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May 07, 2022

Philly area sees venture capital investment grow more in Q1 than any other U.S. metro

Funding around the city expanded 71% last quarter, which is more than twice as much as runner-up Atlanta, according to the report from CB Insights. It's one of just three metros where startup investment grew last quarter.

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Venture Capital Philly Thom Carroll/for PhillyVoice

Venture capital investment in Greater Philadelphia grew 71% over the first three months of 2022, a new report from analytics firm CB Insights says.

The region saw the biggest first quarter increase in startup funding of major metro area in the country this year.

Venture capital investments in Greater Philadelphia grew 71% over the first three months of 2022, according to a new report from analytics firm CB Insights.

That's more than twice as much as runner-up Atlanta, which saw 30% growth, and nearly four times more growth than Dallas, which saw 18%.

Those are the only three major metro areas in the country where venture capital funding didn't drop compared with the fourth quarter of last year.

The Philly region saw $1.5 billion in venture capital investment roll in during the first quarter of 2022, up from $874 million in the last quarter of 2021.

"I’m pleasantly surprised about this quarter,” Dean Miller, the president of the Philadelphia Alliance for Capital and Technologies, told “It’s good news for Philadelphia’s market score. It shows us it’s still an attractive place for companies.

The biggest cash infusion, $350 million – nearly a quarter of the entire $1.5 billion, went to the Center for Breakthrough Medicines, a biotechnology firm based in King of Prussia. The money all came from a South Korean investment firm called SK Inc.

There were three more venture capital investments worth more than $200 million, all of which went to internet software and service companies.

Wilmington's Marlette Funding, an online lending firm, got $225 million from the Healthcare of Ontario Pension Plan and Davidson Kempner Capital Management.

A Philly engineering analytics company called dbt Labs got $222 million from a collection of investors.

Velvet, an online marketplace for private funds, got $200 million from Yolo Investments, an Estonian company.

Metro Philly set its venture capital funding record in the first quarter of 2021, the Philadelphia Business Journal reports.

Then, there was $1.9 billion in investment. Companies in the area also raised a record-breaking $8.1 billion last year. The region broke its previous record of $3.1 billion in the second quarter of 2021.

Roughly $3.5 billion of that money went to GoPuff, a Philly-based food delivery company that's expanded nationwide rapidly in recent years.

Although that outsized success may throw off the average a bit, it's not a reason to be less impressed with Philly's rise.

The region is continuing to see the strong venture capital growth it saw in 2019, before the pandemic, and that expansion is spread across several industries and many different startups, Miller said.

The $1.5 billion was spread across 80 deals last quarter, which is more than twice as many as the 38 deals CB recorded in the last quarter of 2019.

“It’s really nice in continuing the trend to see the increase in number of deals, which really is the best marker in overall breadth in increasing the growth of the venture ecosystem here,” Miller said.

There are a few reasons why Philadelphia may be doing so well when it comes to raising venture capital, Inc. reported.

The city has always been a prime spot for top talent given the large number of universities here.

In the past, many of these students would move to bigger metros after graduating. But now they're more likely to stay put, as rents in locales like New York City and Boston have risen at a much higher rate.

Before the pandemic, the city had many incubators and coworking spaces that made it attractive to small, new companies.

This perk's appeal may have faded a bit with the onset of the pandemic and remote work, but there's still plenty of office space in Philly and it's relatively affordable compared with nearby metros like New York and D.C.

The fact that the region is situated right in the middle of those two important locales adds to its appeal, as well.

In the first quarter of this year, Philly area firms accounted for roughly 2.5% of the $71.2 billion in venture capital funds raised nationwide.

That's much lower than the 40% and 16% the Silicon Valley and New York account for respectively, but it's still almost 350% from the $430 million the region raised in the first quarter of 2018.