The Problem with Philly Startups, in One Chart

The Atlantic Cities has a piece out tracking the increasing urbanization of start-up firms. Of the eleven major U.S. cities it surveys, ten of them have the majority of their venture capital investment occuring in urban rather than suburban areas.

The urban shift in venture capital and start-up activity is an emerging norm for high tech, as small and promising firms locate in a dense, urban network of investors, collaborators, and competitors.

The one that doesn’t? Philadelphia. 84.4% of the venture capital being invested in Philly–a good proxy for start-ups–is happening in the suburbs. For the rest of the cities sampled, that number is closer to 20%.

The Atlantic doesn’t offer any clues as to why Philly (as of 2011) was lagging. But here’s one hypothesis: Higher-than-average office rents based on higher-than-average constructions costs. Which has a lot to do with building trades unions.

And here’s one more hypothesis for why suburbs are still more attractive for local startups: Philly’s wage and business taxes are unusually high, making us uncompetitive.