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article imageIs Philadelphia the new Silicon Valley for tech start-ups?

Commissioned Content
By Brand.com     Mar 11, 2014 in Business
by Kay Mathews
When considering the best place to launch a business, often the first U.S. region that comes to mind is Silicon Valley. Some of the world's most successful companies got their start in the San Francisco area, including Apple, Facebook, Intel, Google and Oracle.
The West Coast is not, however, the only hotbed for start-ups in the U.S. Philadelphia, the "City of Brotherly Love," also adores start-ups…and it shows. Partnerships are blossoming due to a start-up ecosystem in Philly. The City of Philadelphia, Greater Philadelphia Chamber of Commerce, venture capitalists, nonprofits, and colleges and universities are working hand-in-hand to make starting a business an attractive idea to executives.
The numbers tell the story of growth and are evidence that the partnerships are producing results. The Department of Commerce states (PDF) that Philadelphia is an ideal location for smart people and smart companies. From 2004 to 2012, Computer Systems Design employment grew 134 percent, and the number of firms in the sector grew by 60 percent. In addition, Philadelphia has the third largest growth of tech jobs.
Support from the City of Philadelphia
Mayor Nutter, Deputy Mayor Greenberger, and the city government as a whole are “active in supporting start-ups whenever we can," said Luke Butler, Chief of Staff to Philadelphia’s Deputy Mayor for Economic Development, Alan Greenberger. "Our job is to create an environment for, and promote, entrepreneurs."
Butler spoke of the efforts of StartUp PHL, a collaborative effort between the City of Philadelphia Department of Commerce and the Philadelphia Industrial Development Corporation, which, among other things, offers "grants to help people become entrepreneurs."
Rebecca Lopez Kriss is a member of the Department of Commerce's StartUp PHL staff. Her position is illustrative of Philadelphia's commitment to new and growing businesses. "My role is business attraction and retention," said Kriss, Manager of Entrepreneurial Investment. "Up to a year ago, the City didn't have that position. In the last year, I've been working specifically with start-ups."
Kriss said she’s proud of the work the city has been doing "phasing-in an exemption to business taxes." She said, "For start-ups, we have mitigated your tax liability." Kriss also noted that Philadelphia has "gotten rid of the fee for registering businesses."
For technology start-ups in particular, Kriss indicated that the City of Philadelphia is a sponsor of the upcoming Philly Tech Week. "There were over 20,000 attendees last year," said Kriss, "and we expect more this year."
Availability of Venture Capital
One of the reasons why Philadelphia is appealing to start-ups, according to Chris Swann, Vice President of Research at the Greater Philadelphia Chamber of Commerce, is due to the availability of "private capital and venture capital." One example he cites is Ben Franklin Technology Partners, which invests in technology start-ups and small manufacturers.
Dreamit Ventures is another sterling example of the potential of Philadelphia’s investment reach. This start-up accelerator, which has a team in Philadelphia, is one with a mission of "helping great people build great companies." Another source of funding is a $6 million seed fund. According to Kriss, the City of Philadelphia and First Round Capital have teamed-up to "invest in Philly-based tech start-ups."
Getting educated
Education, or what Swann called "intellectual assets," was a common theme that emerged when speaking to officials in Philadelphia about the city's appeal to start-ups.
"Young people are starting companies and start-ups are looking to hire from a pool that are educated and tech-savvy," said Butler. "Our universities and research institutions are the best in the country and the world."
Those "intellectual assets" are being retained in Philadelphia. Students from out-of-town or out-of-state who make their way to the city's world-class colleges and universities don't want to leave after graduating. "Students are coming to college here and then are staying here," said Swann. "They are staying because they love Philly and there are so many job opportunities here."
Swann indicated that Campus Philly could provide data on students' perceptions of Philadelphia and highlighted the role that the nonprofit plays in connecting students to jobs. He said, "Campus Philly works with all of the colleges and universities in the area and provides a service to entrepreneurs by hosting an online internship board that matches students with internship availability."
