2019 PHILADELPHIA VENTURE REPORT

Data provided by Matt Klinger We believe in the risk takers, the game-changers and the disrupters—those Senior Vice President committed to leveraging innovation to make the world a better place. Mid-Atlantic (703) 547-8198 Bridge Bank, founded in 2001 in Silicon Valley, serves small-market and middle- market businesses across many industries, as well as emerging technology companies and the community. Geared to serving both venture- backed and non-venture-backed companies across all stages of growth, Bridge Bank offers a broad scope of financial solutions including , equipment and working capital credit facilities, , treasury management, asset-based lending, SBA and commercial real estate loans, ESOP finance and a full line of international products and services.

To learn more about us, visit info.bridgebank.com/tech-innovation.

*All offers of credit are subject to approval Bridge Bank, a division of Western Alliance Bank. Member FDIC. Introduction

The Philadelphia entrepreneurial community is entering a new decade stronger than ever. This report showcases how Philadelphians use their inner grit and industry passion to achieve new possibilities and fuel innovation. The prominence of the life sciences space across the ecosystem has only increased over the past year, and Philadelphia appears poised to capitalize on those gains in 2020 thanks to a growing base of world-class cell and gene therapy companies and the effects of the Cell & Gene Therapy Initiative detailed below. Meanwhile, our angel investment community continues to expand alongside the growing interest of nontraditional investors such as corporate venture arms and growth-stage- focused private equity funds, while Ben Franklin bolsters company formation with capital and growth resources. In addition, outside investors including venture capital (VC) firms based in Boston, New York and Silicon Valley are targeting the region on a growing basis. Last year, Philadelphia set a record for venture investment with close to $2.5 billion, ranking Philadelphia 7th nationally, also a record. Entrepreneurs have begun scaling up operations in Philadelphia and continue to take advantage of the talent emerging from the region’s universities and medical centers along with its high quality of living. Please join me in thanking our 2019 report sponsors. PACT looks forward to working with them and all of you to continue to elevate Philadelphia.

Dean Miller, President & CEO

Data as of: December 31, 2019

Contents Note: This report covers the Philadelphia-Camden-Wilmington Metropolitan Statistical Area (Philadelphia), which includes parts of Pennsylvania, New Jersey, Delaware and Maryland. All data and charts cited throughout the report are based on companies Introduction 3 and/or investors headquartered in this region.

About the Cell & Gene Therapy and Connected Health Initiative:

Dealmaking 4-5 The Chamber, through its CEO Council for Growth, along with collaborating institutions, organizations and companies, has launched a multi-year initiative to leverage and promote Outside & Nontraditional Investors 6 Greater Philadelphia’s cell and gene therapy, gene editing, and connected health sectors. The objective of the initiative is to strengthen the region’s innovation economy through efforts including shared storytelling that build awareness of the region’s Corporate Venture Capital 7 assets, providing resources to start-up and scaling companies, assessing the talent needs of the sectors, and supporting the development of critical infrastructure for the sector’s growth. Exits & Fundraising 8 The initiative is supported by 11 partner companies, institutions and universities in the Greater Philadelphia region. For more information, visit http://www.ceocouncilforgrowth.com Q&A 9

Report Sponsors

3 2019 PHILADELPHIA VENTURE REPORT Dealmaking

VC deal activity Median VC deal size ($M)

223 225 $9 203 200 $7.5 195 192 $8 167 $7 166 139 $6 115 $5 $4.2 $3.8 $4

$3 0

4 $1.9 8 . . . 6 5 6 9 . . 3 1 5 . . 3 2 6 . . $2 . 9

3 $1.2 2 9 5 5 3 6 6 8 5 3 4 4 1 5 7 , 5 , 0 , 1 , 4 8 5 4 6 5 8 $0.6 1 1 1 2 $1 $ $ $ $ $ $ $ $ $ $ $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Deal value ($M) Deal count Angel & seed Early VC Late VC Source: PitchBook | Geography: Philadelphia Source: PitchBook | Geography: Philadelphia

