"By failing to prepare, you are preparing to fail." -Benjamin Franklin
"You can't live only on your history. We have to earn our reputation as a great city every single day." -Mayor Michael Nutter
This is the second in a five-post series of the Rise of the Rest tour, an initiative launched by entrepreneur Steve Case and his investment firm Revolution. My firm, Village Capital, is a partner on the tour. Click here for a recap of Day 1 in Baltimore.
We kicked off Day 2 of the Rise of the Rest tour with a sunrise visit to Independence Hall and the Liberty Bell, where 250 years ago a group of startup founders created the United States of America. Like Day 1's launch at Ft. McHenry in Baltimore, the day's opening reminded us, as Steve Case often says, that America itself was a startup.
The Rise of the Rest tour convenes, celebrates, and challenges entrepreneurs in cities across the U.S. to improve society, and build great businesses that lift up their communities. And while Philadelphia has always been a cradle of innovation, from Benjamin Franklin to the Constitution, in Philly we saw how entrepreneurs can continue to help Philadelphia -- and the country -- continue to earn greatness.
Philadelphia: Companies solving real-world problems
As society is changing rapidly -- and cities are worried about how to take care of an aging population, educate the next generation and more, entrepreneurs and market forces are increasingly leading the way.
Whereas all entrepreneurs by definition set out to solve for a problem, it was in Philadelphia that we saw founders focused on solving for problems that are directly impact people's lives. We saw health companies such as SmartPlate improving people's nutrition; education companies such as Scholly help students afford higher education, and community development companies such as Whose Your Landlord enable residents to have more leverage in their homes through better access to information.
Steve Case in the fireside chat called these kinds of companies the "Third Wave": while the first wave of the Internet (America Online, Netscape, and others) got people online, and the second wave of the Internet (Google, Facebook, Twitter and others) got people to communicate, the "Third Wave" integrates into everyday life: health, education, food, financial services, and more.
Public sector engagement and impact investing
What's different about companies that are solving for public problems? For one, they require much more active government partnerships. While in many cities local leaders will come for a short breakfast or speech, Mayor Michael Nutter and team spent the entire day looking at how startups can make Philadelphia world-class. Already, the city has engaged deeply with seed funds (investing with venture fund First Round Capital in Philly startups), accelerators (including a recent program focused on public safety) and tax policy to attract startups; this public-private integration is critical.
Philadelphia is poised to take the lead also in "impact investing," the emerging field that supports and grows businesses looking to seek competitive financial success while at the same time positively impacting society. Philadelphia is the home of B-Lab, which has set up the B-Corporation movement (similar to LEED certification for businesses and a legal status that enables company leaders to build products for general benefit, not just shareholders); the largest impact investment angel network in Investors' Circle's Philadelphia network; several accelerators and startup spaces, including Impact Hub Philly, GoodCompany Ventures, and DreamIt Ventures; and finally an exceptional research initiative at Wharton in impact investing.
While many believe business and social good can't mix, the majority of people under 40 want to work for businesses that create a positive impact, and the majority of wealth-holders want to invest in and buy products from impact businesses.
And at a lunch on the tour Jacob Gray of Wharton released a teaser of a two-year research study fully released next week in impact investing: surveying 50 funds and hundreds of firms, performance for impact businesses over the past decade has been competitive with "market-rate" firms.
As Steve said to a gathered crowd, "When I was in my 20s, nobody thought the Internet would really be a big thing. Yet it's defined the last 30 years of innovation. I see impact investing as leading the next 30... and of all the cities we've visited, Philadelphia is leading the way."
For Philadelphia -- and any city -- to truly lead the way, strategies around how to attract and retain the most talented individuals are critical.
Philadelphia has been great at this in the past. What made America the great nation it was 250 years ago: the brightest minds were working on building the country. Today, we often struggle to attract the best people to create a better United States -- and politics notwithstanding, building a startup that also improves your community is an exceptional civic act.
Yet today we need to improve pathways for people looking to build businesses. Philadelphia has more college students than the Boston area, but fewer startups; creating a path for young people to explore entrepreneurship as a career. I spoke at length with a young start-up founder; she was a senior at Penn. When I asked her what she was doing after she graduated, she responded that she wanted to work for a top-three management consulting company, rather than working on her business full-time, because that's what a top Penn graduate is expected to do, and she didn't have any role models or ideas of how to be an entrepreneur. She was in the food industry, and found it difficult to get in touch with people who could help her build her business and raise money (though she started her business with a successful Kickstarter crowdfunding campaign).
The best of our next generation are incentivized to work in jobs such as investment banking and consulting, but to remain truly great, we should create pathways to work in entrepreneurship. In Philadelphia, the Blackstone Charitable Foundation sponsored a $10,000 pitchfest for college students; this is is but one small example of important efforts to redirect the most talented people towards feeling the inspiration to create new companies of great value. Getting our next generation engaged in building businesses that work for our community ought to be an academic, civic, and business imperative.
We also heard from a group in Philadelphia that supports immigrant business owners to create and grow companies locally. As Steve reminded us, 40 percent of the Fortune 500 were founded by immigrants, and remaining open to entrepreneurs of all backgrounds is critical to the success of the U.S. Seeing such an active focus in Philadelphia on being a truly open, international city was encouraging.
Philadelphia: a leader in impact entrepreneurship?
Ultimately, all entrepreneurs are solving problems, but a special and distinct kind of entrepreneur is building a great business that also improves society. In the types of businesses we saw in Philly, the engagement with both the public and private sector, and the talented individuals we see building companies, we are excited about Philly's potential to set a template for how markets can lead the way in solving the problems we worry about, and building the world we want.