Philly’s start-up universe has grown tremendously in the past half-dozen years. So what, exactly, is the state of the scene right now? And how can a would-be entrepreneur add his or her own creativity to the mix? Philly Mag’s Tom McGrath and Ashley Primis sat down with four leading figures (identified below) in the start-up world to get some answers.
Richard Vague: Entrepreneur and managing partner of Gabriel Investments, an early-stage venture capital group.
Apu Gupta: CEO and co-founder of social media analytics firm Curalate.
Let’s start by talking about the zeitgeist. In the past few years, start-ups have become sexy. If you’re 25 and you don’t have a start-up idea, you’re missing out.
Bob Moul: If you’re 12 and don’t have a start-up idea, you’re missing out. [laughter from the group]
Exactly. What’s going on culturally?
David Bookspan: When I was in college, the people who were cool were the people who had the band or were actors or were athletes. On campuses right now, the people who are cool are the ones who have their own companies. But also, how inexpensive it is to start a company has led to people just trying stuff a lot earlier—and the success they have found has led to more people wanting part of that.
Richard Vague: I think the bad job market has a lot to do with it. In the 1950s and ’60s, the U.S. economy was growing five or six percent per year. Exxon and DuPont and GE were hiring everybody they could hire. Today you have almost the opposite of that, and folks are finding it hard to find meaningful careers out of college. You’re more inclined to take a risk if the alternatives aren’t that great. If the string’s already been cut, you’ve got to start flapping your arms pretty fast.
Apu Gupta: Yeah, but I think there’s also a cultural change, right? You know, when I was coming out of college—my freshman year in undergrad was 1993, the first year the Mosaic browser came out—I knew I needed to be doing something with the Internet. But it was not acceptable for a 21-year-old to start a company. Culturally, we’ve changed. VCs are willing to invest in 20-year-olds now. Because otherwise, you’ve got to sit in some big building and ride an elevator and look like a chump, and why would you want to do that when you’re 20?
What one word describes the entrepreneurial scene in Philly right now?
Interesting mix. Bob, what do you mean by “tenacious”?
Moul: It’s a very scrappy bunch. Despite a perceived lack of venture capital here, people are building businesses, bootstrapping businesses. It’s a greedy bunch—they work hard, they hustle, they figure out how to get it done one way or the other.
Richard, “nascent” suggests there’s not much there.
Vague: I think compared to San Francisco or New York or Boston, that’s absolutely correct.
Bookspan: It’s really interesting, because the words that we each picked reflect what we each do. So you know, Richard is doing A-round [early-round] financing—and is very, very passionate about Philadelphia and working with the companies in Philadelphia—but the A-round is a really tough area, and there’s not that much activity in Philadelphia. My word was “evolving,” and that’s because I think we’re starting to see some momentum at the earlier stages, pre-A-round, and that’s what I do at DreamIt. And Philly Startup Leaders—I don’t think you can really give enough credit to what PSL has accomplished for the community. You know, they started basically as a group of five or six guys—
Moul: Getting beers one night.
Bookspan: And to be able to attract someone like Bob into what was basically a frat house, to add a level of professionalism and leadership, that is really commendable. And how many members are you up to now?
Moul: Well, we don’t know for sure, but the listserv has more than 1,800 people on it, and we track probably 300 to 500 start-ups.
Apu, your word was “exciting.” Does that reflect the state of your company or how things are growing here overall?
Gupta: I think [our success] certainly contributes to it. We’re based in Philadelphia, we have 300 of the world’s most well-known brands working with us, we have venture capital from the biggest brand-name VCs you can get, and we did it right here. We’re not trying to be Philly-big; we’re world-class. That’s what’s happening, and that’s what you can do in Philly.
I love that phrase, “Philly-big.” Is there enough of that world-class attitude in town?
Vague: There are a lot of highly qualified new ideas and great energetic people here, so I have every confidence that this community will continue to grow. What Philly doesn’t have, and Bob kind of alluded to this, is a lot of resident capital to fund it.
Gupta: Richard, I’d love to bounce something off of you on that. Why does the capital need to be here? I feel like we’re in a world where there’s so much competition for deals in the Valley and in New York. Aren’t we at a point where the money has to go to good ideas wherever those ideas are?
Gupta: No? You don’t think so?
Bookspan: The money, particularly in various parts of the country, is still very, very provincial. We run accelerators in Austin, New York, Israel and Philadelphia, and the companies that are coming out of Philadelphia are every bit as good as the companies that are coming out of the other cities. But they have a harder time getting capital.
What would it take to get more capital in this city?
Bookspan: It’s a virtuous circle that develops around start-ups. You know, at Monetate we have 170 employees now, and things are going really well. If Monetate has an exit, there are going to be 170 people who have been trained in that start-up and evolving path—that leads to more start-ups. From a capital standpoint, unfortunately, until recently the city was ringed with capital, but none of it was in the city itself. And you really need to have that coffee-shop interaction by having all of the pieces clustered together.
Can the city accelerate the process?
Moul: First off, kudos to the Mayor and the administration for StartUp PHL. For the first time in history, we have a seed fund in Philadelphia—a $6 million seed fund. There’s also a $500,000 idea fund—if you have an idea on how to improve the start-up ecosystem, there are grants available to help implement those programs.
So I think you’ve got to give a big shout-out to Mayor Nutter and his team for jumping in here and helping—because it’s been proven to work in other cities. We spent time in New York City. New York City five years ago was not New York City today. But Bloomberg stepped in, they put a seed fund together up there, and now they have half a dozen seed funds, at least. They subsidized space, so they made space more affordable. On the grander scale, they’re building the new tech institute out on Roosevelt Island. And Bloomberg personally gets involved, and our mayor is doing this as well. He’s in my office, in Apu’s office.
Bookspan: Richard, I don’t mean to put you on the spot, but I will. People talk frequently about taxes, and I think that people do follow the financial incentives, for the most part. Last year, Philadelphia clarified an ambiguity in the law with respect to whether venture funds would in essence be double-taxed if they were in the city. If that had not changed, would Gabriel still be based in the city?
Vague: That was big, and I think we very well might have moved.
Bookspan: My hypothesis is that people aren’t going to go from Philadelphia to Chicago because there’s a tax. But what they will do is go from Philadelphia to City Line. And the diaspora of the components of the start-up community is what works against its success.
Moul: Yeah, now you can walk down the street, have coffee with somebody, talk about the business and what’s going on.