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The city government itself has no particular interest in fostering startups (the Bloombergian level of involvement is hard to imagine in a city where they can't even properly manage the snowplows and the public transit system still operates on tokens), and imposes a city-level corporate income tax on top of state and federal taxes. That is the biggest reason so many Philly startups are located in the suburbs.

I take issue with a few parts of this comment:

1) Mayor Nutter's office is working to find ways to support entrepreneurship. A concrete example of this was the city working with First Round Capital to get them to move their offices from Conshohocken to their new space on Locust. Another would be StartupPHL. Or the assistance they've given the Science Center and the Navy Yard.

2) I use Philadelphia public transport regularly. There are tokens and swipe cards, but it basically works. The fancy unified smart-card system is supposed to arrive in 2015, for those who care about such things. I'm just glad the city didn't pull a Melbourne and spend $1.5B on a fare-taking system.

Taxes (especially city wage taxes) are probably the biggest real argument against opening in Philadelphia, but there are certainly some entrepreneurs who find that being directly in the city provides enough value to justify the expense. (Just as some decide to operate in California or NYC.) Whether or not this makes sense depends on what you're doing, who your customers and suppliers are, and who you're looking to employ.

That said, the reason for startups in the suburbs could well be simpler than any of the factors we've previously mentioned. Philadelphia proper has a population of 1.5MM and the MSA has a population of 5.8MM.

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