Philly venture capital activity is down in deals and dollars, but region shows resilience, per new report

Last year was slow for venture capital across the country, but Philadelphia’s market showed durability.

The Philadelphia Alliance for Capital and Technology (PACT) today released its annual venture report. The membership trade nonprofit is focused on providing resources to founders in Philadelphia. Each year, PACT works with PitchBook, a platform that gathers investment trend data, to summarize the highlights of venture investments in the Philly region from the previous year.

“2023 was a down year for everybody, in terms of numbers of deals and dollars, without exception,” PACT President Dean Miller told Technical.ly, “but Philadelphia fell slower or fell less than other geographies, particularly at the seed, pre-seed [and] early-stage levels.”

In the Philly market, which comprises the Philadelphia-Camden-Wilmington Metropolitan Statistical Area, last year brought 403 deals and $2.4 billion raised. That’s a notable drop from 2022, which saw 540 deals for a total of $5.3 billion.

While the region’s total raise dropped by more than half, the 2023 figure is about even with prepandemic stats. And despite the 25% decline in deal count, Philadelphia remained the fifth most active venture capital market in the country by that measure.

Early stage remained even stronger. The 151 early-stage deals in 2023 mark a year-over-year decrease of just 3.2%. The count is only 20 fewer than in 2021, which was a historic year for funding in Philadelphia.

These numbers signal Philadelphia is resilient at the early-stage level, per Miller.

The city’s relatively low cost of living is a factor, the report notes. At 5% above the national average, vs. 50% higher in Boston or 128% higher in New York, Philly is attractive for startups that require flexibility.

“Resilient at that early seed stage level is really important because it continues to build the foundation for future successes,” Miller said. “In clear terms, it means that Philadelphia didn’t stop starting new companies in 2023. And those entrepreneurs didn’t stop getting funding for them.”

Another important piece is the broad range of sectors that show up in the deals, he said.

Life sciences was the funding leader, with biotech and pharmaceutical companies making up 6 of the top 10 deals in 2023, but enterprise technology and B2C companies were also strong, Miller said. If a region relies too much on one sector and it has a slow year, the region will have less economic activity, he noted.

“What we see in Philadelphia is such a good diverse group from a sector perspective, that even when one is down, others can hold the line,” Miller said.

New in this year’s report is data about Philadelphia companies that have been founded by undergrads at local universities over the last decade and a half.

The University of Pennsylvania ranked number one with 93 founders, 80 companies and $1.1 billion raised over the last 15 years. This is not surprising because of the University’s size and its esteemed entrepreneur and business programs, Miller said.

What surprised Miller was that Penn State ranked second with 53 founders, 47 companies and a little over $1 billion raised. Drexel University was in third place with 45 founders, 40 companies and $5.1 billion raised, a chunk of which is thanks to delivery platform GoPuff, which was founded in 2013 by two former Drexel students.

See the Report

What to expect in 2024

In just the first two months, this year has already seen some major deals in the life science and medtech space, including Arrivent Biopharma’s $175 million January IPO.

Seeing significant activity this early gives Miller hope that 2024 will continue its positive trajectory for capital. In the end, he said, this year’s venture activity will probably be mixed.

“We still have mixed indications in terms of macro level economics in the US,’ Miller said. “We still within the global economy have challenges … and our economies are interconnected more now than ever. We still have a lot of uncertainty on the geopolitical landscape as well.”

Sarah Huffman is a 2022-2024 corps member for Report for America, an initiative of The Groundtruth Project that pairs young journalists with local newsrooms. This position is supported by the Lenfest Institute for Journalism.