3 days ago
In the 2010s, the Philly tech coalition worked. Why won't anyone admit it?
Something good happened, and in perfect Philadelphia style, just about nobody wants to admit it.
In the 2010s, cheap money pumped up future-looking tech startups everywhere. But from near irrelevance a decade and a half ago, Philly's tech and startup economy just ranked one of the 15 most vibrant in the world. Compared to faster-growing regions elsewhere in the country, Philadelphia has far outpaced peers. It was no accident: It was an intentional success, and a case study other regions can learn from.
Why won't anyone take the victory lap? And what happens next?
In fall 2009, I took an elevator up to a rooftop party held by a buzzy tech startup in Philadelphia's Center City.
That the party was hosted by a consumer-facing web company founded in Philadelphia was interesting enough. What was even newer was where the party was held. Up till then, what had been the region's tech and startup community was almost entirely based in the western suburbs:
When then-President Ronald Reagan needed a backdrop in 1985 to represent resurgent economic dynamism under his leadership, he spoke in a suburban Chester County business park.
In the 1990s, early software giant SAP chose for its North American headquarters suburban Delaware County over the then-fledgling Navy Yard in South Philadelphia
When local tech organizers put together a poster visualizing the region's tech industry at the dot-com heights of 1999, less than a quarter of the activity was city based.
The result was a diffuse and disconnected industry, which according to 'agglomeration effects' research, contributed to the region's underperformance.
'Despite having been building Boomi from 2000-2010, my take was basically 'There is no tech scene in Philly,'' said Rick Nucci, cofounder of the cloud integration company. Boomi was resold in 2021 for $4 billion and is considered one of the region's defining software exits.
There was a cyclical reason for the issue: Philadelphia city leaders struggled to overcome 20th century urban disinvestment, over-relying on outdated tax policy that chased away profit-maximizing businesses.
'If you can locate three miles outside of Center City and not have to pay an extra 4%,' David Bookspan, a well-regarded repeat founder based in the region, once told me about the city's long-reveiled wage tax, 'you have a strong incentive to do that.'
This led more upwardly mobile, skilled professionals to leave for the suburbs, which in turn gave even more reason for new and emerging businesses to be based there.
Missing the dot-com boom
When North Philadelphia native, Central High School graduate and computing pioneer Lee Felsenstein cofounded the legendary Homebrew Computer Club that inspired Apple cofounders Steve Jobs and Steve Wozniak, he did so in Menlo Park, California. A generation like him followed.
Back home in Philadelphia, none of the bold swings from the 1990s broke through: Infonautics didn't become AOL and CDNow didn't become Amazon.
What 90s-era success the region did celebrate was centered on briefly-billionaire Pete Musser's legendary Safeguard Scientifics investment firm. Musser brought Comcast to Philadelphia and helped launch home-shopping pioneer QVC.
'Everything was clustered around Safeguard,' Bookspan the entrepreneur told me of the legendary suburban-based investment vehicle that defined generations of technology in Philadelphia.
But Musser, and an ecosystem dependent on Safeguard, collapsed when the dot com bubble burst. Publicly-traded Safeguard's stock price plummeted from $98 a share in March of 2000 to just over $6 that December.
'I got seduced by the value of my holdings,' Musser, who died in 2019, said back then. Even before the collapse, early lists tracking emerging tech hubs — like an influential one from the Wall Street Journal that gave Pittsburgh the nickname 'Roboburgh ' — overlooked Philadelphia. Tech leaders scattered.
By the early 2000s, Philadelphia was the nation's fifth biggest city, and among its largest regions, media markets and economies. But by nearly any measure, it failed to create widespread benefit from the internet, software and computing boom the region helped launch.
It seemed like Regan's visit was less prescient than misguided.
That's why taking an elevator upstairs to a rooftop cocktail party held by a consumer tech startup in Center City felt like something entirely new. Turns out it really did mark the beginning of a decade of change.
By 2020 and the eve of the pandemic, Philadelphia's tech economy was transformed: It was urban, thriving and commanding more of a national stage — and named a top 'emerging' tech and startup ecosystem.
Tech parties, meetups and presentations in Center City became so commonplace that locals complained about lack of coordination. Philadelphia had entered the chat.
