Hey, founders, you have a message from Mayor Michael Nutter: “Philadelphia is the place for you to start, stay and grow.”
That was the word from City Hall this afternoon as the mayor and city officials launched a $6 million seed fund designed to keep tech startups in Philly.
Managing the fund will be Josh Kopelman’s First Round Capital, a major player in the national venture scene.
“I firmly believe that if the capital doesn’t come to the entrepreneurs, the entrepreneurs have no choice but to go to the capital,” Kopelman said. “Which is why programs such as the StartUp PHL Seed Fund are critical to this region’s success.”
The fund will focus on IT-based investments. That includes healthcare IT and e-commerce startups, according to Kopelman. Investments will be in the ballpark of $500,000.
The money comes with strings attached.
Included is a clause that keeps funded startups in Philadelphia for at least 18 months.
“There’s this critical gap from one to 15 employees,” explained Kopelman, “and once a company gets above 15 employees it’s very hard for them to relocate. You have spouses and kids in school, et cetera.
“So … we’ve put an 18- to 24-month clause in there, the goal of which is to get those companies above 15 employees so that they don’t leave.”
StartUp PHL is the city’s latest attempt to build momentum around Philly’s tech scene.
It’s also designed to chip away at one of the area’s biggest problems: the lack of capital.
“We saw companies like AdMob get their start here; they sold to Google for $750 million,” Kopelman said. “Invite Media got their start here; sold to Google. Milo got their start here; sold to eBay. Warby Parker got their start here.
“Those four companies alone represent over a billion dollars of market value creation that got its start in the city of Philadelphia. The challenge is that all four of those companies left the city of Philadelphia before they sold. And the reason why — one of the major reasons why — is lack of capital.”
The fund will be managed by First Round for free. The city is investing $3 million via the Philadelphia Industrial Development Corporation. The other $3 million is being invested by First Round.
The goal is to invest the capital in local startups over the next two to three years.