Why this Israeli angel fund left Philly for Chicago

Six months after it finished raising its first angel fund, the team behind startup investment firm JANVEST left Philadelphia for Chicago.

Philadelphia is a “very tough environment for emerging technology and venture investment,” said managing partner Brian Rosenzweig, who ran JANVEST’s Philadelphia office for two years. The firm, which invests in early-stage Israeli startups and helps them expand to the U.S. market (much like the new Philly and New York venture firm INE Ventures), also has offices in Israel and San Francisco and will start investing its second $5 million fund in 2014.

In March, Rosenzweig billed Philadelphia as the best place to do his work. Just months later, his experience apparently changed his mind.

There were several reasons Rosenzweig left Philadelphia:

• Personal reasons. Rosenzweig went to school in the Chicago area, so he already had established connections there, something he said he did not have in Philadelphia.
• Hard to raise capital. “Philadelphia is not a venture investment community,” he said, adding that he found local investors to be “very risk-averse.” Rosenzweig said he spent two years in the city raising JANVEST’s first $5 million angel fund, composed of investors from North America. It shouldn’t take that long, he said. “It took us two years to raise what we can do in Chicago or San Francisco in a number of short months,” he said.
• Lack of major businesses. There weren’t many opportunities for JANVEST’s portfolio companies — web and software B2B startups — to create partnerships or pilot programs, Rosenzweig said. Philly only has Comcast, he said.
• Little support from the community. Apart from Select Greater Philadelphia and the Philadelphia-Israel Chamber of Commerce, Rosenzweig said he didn’t find the local tech community to be supportive. “It’s an insular community and I was on the outside,” he said, adding that it was hard to get introductions to the right people.

Still, Rosenzweig said there are no hard feelings: “I love Philly. I think it’s a great city, but what for what we are doing, it just didn’t work out.” He said he’s already seen a noticeable difference in Chicago, in terms of community support, especially.

This might be hard to swallow locally.

With an international airport, an established Jewish business community, centrality on the East Coast and room to grow, JANVEST is the kind of group a Philadelphia startup community might likely try to convince to come here. What’s more, Rosenzweig isn’t choosing the noisy predictability of Silicon Valley or the expensive finance hub of New York. Instead, he’s left Philadelphia for another big, regional, post-industrial, second-generation tech business community. That’s a competition Philadelphia should be able to win.

That’s not to say that an angel fund can’t exist in the region: the Mid-Atlantic Angel Group, which invests in companies in the Philadelphia area, as well as New York and Maryland, has raised two angel funds since 2005.

The lack of a local focus might be one reason that JANVEST had a hard time, said one local investor, who said that it seems that “most angels like to see deals that are within two to three hours [away] or that there is a lead investor that they know.”

Also, with funds this size, “network is key,” the investor said.