the rise but this does not create the jobs and inspire the change as it would if these companies were actually based 'in the city.' My two sense (pun intended). 
    -Anthony Coombs
     interact -

  • Bob Peterson

    I'm surprised Austin, Texas was not mentioned in this article as one of the major tech cities to compete against.

  • Joseph Chiaccio

    Great to see this covered. Take notice folks. The Philly start-up scene is really growing, and this is an exciting time and place to be in. There is awesome stuff going on here. We just finished Philly Tech Week, and dozens of new startups were launched. 

    Joseph Chiaccio