VCs are losing optimism for Philly startups as investment dollars dip
Despite optimism heading into 2025, macroeconomic conditions caused a decline in venture capital activity in the Philly region.
Companies in the Philly region raised $635.4 million across 82 deals in Q1 2025, according to the latest Venture Monitor report, released quarterly by PitchBook and the National Venture Capital Association. Last quarter, the region raised more than $1 billion through 121 deals. Current figures are also lower than Q1 2024, which saw $741 million raised over 123 deals, at the time showing improvement in the region's deal activity.
This decline isn't surprising, local investors told Technical.ly. Despite hope at the end of last year that the market would show strength in 2025, macroeconomic uncertainty from constant changes at the federal level means that investors are showing more caution, resulting in fewer deals and fewer dollars invested.
'The drop … is not just seasonal fluctuation — it's a market signal,' Howard Lubert, regional president of Keiretsu Forum Mid-Atlantic, said. 'It's paralysis. And that paralysis is driven by policy uncertainty, tariff confusion and the prolonged drought in fund distributions, which are throttling [limited partner] confidence.'
The market shows a slowdown in exits compared to last year, which saw an increase in exit activity in Philadelphia.
A 'highly volatile' market means the environment right now isn't good for exits, Dean Miller, president and CEO of the Philadelphia Alliance for Capital and Technologies, told Technical.ly. Deals like mergers and acquisitions are difficult because the valuation of companies is fluctuating.
All together, these trends are dampening the momentum that startups were feeling last year.
At the end of 2024, there was a lot of optimism and a general belief that the incoming Trump administration would be more friendly to business, according to Miller. But federal funding cuts to healthcare and education are expected to cause a big impact, especially in Philadelphia, which is known for its ' eds and meds.'
'That day-to-day mayhem creates instability, which at the public market level is really challenging and difficult,' Miller said. 'That also spreads to the private market level as well.'
Nationally, deal value is up this quarter, but 10 deals — none Philly-based — valued at over $500 million made up about 60% of all activity in the United States, according to the report.
'Despite a few significant transactions fostering a narrative of market resurgence, VC remains challenging for investors, companies and limited partners,' the report read.
Startups need to prove revenue to land funds in 2025
Philadelphia's VC activity aligns with national trends that show that investors are adverse to risk. VCs are only investing in companies that will result in revenue, which could discourage the next generation of regional founders, according to Lubert.
'2025 is about surgical precision,' Lubert said. 'The days of funding hype are over — it's time for disciplined capital, tough questions and clear outcomes.'
Most deals are going to serial entrepreneurs and founders who've already had success, Lubert said. Investors want companies that have traction and real customers. They're only interested in deals that are efficient on capital, have a clear exit timeline and will not need additional funding rounds.
Firms like Keiretsu are also preparing for these new conditions by reframing the way they consider investments, Lubert said.
'Bringing in experienced operators, locking in milestone-driven returns, and structuring deals for distributions, not just equity appreciation,' he said. 'That's where the next wins are going to come from.'
Conservative decisions and unique products will prevail
Despite investors tightening their belts, startups that have unique products and strong teams will always be able to find funding, Miller said.
Companies can prepare themselves for continued change by staying informed about what's happening at the federal level and being conservative with their plans and money, he said.
Philadelphia also still sees companies in a range of sectors that are getting funding, Sean Dowling, a partner at Osage Venture Partners, said. The top deals of the quarter were in healthcare, financial services and information technology.
'We are encouraged by the diversity of investments that are happening across the region,' Dowling said. 'Reflecting the broad range of startups that are founded in and remain committed to building in Philadelphia.'