Building the kind of entrepreneurship ecosystem policymakers crave
There is still only one unquestioned tech and startup leader: the corridor between San Francisco and San Jose that we call Silicon Valley. It's not close.
By most other measures, the second tier of American hubs is a tossup between Seattle, Boston and New York. Next in line are a dozen regions that distinguish themselves with branding that marketers sell them (Silicon Hills! Silicon Beach! Silicon Prairie! Cellicon Valley!) and obscure portmanteaus that consultants sell them (healthtech! mobilitytech! fintech!)
The numbers matter more. Over the last 15 years, Philadelphia has outpaced its peers.
VC deal activity: Between 2013 and 2023 among the 10 regions with the most VC deals in the country between 2013–2023, Philadelphia startup's share grew second fastest, behind only New York and ahead of Miami, Austin and Los Angeles — stealing share from SIlicon Valley, Boston and Seattle.
Retention of college graduates: By 2019, Philadelphia retained as many of its college graduates as any peer region, vanquishing its former brain-drain problem, and making in-roads with tech graduates specifically.
Shifting tech jobs to the urban center: Regionwide over the last five years, the number of tech jobs in Philadelphia has grown faster than population growth — and the fastest rate of growth was within city boundaries.
Amplifying the successes: There were nearly 50% more stories published last year about tech and startups in Philadelphia than in Phoenix, which was a peer a decade earlier and by most other economic measures has outpaced Philly.
All this resulted in a string of unicorns, private businesses valued at $1 billion or more, and several that came near.
They include Gopuff (logistics), Phenom (HR tech), dbt Labs (developer tools) and DuckDuckGo (search advertising). In the last six months alone, ad tech companies Vistar Media and then Audigent and autonomous robot maker Ghost Robotics were all acquired for nearly half a billion.
These companies span industries, but each had a founder who was in some way involved in what we now call Philadelphia's startup community. Several previously worked at other Philly tech firms; all were active in local meetups. Most have city offices. Two have university affiliations. Half took early investment from state-backed economic development organization Ben Franklin Technology Partners — so their financial successes contributed to Pennsylvania's state budget.
'I think it's a culmination of decades of work,' said Scott Nissenbaum, who has been with Ben Franklin for a decade and its CEO since 2020.
There's more: Salaries for tech workers grew faster in Philly than a basket of other peer regions. Black representation in the tech workforce grew faster too, and the region's density of tech jobs grew faster in Center City than elsewhere in the region.
In 2010, announced Philly Tech Week to stitch together various efforts. From just a dozen events the first year, the series grew to a high-water mark of more than 100 and 20,000 attendees.
'I've seen the change,' said Damon McWhite, who started his career in tech recruiting. He's now director of partnerships at 1Philadelphia, which produces Philly Tech Week. 'The access to tech opportunities that existed 15 years ago is not the same as it is today.'
Meanwhile, evidence has stacked up that this matters: New businesses create effectively all net new jobs, and that each 1% increase in entrepreneurship correlates with 2% declines in poverty. Tech jobs have high multiplier effects: each new tech job supports at least two others. Urban density generates more breakthroughs, and makes these jobs more accessible for people from different socioeconomic backgrounds. Improving conditions for new startup business benefits individual residents.
When Philly's scene started to thrive (but no one wants to say so)
In 2013, longtime tech executive Mike Krupit, once CEO of publicly-traded CDNow, spoke on-stage with privacy-focused search engine DuckDuckGo's Gabe Weinberg. Krupit argued one of Philadelphia's clearest missing links was a string of big, growing tech companies that spun off local talent.
'The arrival of Josh Kopelman in Philadelphia is a game changer.'
Mayor Michael Nutter
Where was their conversation? Inside the glossy new headquarters of First Round Capital, the only A-list venture capital firm launched in Philadelphia, whose influential cofounder Josh Kopelman extended his commute to put a footprint into the city. At the time, Mayor Michael Nutter said, 'The arrival of Josh Kopelman in Philadelphia is a game changer.'
Back then, the Nutter administration took a technocratic and collaborative approach to encouraging local economic growth. They quietly tweaked policy to accommodate venture capitalists. They launched a city-backed investment fund, and then reorientated the focus following community feedback. They launched good-governance and expanded open data policy.
