Philly’s Q2 2020 beat its first quarter for VC deals — yes, despite that pandemic

While the region took a beating in terms of employment in the second quarter of this year — reaching as high as 16% in April — the state and the region saw more deals and an increase of venture capital dollars than Q1, a recent PricewaterhouseCoopers (PwC)/CB Insights MoneyTree report found.

Following a banner 2019 with more than $1 billion in deals for the region, the numbers are back on track with what we’d expect to see for the years proceeding it, Brad Phillips, an advisor to emerging technology and life science companies at PwC, told Technical.ly. It’s unexpected news after Q1 saw some early effects of the coronavirus pandemic.

“Going into second quarter, there was no question that COVID was going to affect things,” Phillips said on Wednesday afternoon. “But the market performed well, despite the pandemic. We saw little to no impact.”

And interestingly enough, Phillips said, Pennsylvania reflected similar trends to national VC data: Deals went relatively unaffected. Nationally, VC dollars were only down about 1% from the last quarter, Phillips said.

In Q2, the Philadelphia region saw $369 million in VC across 26 deals. The numbers increased significantly from Q1’s 14 deals and $194 million invested. (Those figures vary slightly from what we reported back in April, as some deals aren’t accounted for until after the quarterly MoneyTree reports are published.) A majority of deals fell into the “seed” or “early” stages of investments, the report found, and across the state, healthcare and internet industries again represented the majority of investments.

Seven of the top 10 deals for Pennsylvania happened in the Philly area, and the Greater Philadelphia region (which also includes Wilmington and Camden) accounted for 26 of 29 — or 90% — of the state’s deals this quarter.

Companies in the suburbs also continued to rake in some significant dollars, more so than city-based companies this quarter, the report showed. Eleven companies took $59 million in investments within the city, while King of Prussia saw $48.6 million in investments (Renmatix), Cherry Hill saw $80 million (Corcentric), Bala Cynwyd saw $52 million (SwanBio Therapeutics) and West Chester saw $40.5 million (Centinel Spine).

Some notable local raises include Fishtown Analytics’ $12.9 million Series A, Guru’s $30 million Series C, and a handful of biotech raises in the suburbs.

So, why the disconnect between how badly everyday people and small businesses are hurting amid a recession, and a relatively fine quarter for venture investments? TechCrunch wrote this in June, about a separate venture report from law firm Fenwick & West with likeminded findings:

Asked about the numbers, one of the report’s authors — longtime attorney Barry Kramer — noted over email that averages “can obscure” the disparities in how companies are being impacted right now, with some benefiting from the stay-, work-, and learn-at-home shift, with others, including biotech research, manufacturing and hardware companies, being hurt by it.

But no matter the recent headlines, he also added that for now at least, “we aren’t seeing massive upheaval or panic in the industry.” VCs are instead “adjusting to the current situation.”