Sarah Huffman is a 2022-2024 corps member for Report for America, an initiative of The Groundtruth Project that pairs young journalists with local newsrooms. This position is supported by the Lenfest Institute for Journalism.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Technical.ly
3 days ago
- Technical.ly
Baltimore will keep CIAA tournament through 2029, officials announce
An annual basketball tournament held during Black History Month and bringing a wide economic footprint will stay in Baltimore through the end of the decade, local officials announced. Public and private sector leaders on Wednesday gathered at the Baltimore Visitor Center in the Inner Harbor to announce the city won the bid to host the Central Intercollegiate Athletic Association (CIAA) competition from 2027 to 2029. Baltimore has hosted the popular HBCU tournament since 2022, a start date that was delayed a year by the pandemic. Competition is intense to host the event, which features games between historically Black colleges and universities throughout the mid-Atlantic and Southern United States. With this latest win, Baltimore notably beat out Charlotte, North Carolina, which hosted the CIAA between 2006 and 2020. At the announcement, many speakers — including leaders from CIAA members Bowie State University and Lincoln University, Baltimore-based sports apparel giant Under Armour, Maryland's Department of Commerce, tourism arm Visit Baltimore and insurance company CareFirst — highlighted the tournament's impact and significance beyond the court. 'My favorite part of this relationship is the deep investment into community,' said Mayor Brandon Scott. 'The CIAA goes all out: financial literacy, health summits, skills camps … so that we're growing the generation of CIAA graduates to come back to Baltimore and go into communities to help make us the best version of ourselves.' This impact extends to the city's business and startup communities, which each earned a major spotlight during prior tournaments. In 2024, the city saw a total economic impact of $32.5 million, including $23.6 million in direct spending, according to Visit Baltimore. Al Hutchinson, the tourism agency's outgoing CEO (whom Mayor Scott recognized at the end of the Wednesday press conference), previously said that the tournament generated $81.7 million in total economic impact and funded an average of 1,326 jobs each year between 2022 and 2024. The 2025 financial figures dropped a little, with this year's tournament boasting $19.8 million in direct spending and $27.4 million in total economic impact. That said, the number of jobs created, by Visit Baltimore's tally, grew to 1,487. For the innovation community, the tournament offered the chance to showcase Baltimore's Black technologists, entrepreneurs and other sector players during the annual Tech Summit House program. The series of talks and pitch contests revolving around topics like AI, Africa's startup world and how to navigate an industry filled with racist disparities dovetailed with local boosters' broader goal of highlighting this predominantly Black city's unique assets. 'The tournament particularly uplifts Black-owned businesses, highlights our HBCU legacy,' Hutchinson previously told 'and adds to the vibrant mix of music, arts and culture that define Baltimore's Black community.' Although he didn't speak during Wednesday's presser, Mark Anthony Thomas, CEO and president of the Greater Baltimore Committee (GBC), said he took part in a pitch to host the tournament last week. He and others only found out about the acceptance this week. For Thomas, the fact that none of Baltimore's HBCUs are in the CIAA (the closest being Bowie State in Prince George's County, near DC) was actually an asset. 'The most successful ends are when you don't have the natural advantages of other markets,' Thomas told before the press conference. 'We don't have any of the CIAA schools, we're not central to where they're located. And it means that Baltimore overperforms on charm, our ability to be collaborative and a great partner with the CIAA — and we actually put on a good show.' Just a day earlier, Thomas held a fireside chat at the GBC's Inner Harbor offices with Jonathan Bowles, executive director of the New York City-based Center for an Urban Future. For nearly an hour, the pair spoke before GBC members about topics including the growth of New York's tech economy, the Great Recession's lessons in economic diversification and what Baltimore can learn from the country's biggest city. One theme Bowles hit on was the importance of the cultural sector to a city's development. Thomas connected this to the current bid, and the way Baltimore's economy can build upon the prior tournaments. 'In our 10-year plan, creative and culture is one of the three opportunity areas, so this is central to that type of potential we see for the region,' he said. 'Obviously, it's a risk. Visit Baltimore initially pursued this, and so you think about the risk they took — to even believe that Baltimore had a chance at competing for this — and for it to have been successful, now twice, is a huge endorsement of the infrastructure they built.' community Slack and visiting the #baltimore channel.