Philadelphia’s entrepreneurial $20 million in aggregate at the top of driven by Philly’s pharma and biotech community charged out of 2018 the decade, angel and seed deal value sector, which commanded more than to reach record heights for the expanded at a steady compound $1 billion in overall deal value in its aggregate disclosed deal value of annual growth rate (CAGR) of 24% to own right for the first time in 2019. venture investment in 2019, while surpass $160 million in 2019. Although squeaking past the top tally for total angel and seed financing volume Thanks in part to record levels of financing rounds completed by just peaked at 103 financings in 2015, dry powder in the wider venture two deals. At $2.5 billion invested activity at this stage has bounced ecosystem, deal size inflation for across 225 venture financings, Philly’s around above 85 deals every year Philly—though broadly consistent venture ecosystem closed out 2019 since 2014. The $1.2 million median for with the YoY persistence of rising stronger than ever, helping to push angel and seed rounds represents the valuations across the US—has yet the average disclosed round value highest on record, doubling the figure to push median deal sizes to levels to $11.2 million. And as larger rounds from 2018 and tripling the $400,000 reached elsewhere. For example, the boosted VC investment levels over per angel and seed round recorded, median for an early-stage deal in the results for 2018, companies at the remarkably, just the year before. Philadelphia was $3.8 million—roughly early stage alone commanded $244 half the US median. In addition to million more in total VC year over year As Philadelphia enters a new decade, these trends driving overall activity, (YoY) while activity comprised only the ability to sustain gains in venture participation from outside and eight additional financings. Investors activity across the region represents nontraditional investors hit record targeting this point in a startup’s perhaps its most lasting characteristic. heights or recovered last year. lifecycle with larger checks pushed Since the start of 2010, overall VC Commitments from investors based aggregate value past $1 billion for the investment has generated $10 billion in the Bay Area, Boston or New York first time since at least 2006. in aggregate funding value across reached or maintained their peak level. 1,825 financing rounds. And the pace On the other hand, corporate venture As the Philadelphia ecosystem of investing has only picked up of late. arms committed a record amount has matured over the past decade, Firms targeting startups based in the of capital in Philadelphia deals, companies at the most nascent phase region have completed transactions and last year, priavate equity (PE) have also capitalized on a growing valued above $800 million in total investors funded over $350 million investor appetite for getting in on the each year since 2014 across at least to companies showing continued ground floor. Since securing just over 190 financings annually in that time, strength of this investor sector.

4 2019 PHILADELPHIA VENTURE REPORT VC deals ($) by size Top investors (2010-2019)

100% Under $500 Investor name Investments (#)

80% $500K-$1M Ben Franklin Technology Partners of 356 Southeastern Pennsylvania

60% $1M-$5M BioAdvance 83

$5M-$10M 40% Robin Hood Ventures 77

$10M-$25M DreamIt Ventures 49 20%

$25M+ Keiretsu Forum 32 0% 2015 2016 2017 2018 2019 Osage Venture Partners 31 Source: PitchBook | Geography: Philadelphia

VC deals ($) by stage Source: PitchBook | Geography: Philadelphia 100% Angel & seed

80% Early VC

Late VC 60% $750M

40% Size of round for goPuff,

20% the largest ever for a Philly-based startup

0% 2015 2016 2017 2018 2019 Source: PitchBook | Geography: Philadelphia

VC deals ($) by industry Angel & seed VC deal activity

100% Commercial 103 97 98 services 94 91 87 Consumer goods 80% & recreation 71 Energy 62 57 60% HC devices & supplies HC services & 40% systems 25 16

IT hardware 5 7 5 . . 7 . 0 3 6 3 6 4 ...... 4 0 4 0 2 3 2 8 2 9 0 2 20% Media 6 1 1 1 2 3 2 4 7 8 7 $ $ $ $ $ $ $ $ $ Pharma & biotech $ Software 0% 20092010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Other Deal value ($M) Deal count Source: PitchBook | Geography: Philadelphia Source: PitchBook | Geography: Philadelphia

5 2019 PHILADELPHIA VENTURE REPORT Outside & Nontraditional Investors

VC deal activity with Bay Area investor participation VC deal activity with PE investor participation

