Business / Funding / Investing / Startups / Venture capital

Philadelphia prayed for a tech unicorn with a household name. Now what?

goPuff, the Callowhill-based on-demand delivery startup, reportedly got a $750 million investment from SoftBank. It may be the first billion-dollar company from Philly you've actually heard of. Here's why that matters.

Spotted in Columbia Heights: goPuff on a bus. (Photo by Tajha Chappellet-Lanier)
Philadelphia needs a big, fast-growing, tech-enabled company with a household name.

For years, that’s been the most consistent diagnosis of how Philly might graduate to the next stage of regional tech economies to take seriously. In the 20 years since the dot-com bubble burst, progress has been made on the checklist.

The city is a better place to live. The region’s universities have evolved their programs. Social networks have developed. People-first communities have formed. Corporates have begun to modernize. Companies do business with each other.  More venture dollars have come. Enterprise tech companies have grown and sold, creating some wealth and adding experience.

But in Philadelphia’s Quakerly way, we’ve quietly made well-performing companies that few had reason to know. Michael Rubin made a giant of GSI Commerce, the region’s biggest ever exit, then got back to work. Boomi, Invite Media and Bluestone Software and others were strong enterprise technology companies that made money behind the scenes. Acquired last fall, Monetate, too, has been a flag bearer but, like the rest, is more akin to the plumbing than the painting of the internet’s infrastructure.

Put another way: Philadelphia never had a billion dollar tech company that the average resident has ever heard of.

That may have changed. On Friday, The Information reported that last August on-demand delivery startup goPuff reportedly took on a “secret” injection of $750 million by SoftBank, the Japanese conglomerate that has transformed global growth equity with its embattled $100 billion Vision Fund. That’s an enormous sum of money for a logistics startup from a fund that has had a troubled last year, highlighted by the long-predicted WeWork cliff.

goPuff was already on the shortlist of Philadelphia’s most compelling growth companies. In December, our readers named it Growth Company of the Year at the 2019 Awards, besting suburban Ambler Yards-based HR tech firm Phenom People, Center City-based performance marketing firm Sidecar, Center City knowledge management firm Guru and Perpay, the Center City-based fintech company.

What has set apart goPuff, founded in 2013, is its mix of both scale and consumer target. Perpay, Navy Yard-based motorcycle ecommerce site Revzilla and privacy-forward search engine DuckDuckGo, based in suburban Paoli, were arguably Philadelphia’s only other consumer-focused growth software companies at scale. Still, goPuff has been something different, with an early association with late-night munchies and a more universal potential user base. (The company is reportedly focusing on growing its business travel customers.)

With the reported three-quarters of a billion dollars of investment from the world’s biggest venture fund and the private market valuation along with it, the gauntlet is set: goPuff is Philadelphia’s big, fast-growing, tech-enabled company with a household name.

Understandably, when a new unicorn is crowned in a place not rich with them, the king’s court splits. Spending wealthy people’s money to chase market share with a bigger team and advanced technology has a way of eliciting different perspectives. A billion dollars can buy a lot of heartbreak. But a city can hitch a ride.

Tech startups have turned tech giants in places outside of Silicon Valley before. Seattle was remade by Microsoft and then Amazon, both for good and for bad. Bill Gates became a global philanthropist. Seattle got wealthier and smarter. But inequality persists.

Philadelphia has had its chances for one of its own homegrown web giants before. Early web company Infonautics looks now like it could have found its way to being an early search engine. CDNow today sounds an awful lot like early Amazon, with its initial focus on books. New Hope’s myYearbook and in Jersey City were never quite Philadelphia. The closest point on the board the Philadelphia region has is, the online retailer (and cost effective marketer) that sold in June 2000 to eBay for $350 million and helped cement Josh Kopelman as the region’s undisputed tech business savant.

It may have been just 20 years ago but predates the social web and so doesn’t quite square as Philadelphia’s consumer-facing software giant. Many other peer cities have their own, albeit of varying size, longevity and present status.

Makerbot, Etsy and Kickstarter changed Brooklyn’s economic mix. For Los Angeles, it’s the company behind Snapchat. For Atlanta, it’s Mailchimp. For Austin it may have been Indeed. For Pittsburgh, it’s Duolingo. For Chicago, it was Groupon. For Las Vegas, it was Zappos. Washington D.C. seems to get one every decade or so, from AOL to Blackboard to Living Social, founded in 2007.

Critically, though those companies had different fates, they all were well and widely known enough that they not only attracted talent, they also shaped the understanding of a place and what was possible. Suddenly a high schooler interested in math in one of those cities could imagine working on a product in her own hometown that she or her mother used. A software engineer lured by Snapchat or Duolingo or Groupon could find a better fit at another company in their new city.

It’s assumed that that does something more than what economic impact reports can quantify. That’s why this desire has remained on the wishlist of Philly tech and economic development leaders. As far back as 2013, longtime Philly tech executive Mike Krupit called the need for a big growth tech company to attract and throw off talent and shape the region’s narrative one of four pillars for economic success. Investors, policymakers, other founders have commonly cited the next big need: Philadelphia needs big growth companies to attract experienced talent.

In the last decade, more fast-growing tech companies have grown up in Philadelphia, no matter what the naysayers say. Last year, biotech Spark Therapeutics, which developed a blindness treatment, became the largest-ever, city-based exit in modern history, at $4.8 billion. It was meaningful but suddenly less improbable sounding to those walking University City or driving Route 202. The company recruited in Philadelphia and far beyond it, as has become commonplace over the last decade of economic growth.

Big companies help attract people. Software-powered growth companies do that even more; Kauffman Foundation research points out that it isn’t precisely small businesses that drive economic growth, but new businesses. Whether you think consumer-facing matters or not, or whether you think goPuff is the best flag bearer or not, it seems it’s here. Like so many other elements of transitioning from one economic mix to another, Philadelphia will have surpassed another checkpoint.

What remains true is founders need to grow companies, engineers need to write software and teams need to become a bit more competitive. Others need to work to support them, and ensure enough Philadelphians benefit from it all. This is a piece of the puzzle, whether we know where it fits yet or not.

Companies: Gopuff / Perpay / Phenom / Guru Technologies / Blackboard / LivingSocial / Sidecar / MeetMe / Monetate / MakerBot / CDNow / Kickstarter / Kauffman Foundation / Invite Media / Infonautics / / eBay Enterprise / Etsy / eBay / DuckDuckGo
Series: Journalism

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