How do Philly’s Q3 venture capital deals compare to the national trends?

According to data released by PitchBook and the National Venture Capital Association (NVCA) in their Q3 2023 PitchBook-NVCA Venture Monitor, the Philadelphia region raised $750.31 million across 75 deals last quarter.

During the second quarter of the year, the Philly region raised $492 million across 95 deals; that came after a first quarter with $542.42 million raised over 101 deals. These numbers followed two years of impressive venture capital figures in the area.

Nationally, deal count has been declining and deal size and valuations have been lower than the previous year, according to PitchBook VC Analyst Kyle Stanford. So far, $42.7 billion has been raised, putting 2023 on track to be the lowest full-year total since 2017.

Last quarter, the Philadelphia region was ranked number five for deal count in the country and has been holding on to that ranking since 2022. This quarter, the region dropped to number six, with the Bay Area, New York, Los Angeles, Boston and DC ahead of Philly.

Below are Philly’s 10 largest deals in Q3 2023, as reported by the Venture Monitor. Note that, as we often see in these quarterly reports, the data may be incomplete, contain some inaccuracies — including companies based elsewhere and merely incorporated in Wilmington — or reflect interim raises. Deal amounts are pulled from public filings.

• Philly-based Dispatch Biotherapeutics raised $113 million.
• South Jersey-based medical device company Impulse Dynamics raised $91.4 million.
• University City-based biotech company Fore Biotherapeutics raised $75 million.
• ZeroEyes, an AI-based gun detection software company based in Conshohocken, raised $50 million.
• Malvern-based Venatorx Pharmaceuticals raised $35 million.
• Invgate, an information technology service management platform based in Delaware, raised $35 million.
• Certa raised $35 million. (The company appears to be based in California, but incorporated in Wilmington.)
• Xyla, a Wilmington-based company focused on large language models, raised $25 million.
• Wilmington-based Jada AI raised $25 million.
• Wayne-based Cornelis Networks raised $24.3 million

Emily Foote, a partner at Osage Venture Partners, said she was not surprised to see more capital invested in the region this quarter compared to the first half of the year, or to fewer investments with higher average investments.

“While we have seen a sprig of hope as it relates to the IPO market thawing, investors are still faced with tighter liquidity and a higher cost of capital compared to recent years,” Foote said. “As a result, investors are turning to companies with stronger fundamentals and a path to profitability. Based on the data, it appears that investors are doubling down on companies with exceptionally strong fundamentals.”

Foote said Osage encourages its portfolio companies to create worse-case, base-case and best-case scenario plans. She said understanding all the paths the company could take is important to make the right decisions in a time of market uncertainty.

Dean Miller, president of PACT, said he is not surprised by these numbers and while Philadelphia has come down, it doesn’t seem to have declined as much as other regions. That’s especially because nationally, quarterly deal values decreased, but Philly’s increased from last quarter to this quarter.

“That’s largely on the strength of the biotechnology sector, even in what many referred to as a current nuclear winter,” he said. “So we still have biotechnology companies raising significant sums in this quarter, which is helping our value grow.”

We continue to be in a time of economic uncertainty, but while investors may pull back during this time, entrepreneurs don’t seem to. Miller said PACT’s Capital Conference had a record number of companies apply to present this year.

Miller added that Philadelphia’s drop to number six nationally is part of the natural ebb and flow of VC.

“Still a far cry from our outside the top 10 placement that used to be the consistency that we’d have from quarter to quarter,” he said. “We’ve broken into the top 10. We’re showing our staying power to stay in the top 10 and again, that has a lot to do with Philadelphia’s continued evolution and its burgeoning entrepreneurial community — and again, the diversity of it across sectors.”