'[Nutter] and his team were engaged and worked to help the community,' said Tracey Welson-Rossman, a longtime regional tech executive and cofounder of Philly Startup Leaders. 'This energy that was in the air made us believe we could change how the city viewed itself and did business.'
Kopelman, who still works from Center City, was the brightest light in a string of what the Nutter camp called ' gateway offices.'
'There was also a better connection between what had been happening in the burbs and Philadelphia proper than had been before,' said Welson-Rossman, herself a GenX suburbanite who has long invested in city-based connectivity. 'There may have been grumbling about coming into the city, but people did it because that is where things were happening.'
Meanwhile, Philadelphia was becoming a better place to live. That came with a flourishing of tech meetups and other connective tissue.
'The biggest lesson is simple: People did stuff and showed up to each other's stuff,' said Alex Hillman, who founded beloved coworking community Indy Hall and has remained a fierce champion of local organizing. 'The stakes were low to try things, to push back on status quo tech/business ecosystem players, and the upside potential was high.'
Indy Hall grew across several Old City locations in the 2010s, helping to give credence to the N3rd Street nickname that got official city-sanctioned signage in 2012. Importantly though, Hillman's tribe wasn't alone. When hosted our annual Super Meetup in summer 2016, more than 1,000 came out from nearly three dozen active tech groups.
One was Philly Startup Leaders, which started as an informal, volunteer-led group for and by local tech entrepreneurs. In addition to Welson-Rossman, among its founders and most active members in those days was Chris Cera, who grew software consulting firm Arcweb. After the Boomi acquisition, Cera connected with suburban Nucci and got him involved in PSL and other city tech and startup events.
'Every week I would meet a new founder building a cool thing,' Nucci said. Other tech CEOs, software builders and entrepreneurs followed.
Philadelphians make civic sport of explaining away successes
Alongside our daily reporting, Technically made our contribution via Philly Tech Week, which widened the tent and broadcast the message.
In 2012, we partnered with the University City Science Center to put digital art up on the PECO Crown Lights. In 2013 and 2014, with Drexel professor Frank Lee, Technically kicked off Philly Tech Week by playing what is still today the world's largest video game, and caught the attention of New York Times, USA Today and CNN. A few thousand came out for the spectacle. Philly Startup Leaders grew its Entrepreneur Expo into a gathering of nearly 100 startups and hundreds of attendees.
But few civic leaders took this seriously. One influential economic development pro told me at the time: 'If you take all the tech startups together, I'm not sure they'd fill 100,000 square feet of commercial real estate.'
That assertion proved quantifiably wrong as splashy (if small) software offices in Center City stacked up. In spring 2015, hosted a tech-focused mayoral forum that surprised several of the candidates with more than 350 attendees, representing thousands of jobs in the region.
Before the pandemic took hold in January 2020, Gopuff confirmed it raised a financing round that valued the convenience-delivery platform at well over $1 billion, creating a certifiable, homegrown, city-based, consumer-facing tech unicorn. Others followed. Elsewhere, policymakers and economic leaders might take the W. Not so in Philadelphia, where self-flagellation is a cornerstone shibboleth.
Even repeat entrepreneur Bob Moore, a proud Philly booster whose tenure as chairman of Philly Startup Leaders was the group's apex, demurred at first.
In his telling, his first startup RJMetrics, which is credited with creating a 'mafia' of alumni, employed 150 in Center City at its mid-2010s peak 'not because we did anything brilliant but because [venture capitalists] needed to diversify where they were deploying capital.'
It's true that steady economic growth and low-interest rates in the 2010s supported speculative startup investment — which helped regions around the country develop the human and financial capital to sustain it in the 2020s.
'So many ecosystems can support early stage startups these days,' wrote Peter Walker, head of insights at Carta, which produces widely-used company valuation software.
Over the last 12 months, according to Walker, the median post-money company valuation (over $15m) for a Philadelphia-based tech founder was similar to Denver, Chicago, and Los Angeles – and well over Atlanta, San Diego and in North Carolina's Research Triangle. Top Philly valuations (those in the 75th percentile or above) were above Boston and Austin, closer to New York and Seattle.
Philadelphia may be competing as just one of a dozen of the country's most dynamic tech hubs. But it helps to understand a decade ago it wasn't that.
