We recently invested in Sidecar, a Philly-based e-commerce marketing solutions company. Great company, great team, and an awesome CEO. While the company is note-worthy in its own right, it is also noteworthy for being located in downtown Philadelphia (near 13th and Sansom). Until about a year ago, we had one portfolio company with a Philadelphia presence – now we have four. Our first was InstaMed, which has been downtown for close to ten years. We invested in InstaMed in 2008 and have seen its staff grow more than 10x in Philly to well over 120 people in the city by year end. PeopleLinx, in which we invested in 2013, was our second. SevOne, a Wilmington-founded tech company in which we invested in 2007, this year established a large development satellite on South Broad Street in order to attract talent. Is this just serendipity and the law of small numbers or have things changed?
From 2002 to 2008 when I was running Verticalnet , which was originally founded in Horsham and then later moved to Malvern, I only went downtown to see our lawyers or for a rare social dinner. I technically live in the city (if Chestnut Hill counts) but it was clear when I moved to Philadelphia in 2000 that the technology community that existed here had its nexus in Wayne around the 202 corridor and the Safeguard campus. Technology companies were in office parks. There was also a brain drain with a constant complaint that we had great universities but that we were training people in order for them to graduate and move elsewhere. The reputation for the Philly region was that it was a great place to raise a family (which it still is), but the converse of that reputation was the difficulty in attracting and retaining young people.
So what’s happening? I think it is a lot of small things that have come together to begin a groundswell. Urban renewal of some vibrant neighborhoods has been successful, with West Philly, Northern Liberties, Fishtown, and other neighborhoods offering affordable options with a restaurant, bar, and activity scene that is much more appealing for the recent graduate (and tech entrepreneur). Philly’s start-up scene is real and growing and more fuel is being added to the fire, while an increasing number of Route 202 corridor companies are building satellite offices to attract tech talent in Center City. What was the catalyst? Was it Mayor Nutter? John Fry? Stephen Tang at the Science Center? Was it Philly Start-up Leaders? Was it Ben Franklin Technology Partners? Was it DreamIt, GoodCompany Ventures and other incubators? VentureForth and other shared workspaces? Was it fueled by Philly Tech Week and PACT with its IMPACT and Phorum conferences? Frankly, I think it was an environment that was ready for this and a lot of visionary people contributed to the momentum we now feel.
The other sub-trend that has been emerging is that the types of businesses being started have changed. Six years ago as the Philly revival began, the companies being started were consumer facing – mobile apps pursuing the next social, mobile, texting, location based ideas. Today we are seeing strong business-facing solutions emerging with greater frequency from Center City. These are companies with sustainable business models and experienced leaders. These are companies that are recruiting talent in Philly and drawing experienced people into Philly from outside.
I am not proclaiming that Philadelphia is the next Silicon Valley. It doesn’t need to be. What I am saying is that Philadelphia is a city that is going to be increasingly hard to ignore when looking at cities on an upswing or cities where strong investing opportunities exist for angels, venture investors, and private equity firms. At Osage, we certainly have an eye on Philly and we look forward to seeing our number of Philadelphia investments continue to grow and our current investments continue to thrive.