While Philadelphia is in the top 10 cities in the country when it comes to creating a startup, a “lack of openness to new ideas and a difficult regulatory environment are a burden for entrepreneurs,” a recent report concluded.

A new report from Washington, D.C.-based venture capital firm 1776 and the U.S. Chamber of Commerce Foundation ranks 25 American cities and their “readiness to capitalize on the inevitable shift to a digital economy” by analyzing startup culture and growth in various sectors through surveys and a roundtable discussion in each city.

Philly has seen a spike in young, educated folks moving to the city. The percentage of the 18 to 34 population has increased from 25.7 percent to 29.5 percent since 2000 while the increase in young Philadelphians with college degrees has almost doubled the national rate. But talent challenges remain due to a stagnant population base and “middling levels of education attainment” for the majority of the city, the report concluded.

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The report also noted low corporate and institutional engagement could be stifling innovation in the region. Innovation That Matters found five cities that rose to the top in terms of being the best locations for innovative companies to be, and Philly came in 8th overall. The top five were:

  1. Boston
  2. San Francisco Bay Area
  3. Denver
  4. Raleigh-Durham
  5. San Diego

While 1776 wrote the San Francisco Bay Area dwarfed the startup scene in Boston in terms of size, its “lack of a cohesive community and declining quality of life for residents” put Boston atop of the list.

Philadelphia’s performance on the index was bolstered by solid rankings when it comes to its established education (3rd), energy (2nd) and health (2nd) spaces, but it came in 18th and 22nd when it comes to corporate and institutional engagement. Philadelphia came in 10th out of 25 in overall “connectivity,” which refers to the accessibility of universities, mentors and advisors, professional services firms, investors, corporations, civic institutions and local citizen advocacy groups.

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So what is Philadelphia first in? Civic sector skills, particularly in the health field, were highlighted by Innovation That Matters, but the company noted those skills are often found in established companies. They wrote the city is underperforming in its ed tech and energy tech startup sectors, but health tech is “the clear bright spot of the ecosystem.”

The firm had four major recommendations for cities outlined in its report:

  1. Understand the inevitable trajectory of the digital economy
  2. Imagine a new future that includes history; where technological possibility intersects with legacy assets and unique strengths
  3. Focus beyond startups to include corporations, universities, nonprofits and local government
  4. Work proactively toward a new governing framework that marries technological possibility and regulation. Then, leaders can get started by establishing the basics to make way for the big opportunity.

Anna Orso was a reporter/curator at Billy Penn from 2014 to 2017.