Technical.ly
4 days ago
- Technical.ly
ARM Institute welcomes a longtime Pittsburgh entrepreneur as its new CEO
Power Moves is a recurring series where we chart the comings and goings of talent across the region. Got a new hire, gig or promotion? Email us at pittsburgh@ Every year, Pittsburgh's universities train a new wave of talent, and while some stay to build locally, others take their ideas elsewhere. A longtime robotics entrepreneur with decades of experience shaping Pittsburgh's tech scene is sticking with the city as he assumes a new leadership role at the ARM Institute. Meanwhile, two early-stage founders from the University of Pittsburgh are heading to Philadelphia to grow their startups, and the cofounder of a well-known autonomous trucking company has taken on a new leadership role at General Motors to support its push into self-driving vehicles. Read on below the chart for more on these power moves and other professional changes in the region. ARM Institute appoints robotics entrepreneur as new CEO A new chapter begins at the Advanced Robotics for Manufacturing (ARM) Institute today, as its newly appointed CEO officially steps into the role. Jorgen Pedersen, a local robotics entrepreneur, has contributed to the growth of the Pittsburgh robotics scene for more than 25 years. He was one of the founders of Carnegie Mellon University's National Robotics Engineering Center and later founded RE2 Robotics, a leading developer of human-like robotic arms for unstructured environments. Pedersen succeeds Ira Moskowitz, who recently retired from the position after being appointed to the role in 2020. When RE2 was acquired by Sarcos Robotics in 2022, Pedersen worked as Sarcos' COO for a year during the transition. He then joined the board of directors for the Pittsburgh-based manufacturing consultancy Catalyst Connection and the Pittsburgh Robotics Network, where he was eventually appointed president. After that, he became the Robotics Entrepreneur in Residence at Innovation Works ' Robotics Factory, where he mentored early-stage robotics founders. 'We're at a pivotal moment where robotics and AI are no longer future technologies — they're ready to transform US manufacturing today,' Pedersen said in a prepared statement. 'I'm honored to join the ARM Institute in its mission to drive innovation, strengthen our industrial base and prepare a workforce ready to thrive alongside advanced technologies.' The ARM Institute is structured as a public-private partnership of over 450 member organizations. Pedersen will continue the ARM Institute's work of fostering collaboration between government, industry and academia to make robotics, automation and AI more accessible to manufacturers. Pittsburgh loses two founders to Philly-based fellowship program Two researchers at the University of Pittsburgh are leaving the city to develop their innovations across the state. Molecular pharmacology graduate student Olayemi Grace Akinyele and AI health researcher Thomas Tam have been selected for the University City Science Center 's year-long Founders Fellowship program in Philadelphia. The life sciences builders will receive hands-on experience on tackling challenges related to aging populations. Akinyele will work on developing her bioengineered platform that would preserve mitochondria, the parts of the cell that produce energy, even after they've been removed from the body. Since mitochondria have emerged as a biomarker for early detection of Alzheimer's, the new technology could make it easier to research the disease in the future. Tam will also leave Pittsburgh to continue working on his AI-powered medication guardrails, which aim to fix the current error-prone process of tracking medications across different care settings. Tam's venture was previously supported by Carnegie Mellon's Project Olympus Incubator Program and the Pittsburgh-based Patient Safety Fellowship. Cofounder of Aurora leaves for General Motors Aurora cofounder Sterling Anderson announced his resignation as the autonomous trucking company's chief product officer in May, following the launch of Aurora's self-driving trucks in Texas. The news was made public in a regulatory filing, where the company said Anderson's departure 'did not result from any disagreement with the company concerning any matter relating to its operations, policies or practices.' During the company's first-quarter earnings call, Anderson said Aurora's recent launch gave him the confidence to leave the company at this time. 'Aurora has reached a critical inflection point; product strategy is firmly established,' he said. 'The technology is on the road, the team is in place to scale it, and the momentum we've created in the industry is palpable.' A few days later, General Motors announced Anderson as the company's new executive vice president of global product and chief product officer. Anderson joins the team as General Motors works to incorporate autonomous technology into its vehicles. Later that month, Aurora made the call to put 'observers' back in the front seat of its autonomous trucks, per a request made by Paccar Inc., the company that manufactures the trucks. More power moves: North Shore-based aluminum producer Alcoa named Thomas J. Gorman as its non-executive chairman of the board in May. About 105 Leviathan Energy employees will lose their jobs as the company closes its Monroeville and Canonsburg offices following the $1.8 billion acquisition of Olympus Energy. Innovation Works eliminated its portfolio executive role, cutting three team members. Based on founder feedback, Innovation Works says it updated its service model to give portfolio companies direct access to managing directors, a mentor network and a new service desk to route, track and manage requests. California-based defense tech company Anduril is hiring for several software roles in Pittsburgh, despite not currently having a physical presence in the city. The company develops autonomous weapons used by Ukraine. Point Park University appointed Shari Payne as the permanent provost and senior vice president for academic affairs. Payne had served as interim provost since January. Kristen Martin, a former professor of IT and technology ethics, will serve as the next dean of Carnegie Mellon University's Heinz College starting in July. After the local software firm Smith Micro had a 50% drop in revenue last year, it brought back Tim Huffmyer to resume his former role as CFO and take on the COO position as well.