47 16 40 15 14 14 13 12 12 12 31 30 11 28 27 9 19 16 17 14 4 0 3 3 9 6 5 7 9 5 9 . . . 7 . 0 4 . 3 . . 1 . . . . . 3 . . 4 . . 2 . . 6 7 5 9 . 0 9 2 5 2 . 6 8 0 0 9 9 3 7 2 5 1 3 3 7 4 0 3 5 7 0 3 5 5 2 2 8 3 8 3 9 6 1 3 1 2 2 4 3 8 8 9 2 2 1 1 1 2 4 2 4 3 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Deal value ($M) Deal count Deal value ($M) Deal count Source: PitchBook | Geography: Philadelphia Source: PitchBook | Geography: Philadelphia

The Philadelphia metropolitan Philadelphia. The firm cut a $750 the late stage to $88 million in the US, statistical area (MSA) was far from million check to goPuff from its $100 with both early- and angel and seed- an exception to several of the more billion Vision Fund in August—a deal stage deals jumping as well. Although noteworthy trends reshaping the larger that went undisclosed for several Philly’s multiples have also been VC landscape of late. 2019 registered months. Founded in 2013 by a pair heating up, investment values are an overall increase to participation of grads from Drexel University, attractive overall on a relative basis from nontraditional VC investors, the startup delivers convenience with a growing base of high-quality including PE firms. Across the US store staples in cities across the US, startups. venture ecosystem, nontraditional targeting the last mile of delivery that investors joined VC firms on more than can account for some 40% of the total Historically robust exit activity, 85% of all mega-deals (rounds of $100 cost to move goods. In a testament to discussed at greater length later, million+) across all stages last year. As the adage that “quantity has a quality speaks to that trend. Likewise, a result, even as it pulled back slightly all its own,” the deal, which also carries investors flush with cash from larger nationwide compared to the record the option for an additional $250 MSAs continue to invest in Philly’s levels registered for 2018, US VC million in 2020, increased the median ecosystem. New York-based investors deal activity featuring nontraditional late-stage deal size by 16% from $6.3 showered a record level of capital investors approached $100 billion. million prior to its disclosure in January on Philly last year. New York firms Likewise, growth-stage-oriented PE 2020 to $7.5 billion in its wake. increased volume YoY at 34 deals investors such as Radnor’s NewSpring comprising a record $682 million Capital have emerged as a robust At the same time that valuations in sum. Likewise, Bay Area firms presence within the Philly ecosystem in hit unprecedented levels nationally, continue to grow their presence in recent years, participating in a steady Philadelphia’s more modest medians Philadelphia, closing 47 transactions stream of venture financing rounds have helped the region attract a on $845 million in aggregate, just nationwide. Although 2019 saw only growing slate of outside investors in $35 million shy of 2018’s record 11 such deals struck for Philadelphia- 2019—especially in a climate poised tally. This trend is driven by both the based startups, aggregate investment to retain overheated valuations going larger size of these outside firms still generated $350.9 million in value. forward as record levels of dry powder and the added resources to pursue allow companies to stay private opportunities further afield, as well as Last year also witnessed SoftBank longer. Last year, median pre-money the attractiveness of the Philadelphia bring its enormous war chest to valuations increased by $12 million at startup community.

6 2019 PHILADELPHIA VENTURE REPORT Corporate Venture Capital

VC deal activity with CVC participation VC deals (#) by industry

31 100% Commercial services 27 Consumer goods 23 80% & recreation 20 Energy

16 60% HC devices & 13 13 supplies 12 10 10 HC services & 40% systems 6 8 1 4 . 4 . . 4 . 7 7 7 0 IT hardware ...... 5 6 0 4 4 9 2 7 7 7 2 1 0 1 4 7 5 4 5 9 Media 2 1 2 1 1 2 1 3 7 8 20% $ $ $ $ $ $ $ $ $ $ Pharma & biotech 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Software 0% Deal value ($M) Deal count 2015 2016 2017 2018 2019 Other Source: PitchBook | Geography: Philadelphia Source: PitchBook | Geography: Philadelphia

