(Photo courtesy of J. Fusco/Visit Philadelphia)
This year has so far proven to be a slow one for venture capital deals nationwide.
A new report from PACT and venture capital research firm PitchBook, found a lull in the Philly market that echoes national trends. The 12-page dossier, presented at last week’s Capital Conference says Philly’s angel and seed investments — both by size and number of deals — have slowed considerably in 2017.
Investments in the Philly area hit $1,010 billion in 2016. So far this year, that number is significantly inferior at $529 million. The angel and seed deals also shrunk. In 2016 there were 85 angel and seed deals totaling $79 million in funding. With 2017 on its last stretch, the Philly area has seen just 49 deals in the seed stage for a total of $51 million in investments, the report states.
“If Philly was going the opposite way, I’d be concerned,” said Dean Miller, PACT’s president and CEO. “The increase we’ve seen for the past 10 years is where I build the hope into. That increase is also in the seed and angel level is a big positive because it fuels the next generation of entrepreneurs.”
Miller said while there’s been growth in the seed and angel stages through the past few years, there’s a need to beef up capital available for traditional first institutional rounds. One solution? Seeking capital from the better funded poles like Boston and San Francisco while operating from Philly.
(This is a playbook that has been followed by a string of Philly-based companies. We’ll name just two: Sidecar, which raised an $11 million Series C in May with backing from Boston-based Ascent Capital; and Guru, which set up the next stage of its growth with a $9.3 million Series A led by San Mateo, Calif.-based Emergence Capital.)
“We don’t need to homegrow all of our capital,” Miller said.
The results of the report ring true for South Philly investor Jon Gosier.
“Either investors are fatigued of early-stage investing, or they are investing outside of the region,” said Gosier. “This comes, ironically, at a time where the quality of deal-flow in the Philadelphia region seems to be getting better. I say this based on anecdote and observation, but also the difficulties some of our own Philly-based portfolio companies have had closing.”