After a banner 2019, Philadelphia sees fewer VC deals in Q1 of 2020

This year is off to a slower start in terms of deals made and money spent in Philadelphia-area companies after 2019, the region’s best year to date since the new millennium.

After deals surpassed $1.3 billion in 2019, the first quarter of 2020 saw only $193 million invested into 12 companies, according to a recent PricewaterhouseCoopers (PwC)/CB Insights MoneyTree report.

It’s a 36% drop in dollars spent compared to Q1 of 2019, and a drop in number of deals by about half. While the impacts of the COVID-19 virus and its disruption of the economy come into play here, Brad Phillips, an advisor to emerging technology and life science companies at PwC, said we’ll likely see more of an impact in investments later this year.

“It’s a historically unprecedented economic slowdown, nobody can predict when we’ll pull out of it,” Phillips said. However, “we do expect it will effect fundraising in Q2.”

But the region’s numbers aren’t wholly effected by the virus, Phillips said. After 2019, the best year for deals in two decades, we’d expect to see those numbers returning to a more normal ground.

“Some drop was expected,” he said, adding that this year’s Q1 numbers are more on track with investments in Q1 back in 2016 and 2017.

Of the quarter’s $193 million in deals, $112 million was in the healthcare sector, $41 million was in internet and $3 million in software. Only $13.8 million of deals were done with Philadelphia-based companies, while companies in area suburbs pulled more: Exton-based companies Castle Creek Biosciences and Castle Creek Pharma saw $109 million in deals, while Newtown’s Good Catch Foods caught $32 million, and Ambler’s Phenom People earned $30 million in a Series C.

Overall, Pennsylvania ranked 12th in deals made for Q1, and ninth in money spent. The state saw $281 million invested in 17 deals. Across the U.S., three states — California, Massachusetts and New York — pulled 80% of all funding.

“The first quarter for Philly was a significant drop, but it needs to be considered in the context that 2019 was a banner year, the best since the year 2000,” Phillips said. “Twice in the last few years, funding has varied by $250 million or more, so it wasn’t a big surprise to see this drop.”