Hitting a record high of 31 completed ecosystem, its rapid rise over the past financings, 2019 capped a seven-year two years and its ability to attract streak of YoY increases in corporate outside and corporate investment venture capital (CVC) activity dating in 2019 was the $250 million round back to 2012. Corporate players closed in Q3 2019 for Century are joining in larger deals than ever Therapeutics. The startup, founded before to generate a record sum of in 2018, deploys adult stem cells to capital committed after aggregate develop cancer therapies and secured commitments more than doubled in the Series A from German drugmaker 2018. That momentum helped CVC Bayer, Fujifilm Cellular Dynamics and $821M activity approach 50% of cumulative San Francisco-based Versant Ventures. venture deal value at $821 billion for a Similarly, Passage Bio raised $110 second year running, when controlling million in a Series B led by Access CVC committed for the outlier effect of SoftBank’s Biotechnology, the life sciences in aggregate to record round for goPuff on overall venture arm of Access Industries, just value. By extension, CVC plays a vital seven months after the developer of Philly’s startup role not only in Philadelphia, but also genetics-based medicines took home ecosystem in 2019 Pennsylvania’s broader ecosystem, a $115.5 million Series A. as the region accounts for the bulk of overall VC invested across the Looking beyond Philly’s robust with Slack joining existing investors. state and, in 2019, nearly 80% of the ecosystem of pharma, biotech and Finally, autonomous robot systems funding rounds closed. medtech startups, CVC arms also developer Exyn Technologies secured targeted software companies such as $16.0 million from London-based PE A deal that, perhaps more than any data analytics firm Crossbeam, which firm Centricus in a Series A joined by other, illustrates the strength of the secured a $12.5 million Series A led Yamaha Motors Ventures, among others. life sciences industry across the Philly by New York-based FirstMark Capital,

7 2019 PHILADELPHIA VENTURE REPORT Exits & Fundraising

VC exit activity VC fundraising activity

31 5 5

24 23 4 4 21 18 18 17 17 3 3 3 15 13 2 2 $100.0 3 0 4 0 1 . 7 . . 1 . . 1 7 . 6 . 2 . 3 6 . 4 5 3 0 0 5 5 9 3 6 0 8 . . . . 9 ...... 3 6 0 6 6 7 9 7 7 5 6 8 4 6 6 6 4 4 8 4 1 0 7 , 7 1 3 5 , 3 , 2 , 1 , 5 , 9 0 0 8 8 4 4 9 8 3 5 1 1 2 1 1 1 4 1 1 1 2 1 1 2 1 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Exit value ($M) Exit count Capital raised ($M) Fund count Source: PitchBook | Geography: Philadelphia Source: PitchBook | Geography: Philadelphia

Fundraising figures for Philly have stands to benefit as a destination for remained decidedly cyclical over capital cycling back into the market. the past decade. After falling YoY since 2015, VC firms anchoring the Likewise, the return to outsized ecosystem registered a modest uptick fundraising results for 2019 reflects in the number of funds raised in in large measure capital flowing into 2019. More remarkable were the sums the ecosystem following several years committed to these vehicles. Last of successful, sizeable exits. Last year, year, LPs invested the most capital to Philly registered its first increase in exit Philly firms since 2009 at some $416 activity since reaching a record $2.7 million, or roughly 4x the figures for billion in value on 31 completed deals $600M either of the preceding two years. in 2015, the year Spark Therapeutics, Overall, the fundraising ecosystem— recently purchased by Roche for Estimated exit size although annual totals have ebbed and $4 billion, debuted on the Nasdaq. flowed—has supported the generation Following a consistent decline in for JP Morgan’s of nearly $1.9 billion in aggregate volume since then, though, exit value acquisition of fundraising across 32 closed funds increased by more than a third in since the start of 2010 for an average 2019, driven in no small part by the InstaMed in July just shy of $60 million per vehicle. acquisition of healthcare payments MissionOG comfortably surpassed that platform InstaMed for an estimated services to a Dallas-based healthcare sum with its third fund in December, $600 million by JPMorgan. Meanwhile, management provider speaks not with which the firm plans to target exit volume also jumped by nearly only to the complementarity that startups in financial services, payments 40% YoY—a return to form accruing to characterizes the diversity of ventures and software. Closed at a cap of $93 the benefit of local firms. For example, supported by the Philly ecosystem, million, the vehicle more than tripled Philadelphia-based Rittenhouse but also the increased attention it has what the firm raised for its inaugural Ventures notched a handful of attracted from outside investors over fund just five years earlier. Going notable exits. In October, the firm the past decade. forward, the strong returns from a exited Philadelphia-based portfolio record year of public debuts will likely company GSI Health to Medecision. increase liquidity across the wider US The deal for the SaaS provider of venture ecosystem, and Philadelphia workflow, engagement and compliance

