Philadelphia’s venture capital deal flow in 2024 fell behind the year prior, but the size of those raises still shows strong indicators of growth.
2023 had $2.4 billion over 505 deals and this year had $3.3 billion over 444 deals, according to the Philadelphia Alliance for Capital and Technology’s (PACT) and PitchBook’s annual venture report, which came out today.
While that means the cash flow wasn’t as widespread as it previously was, larger deals create momentum for other investors to jump in on the action, PACT president Dean Miller, told Technical.ly. The Philly market, which comprises the Philadelphia-Camden-Wilmington Metropolitan Statistical Area, still ranks fifth nationally in terms of deal volume.
“Anytime you see dollars flowing, particularly larger transactions, they are good signals that investors are being a little more free with the cash,” Miller said.
Specifically, increased exit activity and continued investment in early-stage companies are positive signs, he said.
There were eight more exits in the region in 2024 than in 2023. When companies are being bought, money goes back to the investors and they can then reinvest, according to Miller.
“It doesn’t sound like a crazy amount,” Miller said. “You look at the historical numbers, though, and it’s a pretty good percentage increase over last year from a numbers perspective.”
There’s also been positive activity at the pre-seed and seed stages.
Before 2020, activity for these levels was very low for both the number of deals and dollars invested. These numbers jumped in 2021 and 2022, which are considered to be exceptional years for venture capital overall, but the spike in activity remained consistent in 2023 and 2024, according to the report.
“That’s a lot of positive activity and funding [of] early-stage companies, that a portion of which will go on to raise growth capital and ultimately exit,” Miller said.
The Philly region finished 2024 strong, raising just over $1 billion across 103 deals in Q4, according to Pitchbook’s quarterly Venture Monitor report. More capital raised over fewer deals is a signal that investors are focused on “quality over quantity” when it comes to investments, Howard Lubert, area president of angel investor network Keiretsu Forum Mid-Atlantic, previously told Technical.ly.
AI and life sciences continue to dominate the scene
Analysis of investment trends in AI is new to this year’s report.
Overall, AI deal flow has been pretty steady over the last few years, but this year saw a slight increase in funding raised in the sector. Venture capitalists invested $576 million across 127 deals in the AI sector last year compared to $415.9 million over 133 deals in 2023.
We’re still in the early days of AI development and application, though, Miller said based on his conversations with industry experts. Local institutions like the University of Pennsylvania and Drexel University are contributing research to the development of AI, and the region is home to many companies working on AI tools.
The investment ecosystem goes through cycles of “hot” sectors, he said, and AI happens to be the latest in that cycle. The report also pointed out that many AI applications intersect with the healthcare and fintech sectors as well, showing the region’s diversity.
“It’s going to take a while for massive application of AI in the enterprise or in life sciences, or in a host of different areas,” he said. “I anticipate more and more AI-related investments.”
The life sciences sector also continues to show strength through its research institutions and spinout companies through big deals. For example, gene therapy company GEMMABio raised $34 million, securing its spot as the fifth top deal in the region last quarter.
Nationally, the life sciences sector hasn’t been as active the last few years, Miller said. But there have been signals early this year that indicate this could change in 2025. Deals like Johnson and Johnson’s $14.6 billion purchase of Intra-Cellular Therapies in early January created excitement in the industry, he said.
Regulatory shifts leave room for only incremental growth
Overall, Miller is cautiously optimistic for 2025. He anticipates the venture capital landscape to improve, but it probably won’t be a dramatic shift, he said. Stakeholders are hopeful there will be more investments this year from private equity investors and big businesses that are sitting on a lot of money.
However, he doesn’t anticipate it to be a remarkably better year. There is a lot of uncertainty surrounding the Trump Administration, geopolitical challenges and whether there will be rate cuts, he said.
Generally, it’s hard for startups to raise money right now and while Miller hopes to see conditions improve this year, it’s always been hard to raise capital, he said.
“The capital is there,” Miller said. “The investors are holding cash, [it’s] just a matter of getting them in a position to be more open to investing it.”
Sarah Huffman is a 2022-2024 corps member for Report for America, an initiative of The Groundtruth Project that pairs young journalists with local newsrooms. This position is supported by the Lenfest Institute for Journalism.
