Startup founders still believe in Philadelphia, despite the funding squeeze

RealLIST Startups 2025 in Philadelphia is supported by Deloitte and JPMorgan Chase Startup Banking. Technical.ly is a free news resource thanks to financial partners like these Technical.ly clients.

As federal funding cuts and policy changes put a squeeze on startup financing, Philly founders are still working to grow their companies locally — even amid pressure from investors to move elsewhere.

There’s a lot that goes into the decision to leave or expand outside of your home region, several entrepreneurs said last week at a dinner celebrating the 2025 Philly RealLIST Startups. In addition to funding, founders said, they consider factors like their footprint in the local ecosystem and what opportunities and challenges come from operating a physical space there. 

Philadelphia can be great for raising an early round, but as a company becomes more successful, investors often suggest founders to move their business to places like New York and San Francisco, said Nick Ashburn, founder and CEO of financial wellness platform Personawealth. 

“I’m really scared if and when I do raise outside capital,” said Ashburn, whose company has so far been bootstrapped, “that they’re going to make me go somewhere else.” 

Philadelphia isn’t as investor-friendly for later stages as San Francisco or Austin, agreed Jason Sherman, CEO of social connection app Spinnr. It would probably be easier to raise bigger amounts if he did move, Sherman noted, because investors have already asked him to do just that. 

However, being forced to be more careful with money isn’t necessarily a bad thing, observed Patty Tawadros, CEO of biospecimen donation platform Donor X. 

“It forces you to be leaner in the way you’re spending money and you’re giving up less equity later,” Tawardros said. She added that a founder could potentially have it both ways. “If you have to leave the more … affordable ecosystem, go to New York, Boston, California, raise the money and then come back and spend it here, what’s wrong with that?” 

Despite Philly’s relative affordability, its startups still face the same macroeconomic challenges as the rest of the country. 

Right now, a big one is the uncertainty about whether Congress will renew the Small Business Innovation Research and Small Business Technology Transfer programs. Known as SBIR and STTR and often called the US government’s “seed fund,” these programs have long played a key role as one of the only sources of major nondilutive funding for early-stage companies.

Joshua Freedman, cofounder and CEO of early-stage medical device company Airalux, is currently waiting to hear about SBIR funding. But review dates keep getting pushed back and no one knows what’s going to happen, he said.

Government grants helped Vertical Solar Generator (VSG) prototype its stackable solar energy system, but some of those sources have stopped, said cofounder and COO Charles Mbata. His company is considering pivoting to crowdfunding and private equity to support further development. 

A physical office: Investment in the local community

For some startups, the federal turmoil means the possibility of slowing down major partnerships.

HouseCallVR, which uses virtual reality to educate patients, counted the US Department of Veterans Affairs as one of its first collaborators, per cofounder and CEO Linda Ciavarelli. But now, allowing for delays and shifting priorities within the system due to the change in federal leadership has “been a challenge,” Ciavarelli said. “[People working within the Veterans Health Administration are] not necessarily as interested in implementing emerging technologies.”

Ciavarelli’s staff works from all over the world, so she’s not planning to open a physical office, and that sentiment was echoed by many at the RealLIST Startups dinner. But like last year, opinion was split on work modality. 

Several founders see an IRL workspace as something keeping them tethered to Philadelphia, in a good way.

FSH Technologies, which offers software for city operations, opened an office in Center City in March, cofounder Johnson Lin said. Virtual work was fine when the company was building a project or doing routine work, but they found that it’s better to be in-person when they’re trying to problem-solve or pivot. 

“People just brainstorm together on a whiteboard for two or three hours,” Lin said. “It’s been so much nicer to have these conversations, be in person, in the office.” 

Opening a physical space also solidifies the company’s presence in Philadelphia, especially as it recruits talent and builds partnerships with local workforce development orgs like Philadelphia Works, Mbata of VSG said. 

Neftwerk, which uses blockchain technology to create a marketplace for buying and selling art, reaches an international market, said founder and CEO Francesca Augustine. But she still wants to invest in Philly by creating local jobs and giving back to the community. 

“Since we’re working with new tech, [we want] to be part of training people in Philadelphia to take those jobs,” Augustine said. “We’re pretty passionate about building here in Philadelphia and creating an ecosystem in Philadelphia.”