Entrepreneurship | January 9, 2018

Philadelphia rings the bell on a 21st-century revival

Megan McFadden
Guest Author

Megan McFadden

Almost 250 years ago, Philadelphia incubated a world-changing startup: the United States of America. The rest is, well…history.

Now, Philadelphia is incubating a locally-driven, 21st century revival that could become a model for other post-industrial U.S. cities.

The city finds itself rising on national lists: Leading startup city. Next in tech city. Top cities for social enterprise ecosystems. America’s best new restaurants. Last year, Philadelphia was called the country’s leading city for diversity in science, technology, engineering and math. With small wins and intentional progress, there’s a new tone in Philadelphia.

Philadelphia needed such a revival. More than one-quarter of the population lives below the poverty line, making it the poorest of the nation’s 10 largest cities. Drug overdose deaths are rising. Most residents consider the public school system low quality (the mayor is dismantling Philadelphia’s School Reform Commission and asserting municipal control). A nearly $6 billion unfunded pension liability hampers City Hall’s ability to address long-term challenges.


However, the trendlines are changing. Last year, Philadelphia outperformed the nation in job growth and saw a rise in median household income. Deaths from homicides, fires and traffic accidents have been at or near historic lows.

When Philadelphia sought to distinguish itself from more than 100 other U.S. cities bidding for Amazon’s second U.S. headquarters last fall, it touted growth, energy, diversity and innovation (at least in the parts of the proposal it released publicly). The city with a name for its own cynicism, Negadelphia, is slowly changing its narrative and finding a new voice.

“Philly…is a city that has an X-factor right now that very few cities can claim,” said Apu Gupta, co-founder and CEO of Curalate, a Philly-based, VC-backed marketing technology company, as part of the Amazon bid pitch. “We’ve got momentum.”

In the second half of the 20th century, Philadelphia lost more than half a million people, or 26.7% of the city’s population. The city became largely segregated due to redlining, neared bankruptcy in the 1980s, gained a national reputation for political corruption and stagnated under antiquated tax policies.

Table credit: Philadelphia 2017: The state of the city

Since the turn of the century, Philadelphia has seen signals of change: a rise in the millennial population, a growing immigrant population, more births than deaths, and transplants from New York City and Washington DC, drawn by Philadelphia’s lower costs and quality of life. In 2007, Philadelphia’s population ticked up and has grown steadily for the past decade.

Incubator City

Philadelphia is returning to its roots and leveraging core strengths. The city has all the ingredients that think tanks like the Brookings Institution consider the formula for 21st century success. Already several “innovation districts” are “dense engines of economic activity where research-oriented anchor institutions, high-growth firms, and tech and creative startups exist within an amenity-rich residential and commercial area,” according to Brookings’ researchers.

Philadelphia’s strengths extend further, and include an already diverse population and growing civic and business commitment to positive social impact. The city has a strong history of community-building and resistance for justice, powerfully told by Philadelphia Assembled, an exhibit at the Philadelphia Art Museum. Modern day community organizers have picked up the torch with recent wins such as a memorial to Octavius Catto, a 19th century educator and civil rights activist who fought for emancipation — the city’s first such memorial to an African American.

Philadelphia is a majority minority city and claims a large and growing immigrant population. It has a thriving gayborhood and a population that celebrates all faiths. To be sure, the city still has a long way to go. The city’s “State of Women and Girls in Philadelphia” report, for example, offers sobering statistics on everything from violence, health, economics, and government representation.

“Dramatic levels of immigrant entrepreneurship in cities as diverse as Houston, Miami, Philadelphia, and Minneapolis are powerful reminders of how cities were built and rebuilt over generations,” write Jeremy Nowak of The Philadelphia Citizen and Bruce Katz of the Brookings Institution, in their new book “The New Localism: How Cities Can Thrive In The Age of Populism.”

Nowak is a Philadelphia icon, as founding CEO of The Reinvestment Fund, a nearly billion dollar community development finance institution, and chairman of the solutions-oriented publication, The Philadelphia Citizen. Philly is an example of such “new localism,” which Nowak and Katz say is “the twenty-first century’s means of solving problems characteristic of modern life: global economic competition, poverty, the challenges of social diversity, and the imperatives of environmental sustainability.”

Seeding the revival

To reverse inequality and boost livelihoods, city and community innovators, along with local entrepreneurs and investors, are leveraging Philadelphia’s assets and building out the city’s civic, impact investing and entrepreneurial ecosystems.

1. A nascent tech startup ecosystem attracts attention. The growth of Philly’s startup scene seems sudden, but it’s been a long time in the making. The city is not yet in the realm of San Francisco, New York or Boston when it comes to attracting venture capital (indeed, the size and number of investments fell in 2017). But the pipeline of local life sciences, biotech and civic tech startups is starting to swell.

Spark Therapeutics has received FDA approval for a gene therapy solution to treat blindness. Lia Diagnostics received FDA approval and Techcrunch Disrupt Berlin’s top prize for the world’s first-ever flushable pregnancy test. Metropolis Farms is the world’s first solar-powered indoor farm company that advocates local growing, buying and hiring. The Navy Yard is a smart energy, mixed-use industrial campus and host to some of the nation’s leading smart grid research and innovative network of stormwater technologies.

