In what was a slow 2023 for raising capital, the head of a local advocacy group for entrepreneurs and innovation sees hope in the number of deals struck by Philadelphia's youngest startups.
According to the Philadelphia Alliance for Capital and Technologies' 2023 Philadelphia Venture Report, early stage startups struck 151 deals last year, a 3.2% decrease over 2022 and 20 deals short of 2021's record.
"Seed and early stage not falling as precipitously as the rest of the country and other geographies [stands out] because it creates a continued foundation of future potential dealmaking," said Dean Miller, who is CEO of PACT.
Total funding for Philadelphia startups plummeted 53.5% with $2.4 billion deployed across 403 deals in 2023. The drop-off was more exaggerated locally than the country at large, where total funding dropped nearly 30% in 2023 to $170.6 billion, according to Pitchbook.
Miller said the decline is a "more of a blip" that doesn't compare to years like 2001 or 2008 when venture markets sunk, the deal market dried up and took time to recover. Miller, who has been in the venture world for over 25 years, said he doesn't see this as a "sustained depression" for Philadelphia's startup founders.
He pointed to spinouts from the University of Pennsylvania in cell and gene therapy and mRNA technology that have and will continue to rake in large dollar figures to commercialize innovative life sciences breakthroughs. Other institutions around the region — whether in higher ed or research-driven nonprofits — will continue to fuel innovation bring ideas to market. Coupled with the foundation of promising early stage startups, Miller thinks the "region is well positioned."
Nationally and locally, startup founders and venture capitalists alike are looking for relief in 2024. Locally, the market is showing early signs of a rebound through the first seven weeks of the year. The Philadelphia area has already matched the number of initial public offerings it saw in all of 2023 — one — after ArriVent Biopharma completed a $175 million IPO in second week of January.
Larger funding rounds are making their way back into headlines. Four life sciences companies already have raised over $100 million this year: Impulse Dynamics, Mineralys Therapeutics, Synnovation Therapeutics and ArriVent Biopharma through its IPO. Outside of the life sciences, Burro kicked off the year with a $24 million round and LoanStar Technologies raised $28 million.
Miller said he was "surprised at how [capital markets] have come back even in the first seven weeks of the year," but "that doesn't mean it's going to continue."
After the challenging 2023, he said most startups he's spoken with are still in cash conservation mode, but are beginning to test the fundraising waters again.
PACT puts together the report annually using Pitchbook data to take a closer look at venture capital and startup fundraising trends in the Philadelphia region.