Technical.ly
4 days ago
- Technical.ly
Let's Rallie brings Philadelphians together IRL — with a little help from their phones
For Robbie Verna, business is all about community. The 29-year-old, originally from Delaware County, has been reimagining how communities connect and celebrate through event technology platform Let's Rallie since 2021. His cofounder, Wendy Verna, a longtime entrepreneur and founder of Octo Design Group, also happens to be his mom. Both companies are located on South Street in Philly. 'We started it during COVID as a fun little startup,' Robbie told 'Since then, we have pivoted the business to our current business model with the same mission, to drive commerce to different neighborhoods.' The platform is an app to to help users navigate in-person community events, serving local organizations, nonprofits and community groups across the Philadelphia region. It supports everything from festivals to brewery tours, providing interactive features like scavenger hunts, voting and custom event maps. Embracing the city's community vibes Verna left his hometown of Media for college at a Connecticut university, where he studied marketing and entrepreneurship. After graduating in 2018, he was ready to move back home, but instead of suburban Delco, he moved straight into the city of Philadelphia and has been there ever since. Verna embraces life in Philly, from the strong sense of community to the easy access to networking events. Depending on the weather, he bikes, walks or takes the bus from where he lives in the Graduate Hospital area to the office. His desire to see the city's communities thrive fueled Let's Rallie. 'Our mission is to drive traffic to local businesses and also support neighborhoods and their operations,' he said. 'Our goal is to help different community teams with their event technology [and] to keep people in those areas, exploring new things.' Let's Rallie's bread and butter, Verna said, is a software service for local organizations looking for technology for their events. Some of its clients include The South 9th Street Italian Market, Manayunk Development Corporation and CampusPhilly, as well as regional clients including the New Jersey Tourism Association and Harford County, Maryland. Attendees download Let's Rallie to their phones, where they can access features like schedules, interactive maps, push notifications, raffles and scavenger hunts. A voting feature allows events to interact with attendees, who can use it to participate in things like pet costume contests at a Halloween event. 'We do a ton of festivals,' Verna said. 'We've done ice sculpture festivals, food truck festivals, the Italian Market Festival, and we also do a lot of tours and crawls, like a burger crawl, a seafood crawl. We're right now doing a brewery tour.' Now, he said, Let's Rallie is expanding into multi-day events like restaurant weeks and soccer tournaments, too. 'We started out in the East Falls and Manayunk area, and they took a chance on us,' Robbie said. 'And then from there, some people from South Philly heard about us, and it just snowballed.' Born into entrepreneurship Both of Verna's parents are business owners, something he says has been a benefit as he launched his own startup. 'It was certainly helpful to have both of my parents in my corner,' he said. 'It let me know that it was possible, and made it a little less scary.' Wendy Verna's 25 years of doing business in Philly and making relationships gave the business insight into how things work in the city, like having a built-in mentor. Logistically, the Vernas had to start by building the app, which they did with the help of a friends and family round of funding. Since then, they've been bootstrapping. 'We did join an accelerator with Philly Startup Leaders early on,' Verna said. 'They helped us with our business model and making sure everything was buttoned up and ready to go. They were certainly a big help, with connections as well, so that helped us grow.' As clients started signing up, they learned to listen to their needs to keep the business growing. 'As we got those clients, we reinvested that money back into what would be helpful for them, so trying to be as nimble as possible,' Verna said. 'We're ear-to-the-ground, listening to clients, and making sure that we weren't just building something and trying to make it fit.' Ultimately, he said, the clients are communities, in a city and region where community is a big part of its identity. 'The creativity and the true community energy that the city has, and the willingness to help each other, is definitely something that has been very beneficial to our business,' Verna said. Rallie -ing to the future In the future, Verna would like to see the app evolve into an all-purpose events tool that community members can take with them and use, even after a specific event has passed. The map feature, for example, could be used to show a user all of the events happening in the area on a given day. A tool that a user can open when they go to a new town in the region — or, eventually, beyond the mid-Atlantic. 'We're growing, one relationship at a time,' Verna says, 'and now, with people expecting an app for their events — we're right where they want us to be.'