Local catalysts such as Philly Startup Leaders, StartupPHL, and Technical.ly Philly aim to connect startup talent with community, capital, and programming. The Philly Tech Guide aggregates a strong list of coworking spaces, events, local funders — from Benjamin Franklin Technology Partners to First Round Capital — and more.

2. Pointing an impact investing ecosystem toward home. Philadelphia is headquarters to many of impact investing’s pioneers: B Lab, Wharton Social Impact Initiative, Halloran Philanthropies, Reinvestment Fund, Investor’s Circle’s largest chapter, Good Company Ventures (Climate Ventures 2.0 and FastFwd), Wash Cycle Laundry, and more. The city provides tax credits to social enterprises and is home to the Sustainable Business Network, founded by local economy guru Judy Wicks.

Now, a consortium is forming to drive impact investment in Philadelphia itself. A newly formed initiative called ImpactPHL aims to bring more investment with a $15 million impact investing initiative. The BestforPHL program is shining a light on Philadelphia opportunities. In April, the Total Impact conference will kick off in Philly to share the nuts and bolts of impact investing with the region’s wealth advisors. The Good Capital Project, which is launching the conference, is working with ImpactPHL (and ImpactAlpha) to showcase Philly’s impact economy on day two.

Total Impact

3. Community leadership provides a strong foundation for change. Opportunity Finance Network, the leading national network of CDFIs (community development finance institutions), was founded in Philadelphia in 1995. Reinvestment Fund, a locally based CDFI, leads national initiatives like PolicyMap and a $50 million public bond to tap commercial capital markets for low-income communities. Loans from Reinvestment Fund have helped fuel the expansion of Brown’s ShopRite supermarkets into Philadelphia food deserts, for example, where the food chain found a $250 million market for quality food among 250,000 people in low-income neighborhoods.

Philadelphia is home to over 8,000 nonprofits, including forward-thinking initiatives like Common Market, which connects local farms to local institutions in low-income neighborhoods. There’s also CultureWorks, which creates a management commons for arts and culture nonprofits.

Even community journalism is strong. The Lenfest Institute for Journalism is on a mission to build sustainable business models for local journalism. The Institute, which owns The Philadelphia Media Network, is taking a “venture philanthropy” approach to support entrepreneurialism and innovative experimentation with $2 million in grants to national and local media initiatives.

4. Universities foster innovation and anchor the city’s neighborhoods. The dominant presence of higher education is felt throughout Philadelphia, a city with more than 100 colleges and universities. Local universities are economic and innovation forces. The Penn Center for Innovation runs Upstart, a virtual incubator dedicated to supporting technology commercialization.

Universities, however, can have tenuous relationships with local communities, which often suffer from displacement when universities grow and gentrify neighborhoods. Drexel University’s President, John Fry, is working to change that. Drexel, located in University City in West Philadelphia, aspires “to be the most civically engaged university in the country,” Fry says. The University will use a $30 million grant to improve local public schools, has committed $6 million to the local community in a 14-acre mixed-use development project and provided numerous community programs through their Dornsife Center for Neighborhood Partnerships.

5. Culture-shifting initiatives tap the creative economy. Philadelphia’s art scene is well known, from the Fringe Festival to the Barnes Foundation, the Mural Arts Program and the Fleisher Art Memorial. New initiatives are reimagining the role arts and culture can have in driving growth and social change, reflecting a national trend.

Monument Lab provoked a citywide conversation about the role of modern-day monuments for Philadelphia while the Chester Made Exploration Zone is spurring creative enterprise to revitalize downtown Chester, less than 20 miles from Philadelphia. Shift Capital asked the community to reimagine the future of an urban corridor in Kensington.

6. City Hall is becoming an engine, not an obstacle. Mayor Jim Kenney, elected in 2016, launched GovLabPHL (an initiative inspired by Philadelphia’s participation in a City Accelerator run by Citi Foundation and Living Cities). He led the charge to reclaim Philadelphia’s local school system, and is attracting private sector support for a $500 million initiative called Rebuild, meant to rewrite the future of the city’s recreation centers, libraries, playgrounds, and parks.

The Knight Foundation awarded a $338,000 grant to the City of Philadelphia to create PHL Participatory Design Lab, a project that aims to use big data and behavioral science to improve city services. Larry Krasner and Rebecca Rhynhart, Philadelphia’s newly elected DA and Controller, were both seen as untraditional picks and change agents.

The city is pushing climate action. A plan to be waste and litter-free by 2030 is predicted to save the city $41.5 million annually, while the mayor’s pledged support for 100% clean energy and a new energy master plan will help reduce carbon emissions and curb climate change. “If everyone keeps their new sustainability resolutions made this year, Philadelphia will be an environmentalist’s dream 15 years from now.” says Catalina Jaramillo of Plan Philly, an effort to engage citizens in the city’s design.

Philadelphia’s revival will not be led by a single actor, entity, or sector, but rather a convergence of leaders and communities creating momentum. If the efforts succeed, Philadelphia will have incubated a model for what a sustainable, resilient, smart and thriving city can look like in the 21st century. And that could make history, all over again.