Why no shouts of victory? A true ecosystem approach obscures big wins
If it has all gone so well, why don't we admit it? Exactly because Philadelphia's success was such a community, or, to use economic development lingo, an ecosystem approach. No one person, no one organization is responsible.
Community groups like Philly Startup Leaders and Indy Hall mattered. Influential, if short-lived, early tech accelerator DreamIT Ventures, which attracted out-of-town founders, and others like it mattered. mattered, with our daily coverage to narrate change — data suggest our storytelling led to more follow-on coverage and a bigger, better ecosystem. Community traditions like Philly Tech Week and community events like Mobile Monday and Barcamp mattered. Individual startups, especially those with Center City offices they opened to others, like Guru and Perpay, mattered. Those lucky few founders who had breakthroughs to reach big scale and exits, and actually reinvested locally, have mattered too. Institutions like the University of Pennsylvania, the University City Science Center and state-backed Ben Franklin Technology Partners mattered. Successive teams within City Hall mattered. The region's largest private employer Comcast, which far exceeded the civic stewardship of any other corporate in the region from gleaming skyscrapers in Center City, mattered.
Back in 2014, startup founders expressed concern that influential investor Kopelman, with a credible national profile, had outsized influence. Since Philadelphia had so little reputation for producing tech founders, Kopelman's imprimatur was necessary.
'If you're a Philadelphia based technology company and Josh hasn't invested in you, they want to know why,' one Center City-based entrepreneur told us back then. 'It can be a black cross on you.'
Maybe then. Not so now. Kopleman's First Round Capital invested in exactly zero of the tech unicorns that Philadelphia has produced. Unlike Musser in the 1990s, Kopelman was just one of many of the many species in Philadelphia's urbane entrepreneurial ecosystem.
Many groups and countless people played a part. No one person led then, so no one person is gloating now. Ecosystems have no chief marketing officer.
This is good. As Philly Startup Leaders has faded as the region's primary entrepreneur support organizations, a new wave of groups are popping up.
The risk of not claiming victory is that this ecosystem approach gets overlooked. Philadelphia was a nonentity in tech and startups in 2010. Over the next decade and a half, a coalition made this city and its region more dynamic and accessible.
That's not to say all is going swimmingly. Investment in Philadelphia startups is down. AI is challenging software jobs (welding anyone?), and necessitating a new generation of founders. Black residents in the region are still underrepresented in the tech workforce. The life sciences–style innovation that Philadelphia's traditional economic developers have prioritized over tech has been humbled, prominently represented by the write-down of Spark Therapeutics. Just as it's becoming clear that the work from the 2010s was successful, a new chapter in 2020 is making all this work harder: student robotics groups are under threat, the region's entrepreneur support network is retreating and the importance of tech skills are questioned.
Current Philadelphia Mayor Parker has not so far identified senior leaders to prioritize high-growth entrepreneurship or the efficiency gains that digital services can offer residents, though she speaks on the topic. Her budget rolls back exemptions for new business taxes. Bad timing, since now nationwide policymakers are turning their focus here. Philadelphia can once again squander the progress that's been made.
'How do we keep showing up for each other?'
Wil Reynolds, SEER
No question post-pandemic Philadelphia is different, like it is for anywhere else. It's a new chapter, with new obstacles. Just don't forget what we did together to get us here, because we did make progress. So we can do it again. Today's challenges are gifts from the past. We rallied together in the past. Who's leading this time?
'Now,' said Wil Reynolds, the founder of digital marketing firm SEER, which retains a headquarters in Northern Liberties: 'how do we keep showing up for each other?'
What happened to that startup who hosted that rooftop cocktail party?
The startup, RedLasso, which made it easier to make video clips, got sued out of existence. A few stakeholders went on to start a company called TrafficCast, which had a small exit, and that company's CTO went on to start Delaware fixed wireless company WhyFly. That company spun off several engineers who were later hired by IONOS, a European web hosting company that relocated its US headquarters to Center City in spring 2022 to hire talent. One worked at Crossbeam, another at dbtLabs, both of which have generated other founders. Most of these built real solutions, and attracted smart people to this place. Some created bits of wealth, all employed real people. Some of these people developed a civic technology community to solve other local problems.
None of these companies on their own may be remembered. What we all did together could be, if we allow it.
