If Philadelphia ever wants to compete with the likes of Silicon Valley and New York City, it needs to fund the innovative ideas and rapid growth of start-ups.
Despite this great progress, there’s still much room to grow: A recent study ranked Philadelphia 22nd in tech talent attraction. Moreover, we’re experiencing setbacks. In the same record-setting year of 2018, angel and seed investments dropped more than 8% from their peak of $108.4 million in 2014.
We can’t inject another $1.4 billion of venture capital into fast-growing start-ups if we don’t fund early-stage companies. We have to plant more seeds, if we’re to water more flowers.
Piling on the pain, the Pennsylvania government just ripped the Achilles out of Philadelphia’s early-stage funding foot.
On June 28, Gov. Tom Wolf signed the commonwealth’s 2019-20 budget. The budget puts in place funding for many vital programs and initiatives, which aims to satisfy the wants and needs of many audiences across Route 80, up and down Route 76, and everywhere in between.
But the budget does Pennsylvanians – and Philadelphia’s start-up community, especially – a disservice. It closes job openings, bores innovation to death, bankrupts economic opportunity, and robs the world of an opportunity to become better.
While there might be other programs to train our workforce on specific trades, or the consistency of local corporate giants like Comcast, few factors are more critical to the growth, sustainability, and vitality of Philadelphia’s economy — and community as a whole — as the funding for Ben Franklin Technology Partners (BFTP).
BFTP is a state-funded economic development program that funds early-stage companies in what we in the start-up world know as Seed Rounds and Series As. It gives founders an opportunity to make their vision a reality.
In funding early-stage, innovative companies, BFTP fuels new ideas that impact our Philadelphia community, Pennsylvania commonwealth, and the world at large. It greases the creative gear, affording genius entrepreneurs to keep pursuing their ideas and disrupting the way we’re used to doing things.
Entrepreneurs bring fresh, creative ideas to the world. They solve problems and improve our lives. Companies like Community Energy and Topaz Pharmaceuticals, makers of clean energy solutions and pediatric medicines, respectively, and two companies supported by BFTP, made our world more sustainable and children healthier thanks to BFTP funding.
Not only does BFTP pump blood into Philadelphia’s — the entire state’s, for that matter — entrepreneurial heart, it creates jobs — good jobs — for our citizens. In 2017 alone, BFTP investments generated 1,891 jobs, adding to the 4,182 jobs it created between 2012 and 2016, according to an internal report. Moreover, these jobs exist in industries that pay average annual salaries of $79,364 per year, 52% higher than the average private non-farm salary in Pennsylvania, per the report.
If Pennsylvania wants to be a hub for innovation, BFTP needs more funding. If Philadelphia wants to compete with other metroplexes like Silicon Valley, New York City, Austin, and Boston, BFTP needs more funding. If we want our tech workers to be employed with good jobs, BFTP needs more funding.
While Pennsylvania cut BFTP’s budget nearly in half to $14.5 million since 2008, neighboring states like New Jersey are launching $500 million initiatives for start-ups. A recent Brookings report found that Pennsylvania’s lack of investment in innovation makes it difficult to compete with the likes of powerhouse like New York City and Boston, whose states support technology and research and development. Plus, BFTP boasts a return of $3.90 for $1 of state money invested. Wouldn’t the state want to generate more money, so that it can grow current initiatives and launch new ones?
The success and impact that BFTP has had on Pennsylvania and Philadelphia is proven on a national level. It’s proven that early-stage funding and venture capital is the rocket fuel that propels economic growth into the stratosphere.
According to a 2010 study conducted by the Kauffman Foundation, young start-ups have accounted for nearly all of the net jobs created since 1977. And according to a 2015 study by Ilya Strebulaev of Stanford University and Will Gornall of the University of British Columbia, of the approximately 1,330 public U.S. companies founded between 1979 and 2013, venture capital backed 42% of them. Moreover, these companies accounted for 85% of the total research and development spend of new public companies — which means they invest their funds in driving innovation.
When I worked at JP Morgan Asset Management, we saw investing in innovation and growth as a constant need — even as the largest and industry-leading financial institution. I led the creation and execution of a global liquidity business during “the dark age of finance,” the Great Recession. Through investing in the downturn and employing creative tactics, that business unit actually grew while entire billion-dollar firms were collapsing.
Pennsylvania must keep investing in the great entrepreneurs that come from the Philadelphia area, or else other areas that maintain or increase funding will out-compete and outperform us.
What if Rick never got funded by BFTP? What if the next Boomi folds because it lacked the capital to survive and thrive?
Contact your local state politician, or BFTP itself, to see how you can help ensure that Philadelphia remains competitive, jobs get created, and dreams become realities.