Philadelphia’s diversified startups keep VC growth steady in 2025 during national AI surge

While the Philadelphia region experienced less venture capital activity in 2025 than the year before, the region remains a nationally competitive fundraising hub. 

Both deal count and deal value were down last year, bringing in $3.8 billion across 470 deals, according to the Philadelphia Alliance for Capital and Technology’s (PACT) annual Venture Report, which came out this week. 

Nationally, however, venture funding appeared to rebound in 2025, mostly concentrated in AI deals. National deal volume reached $250 billion by Q3 last year, compared to $215 billion in 2024. 

Philly’s startups are spread across sectors such as life sciences, healthcare and enterprise technology, which did not experience the same level of capital. AI-focused hubs such as Silicon Valley saw concentrated funding surges, according to the report. 

“In hubs that are heavy in deep tech, life sciences, etc., those deliver incredible value over time, but they are really struggling to raise money in such a capital-constrained environment,” Shiloh Tillemann-Dick, research director at the National Venture Capital Association, said at PACT’s first Venture Report Town Hall on Wednesday.  

To PACT, Philadelphia reflects a more realistic view of the current venture capital market. Philadelphia’s mix of sectors can still take advantage of AI while growing steadily, avoiding boom-and-bust swings, and offering a potential model for other regions looking to build long-term success.

Philly is successfully combining its strength in healthcare with the AI momentum. In 2025, 20.3% of all Philadelphia VC deal value came from healthcare AI companies compared with 6.1% in 2024. 

However, Philly’s AI landscape is unique compared to Silicon Valley because while the deals are smaller, they are more focused on product-market fit, the report says. 

Tillemann-Dick said that in competitive markets, founders often need to make their pitch clearly demonstrate why their product matters. While some may have to give up more ownership than they’d like, funding is still available for strong companies.

Overall, Philadelphia continues to solidify its spot as a major market, making up 3.2% of deal activity in the country last year, compared to 2% a decade ago, according to the report. The region also ranked as one of the top 10 VC markets globally in 2025. 

More than just life sciences

Life sciences remains one of the region’s strongest sectors, with healthcare making up 47.1% of Philadelphia’s total VC deal value in 2025, the PACT report finds. 

However, biotech and pharma deal activity is down. In 2021, these industries were seeing $1.2 billion across 63 deals. Last year, biotech and pharma brought in $600 million across 32 deals.  

This aligns with a broader trend in how the region’s investors are trying to diversify, according to the report. The region is increasing its investment in “new tech,” which refers to technologies like AI, advanced manufacturing, robotics and information technology.

AI and machine learning companies brought in $1.5 billion across 186 deals, a decade high for the sector in Philadelphia. Other “new tech” companies raised $1.6 billion across 208 deals, bouncing back to fundraising highs from 2022.

Companies in the new tech sector include Sojo Industries, which raised $40 million last year, and FORT Robotics, which added almost $19 million to its Series B last summer. 

Growth-stage money to keep companies here

While early-stage funding remains strong, growth-stage companies may benefit from additional local and regional investor connections to support scaling within Philadelphia, Kathie Jordan, managing director of the healthcare investment group at Ben Franklin Technology Partners, said in the report. 

If there is money available for later-stage companies that are looking to grow, raising a Series B or C, for example, they are more likely to stay in the region as they hit milestones, contributing to the region’s VC activity. 

Creating more connections between investors and companies of all stages would also help to keep companies here, said Jonathan Beschen, managing director of the technology investment group at Ben Franklin Technology Partners. 

Outside capital flows through Philly

Philadelphia’s VC activity relies on collaboration with investors from outside the region. 

Not including the Bay Area and New York, it’s common for companies to bring in money from outside the region. That activity in Philly shows that the region has long-term growth potential, according to the report.  

Nearly two-thirds of the money raised in the region last year included participation from Bay Area investors. A little more than one-third of that money was invested by New York VCs.

Founders often share that there isn’t enough venture capital coming from local investors, but participation from investors outside the region demonstrates Philadelphia’s strong reputation and connectivity in the national VC ecosystem, Dean Miller, president and CEO of PACT, said at the town hall. 

Capital is portable and complements funding that already exists here, Miller said. Companies like Tendo, which raised $88 million to date, according to PitchBook, found success after casting a wide net for funding.  

“[Investors] know that there is real interesting science here,” Miller said. “It’s bringing that magnet, right? And part of it’s … the entrepreneurs telling their stories on the road.”