8 2019 PHILADELPHIA VENTURE REPORT Q&A

What new expansion opportunities The spate of successful exits in recent do you see for the region? Are years has encouraged many significant startups looking to scale onto much developments, including founders larger footprints in the coming years, becoming investors or mentors whether national or global? helping other entrepreneurs to raise funding locally or elsewhere. I suspect The companies built here in Philadelphia that will only pick up steam. Likewise, are not parochial in their market as Spark’s founding demonstrates, focus or buildout. They’re truly global Philadelphia’s academic medical companies, and they’re being built centers—where world-class research increasingly with that mentality in is being conducted in areas such place from day one. After all, the region as gene editing, gene therapy and boasts world-class technology and a VC cell therapy—represent real spinout Dean E. Miller ecosystem to support it at scale. What mechanisms. The technology and President & CEO, PACT we’ve seen in recent years, and what the skill developed in the region are we expect to continue, is a combination reshaping these fast-growing industry Dean also serves as Managing of increased talent retention and a subsectors, and the momentum is Director of the PCOM Primary growing sense from the international palpable. The startups that the Philly Care Innovation Fund, a venture venture community that Philly is a great ecosystem can increasingly support capital fund focused on healthcare place to build a company. The secret of across the life sciences industry innovations. He brings over 20 years of investment and community Philadelphia is no longer a secret. represents a direct result of this base building expertise to PACT and the of talent in the region. And you could PCOM Fund. Prior to PACT, Dean Which initiatives have taken shape to say the same thing on the software was Managing Director at Novitas encourage startups to spin out or to side, particularly from an enterprise Capital, a Safeguard-affiliated fund, retain talent in the region? perspective. Guru is a great example where he focused on venture capital of a SaaS platform that emerged from investments across healthcare and A decade or so ago, an organization Boomi, which Dell acquired in 2010. technology. called Campus Philly was created to educate the student population at What is your broad take on investor Philly’s top institutions such as Temple, sentiment in Philly heading into 2020? forefront. That also applies in the Drexel and Penn about all the benefits diagnostics space and, as the past of staying in the city post-graduation. Stories like Spark’s and Guru’s and few years of data illustrate, investment The organization helped the region goPuff’s are only growing in number. into the medical devices space is retain 54% of graduates last year, The companies emerging from our second only to the pharma & biotech up significantly from past retention corner of the larger US venture sector. These will continue to be big rates. As a result, there’s great tech ecosystem continue to post positive areas of strength for Philadelphia. spinning out of Philly’s universities, results. Going forward, personalized We’re still in the early innings in terms particularly in the life sciences sector, medicine should only encourage of opportunities on these and other but also in enterprise technology. growth in cell and gene therapies, fronts, so I’m bullish on the strength of One could point to campus life itself which is a clear macro-level trend our entrepreneurial community as we as the source of inspiration for one within therapeutics playing out on enter the new decade. of Philly’s unicorns, goPuff, which a global scale. And Philly is at the emerged from an organic need in the student population that represented, in SoftBank’s estimation, a far larger B2C opportunity. “The secret of Philadelphia How has the success of startups such as Spark Therapeutics, among others, is no longer a secret.” influenced the trajectory of the biotech sector in Philly?

9 2019 PHILADELPHIA VENTURE REPORT