How many students stay in the area? According to Dr. Deborah Diamond, President of Campus Philly, in 2004, only 29 percent of non-natives (those who come to Philly for school but are not from here) stayed after graduation. In 2010 that figure was 48 percent. Why do they stay? Diamond answered, "The largest factor for students staying in region after graduation is job opportunity."
Internship opportunities in Philadelphia-based start-ups are available to students, and technology start-ups are seeking out those educated, tech-savvy intellectual assets. Diamond provides the following examples of "the rise of start-ups and the attraction to students." She said:
For summer 2013, Campus Philly was funded to provide paid summer internships to college students interested in working at four start-ups that were part of the Ben Franklin Technology Partners portfolio of companies. We announced the opportunities in late March (concerned that many students would already have internships for the summer) and within one week we had 120 applicants for 10 spots. We closed registration and had the companies pick among those 120. Great students got great internships. We’ve also hosted 4-5 start-up focused events for students and start-ups to connect over the last year. No other industry we serve has asked for that many events to introduce them to students.
Quality of Life Amenities
Philadelphia is “a great city for young people to live and work,” said Butler. It has what Diamond calls an “unusual mixture of quality of life amenities – very strong arts and culture; outdoor opportunities; great dining and affordable housing make it a top choice for college graduates.”
Luke Butler  Chief of Staff to the Deputy Mayor for Economic Development.  Philadelphia  PA
Luke Butler, Chief of Staff to the Deputy Mayor for Economic Development. Philadelphia, PA
Courtesy Luke Butler
Philadelphia has benefited from a national trend among millennials who prefer urban environments. Philadelphia is highly walkable, has great public transportation and close-knit defined urban neighborhoods, all very attractive to this generation
Swann echoed her statements, saying, “The cost of living here is great. The median sales price for a home is $230,000 compared to $600,000 in San Francisco.”
Speaking of San Fran, a success story comes from Brand.com, a leader in online brand management. It announced it would open an R&D facility in the Bay Area, but the city of San Francisco wanted extensive fees for Brand.com to set up shop in the area. The company decided to move its facility to Philadelphia, where it had already stationed sales and corporate offices. Within several months, Brand.com added 50 jobs to the city.
Success Stories
Butler agrees with the notion that Philadelphia is a somewhat under-the-radar hotbed for start-up companies. But, he said, we are trying to fix that by “highlighting success stories.” One of the positive stories comes from RJMetrics, which calls itself “the best tool for running a data-driven online business.”
“We have had half a dozen ribbon cuttings in the last six months and one was for RJMetrics,” said Butler. “They just hired their fiftieth employee and opened office space across from City Hall.”
Given her experience working with students in Philadelphia colleges, universities, and community colleges, Dr. Diamond was asked to provide examples of students who graduated from local universities and started their own tech companies. Apu Gupta is a graduate of Wharton and has started Curalate, said Diamond, along with Chris Cera, a Drexel grad, who founded Arcweb.”
Curalate focuses on smarter marketing through imagery. CEO Apu Gupta has plenty of good things to say about the appeal of Philadelphia for start-ups, and many of his reasons coincide with what Philadelphia officials expressed above.
“Curalate has set up shop in Philadelphia for various reasons, but proximity, cost, talent, and culture are the main four,” said Gupta. “A high percentage of Curalate clients are based in New York, which is just a short train ride away and just as long as the typical commute in the Bay Area. And there’s something to be said for the fact that we’ve grown from three people in May 2012 to 28 now without ever compromising on the quality of new hires. The competition for high quality people in the traditional start-up cities is extremely intense. In Philly we’re able to stand out. Additionally, we find the employees we’re bringing on are much more loyal and aren’t distracted by the next ‘big’ thing.”
It may be that tech employees in Philadelphia aren’t distracted by the next big thing because they are right in the middle of the next big thing.
What are now tech giants were once start-up companies founded on the West Coast. Given the City of Philadelphia’s support of start-ups, available venture capital, a tech-savvy talent pool for start-ups, and amenities in the city that retain graduates, the East Coast is giving Silicon Valley a run for its money. Is Philadelphia the new Silicon Valley for tech start-ups? Evidence suggests that the answer to that question is a resounding yes.
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