Investing / Venture capital

After Philly’s best-ever year, how did Q1 VC deals shake out? More deals, with smaller amounts

Philly's metro region saw more than $1.2 billion over 122 deals in Q1 of 2022, about half of the deal amount from Q4 2021.

Philadelphia. (Downtown skyline at twilight via Shutterstock)
Update: Comment from Emily Foote has been added. (4/14/22, 4:30 p.m.)

Editor’s note: These figures may vary slightly, as some deals aren’t accounted for until weeks after quarterly VC reports are published.

What do the numbers so far say about 2022?

Philadelphia saw a shocking amount of venture capital flowing into the region in VC deals in 2021 — by far the city’s best year ever. But much of that success was led by the more than $3.5 billion raised by Gopuff last year. Deals that size tend to throw off the curve. After a stellar year and a stellar Q4 of 2021 — more than $2.6 billion was invested in Philly-area companies across 90 deals in just that last quarter alone — we now take a look at how 2022 has started out.

Per the latest PitchBook-NVCA Venture Monitor report, Philly’s metro region (which includes parts of New Jersey, Delaware and surrounding Pennsylvania counties) saw just over $1.2 billion over 122 deals in Q1 of 2022. The state itself saw $1.02 billion in 87 deals in the first quarter, the report shows.

While the deal sizes seem smaller than the previous quarter, it’s an extremely good sign to see that number of deals, as Dean Miller, president of PACT (aka the Philadelphia Alliance for Capital and Technologies), told Taking out the standout year of 2021, and the pandemic-tinged complications of 2020, the numbers track far better than 2019, which saw only $1.35 billion in total investments.

“It’s really nice in continuing the trend to see the increase in number of deals, which really is the best marker in overall breadth in increasing the growth of the venture ecosystem here,” Miller said. It’s a sign that more companies and a variety of industries are catching investors eyes.

Some of the standout deals of the quarter include Wilmington-based Marlette Funding’s $225 million Series E announced in March, and dbt Labs$222 million Series D from February. The latter round brought the Spring Garden-headquartered company’s valuation to $4.2 billion, after it reached unicorn status with its July 2021 raise. These deals also landed both companies in the top 10 for the mid-Atlantic region overall for the quarter.

It's good news for Philadelphia's market score. It shows us it's still an attractive place for companies.

Real estate company Houwzer also pulled in a $118 million Series B in February, as it worked toward the launch of three new consumer products, and social media company LifeBrand raised a $27 million round, the report shows.

“dbt’s raise is a big deal. Having companies that continue to do that kind of capital raise, and looking at overall numbers, I’m pleasantly surprised about this quarter,” Miller said. “It’s good news for Philadelphia’s market score. It shows us it’s still an attractive place for companies. It’s not hinged on one sector and we continue to see pop from companies like dbt that are still raising outside rounds to contribute to a dollar figure that high.”

Emily Foote, a principal at Osage Venture Partners, told the pandemic has also diversified the firm’s investments. Historically, it’s been focused on B2B, early-stage industry agnostic software companies. But the pandemic has them looking more to the future.

Since May 2020, Osage has invested in 17 early-stage companies, Foote said, of which the average revenue run rate is $1.1 million, and the median year-over-year growth rate is 450%. 2021 was the most active investment period in the firm’s 17-year history.

“With pandemic and emerging technology shifts significantly accelerating change and innovation in how we teach, learn and measure education, how and where we work, and how and where we deliver and receive care, we have refined our investment strategy to focus on entrepreneurs who are building the next generation of B2B software solutions focused on the future work, education, and care,” she said in an email. “Most of our investments since 2020 have been in these ‘future of’ themes.”

The trends Philadelphia saw this quarter match those of the rest of the country, per the PitchBook report. VC deal activity reached $70.7 billion across 3,723 deals in the first quarter of 2022, which goes down as the the fifth-highest quarter on record. But quarter-over-quarter, deal value fell 35% from $95.4 billion in Q4 2021.

“The start of 2022 has shown signs of an expected adjustment for the VC industry on the heels of a two-year period where VC-backed startups served as the backbone of the U.S. economy during the global pandemic,” NVCA President and CEO Bobby Franklin said in a statement along with the report. “Where the slowdown will taper off remains to be seen, but VC investors are in a strong position with ample dry powder amassed in recent years and Q1 to continue fueling startups that are solving big needs and transforming how we live and work.”

Companies: LifeBrand / Houwzer / Best Egg / dbt Labs / National Venture Capital Association / PACT

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