VC trends: Why Philly’s deal flow bounced back quickly in 2020

While 2020 was a disruptive year for just about every market and industry imaginable, startups and venture capitalists found their footing in the latter half of the year.

It’s a somewhat surprising trend outlined in PACT’s 2020 Venture Report which uses PitchBook data to analyze how Philadelphia fared amid the pandemic. We saw similar trends and numbers from a recent PricewaterhouseCoopers/CB Insights MoneyTree report.

Basically, despite the pandemic, the region saw a fairly impressive year in deals.

In the region, companies raised $1.8 billion across 221 venture deals by the year’s end, recording the region’s second-highest annual deal value and third-highest deal count despite the pandemic’s economic impact.

The data show that Q1 and Q2 of 2020 saw dips in investments — likely as businesses braced for impact early in the pandemic — but by Q3, investors were pouring money into area companies. It was Philadelphia’s second-highest quarter in deals, and the second time the region raised more than $1 billion in a quarter.

Read the full report

Philadelphia has always had strength in its healthcare and life sciences sectors, but deals in enterprise technology have risen, PACT President Dean Miller told Technical.ly. The city used to be so focused on its eds and meds, but it has diversified in past years.

This has likely helped save the city from a deeper recession or a bigger loss in VC dollars compared to metros that rely on hospitality or other wholly disrupted industries (something an economist predicted, too, in pre-pandemic January 2020). Instead, the healthcare, life sciences and tech industries have proven their worth in the pandemic, Miller said.

“Many lifted up out of those initial weeks and said, ‘Our need is actually elevated,'” he said. “Enterprise tech, biotech, all of those existing investors looked at them and doubled down as result of that.”

Some of the top deals of the year show this: goPuff, with a delivery-based business model that became extra important during the pandemic, raised the region’s largest deal with a $380 million round. Imvax, a Washington Square-based biotech firm, raised $112 million, and Misfits Market — another home delivery startup accelerated by the pandemic, raised $85 million.

In 2020, local seed and angel investing also held strong, the report showed, and help break a national trend of investors retreating to “more familiar names” once the pandemic hit.

“As investors continue to source and diligence deals virtually in 2021, the ease of investing in companies wherever they happen to be based should continue to bolster Philly’s ecosystem even further,” the report said.

Philly also saw some strong exits, mostly within the biotech and pharma industries, which represent $2.7 billion of the region’s $3.7 billion in value in exits. Also, the IPOs of Accolade, Passage Bio and Prelude Therapeutics generated about $2 billion in combined liquidity. Investors Ben Franklin Tech Partners, BioAdvance and OrbiMed were the principal beneficiaries of this development, exiting a total of 11 investments in 2020, the report found.