Is There Hope for Boston?
The Boston area has really been falling behind in terms of venture-backed activity. If you click through some of the other reports on the site, you'll see that outside of biotechnology and later stage deals, the amount of early-stage IT investment activity in New England is a small fraction of Silicon Valley.
The Boston area was always some fraction of Silicon Valley, but I think that the environment in Boston is even more depressing than the numbers would indicate. Several VC firms that had been very active in Boston have fewer active investment partners than they had previously. And, very few VCs are interested in investing in some of the more interesting new market sectors (clean energy, Web 2.0 apps). Some quotes I have heard from New England entrepreneurs when they try to raise money in Boston:
- It's impossible to raise $2M in Boston. It's too much for most angel groups, but too small for most VCs that are looking to put much more money to work. But, it's exactly the right amount for my early-stage business.
- My deal won't appeal to Boston VCs. But, I am getting more interest from NY and definitely Silicon Valley VCs. They get it. I guess I have a Silicon Valley deal.
So, what will it take for the Boston area to become more vibrant in the venture business:
- We'll have to work harder to build up deals in more interesting spaces. They won't just be able to ride on market momentum.
- Team building will require significant effort, particularly on sales and marketing
- VCs will have to dip their toes in to the water in some new market segments.
- CEOs will have to work hard to expand their skills into new market segments
- Web 2.0 companies will have to work hard to stay relevent to the Silicon Valley Web giants.
- Work harder to leverage outsourced technical talent from Eastern Europe. I know several companies doing this successfully now.
Also, one challenge for Boston is that there are virtually no 'anchor tenant' big companies that provide a solid base for the high-tech community. Most of our big exits have been companies acquired by Silicon Valley companies. I am regularly working on convincing entrepreneurs to stay in Boston rather than move to California. If they all leave, the environment will just get worse.
I am committed to the Boston area for myself and my family. So, we need to rally all the stake holders in the area to make sure that Boston remains a key market for innovation in venture-backed companies.
This is a topic I'll write about from time to time.