Wayfair and HubSpot IPOs Could Be Just The Beginning For Boston Startup Scene

While Silicon Valley firms hold back on their IPOs and there’s hand-wringing over burn rates, two Boston-based startups had highly successful IPOs less than a week apart. Just over a week ago, furniture shopping service Wayfair went public and raised over $300M in its IPO, then HubSpot had a successful IPO of its own a week later. I think it’s safe to say the Boston startup scene is on its way.

Scott Friend, a managing director at Boston-based venture capital firm Bain Capital says these successes bode well for Boston’s startup community. “For sure, the HubSpot IPO, alongside other great IPOs and exits in town in recent years like Wayfair, DemandWare, Endeca and Kiva Systems (sale to Amazon.com for $775 million), enhances the credibility of the Boston start-up ecosystem for fledgling entrepreneurs as well as engineers and sales people, and investors. As we’ve seen in Silicon Valley for several years, the big exits create a virtuous cycle in the local market that is contagious.”

Of course, many outside the Silicon Valley might not know it, but Boston has an active startup scene even without the success of Wayfair, HubSpot and the others Friend mentioned, but these kind of big-number IPOs shine a spotlight on the city’s startup system. In fact, there’s a lot of action bubbling up in the Boston area right now and there is money there.

The Boston Globe started a website last year called BetaBoston to cover the burgeoning scene. I’ve met with Bain Capital, which has funded many enterprise startups, many which now have offices within in blocks of its posh Hancock Tower offices. General Catalyst started in the Boston market, and has an office in Cambridge. And there are scores of others. There’s also Fidelity Investments and Putnam Investments on the public market investment side. Private investors are also getting in on the act. For instance, I wrote about a social sports startup called FanCred in August, which is headquartered in Boston and got early stage seed funding from Linda Pizzuti Henry, wife of Red Sox and Boston Globe owner John Henry. And that just scratches the surface of the money supply of things.

MIT and Harvard are huge engines for innovation and Kendall Square near MIT is busting at the seams with startups. There are incubators like MassChallenge and TechStars, and there is an area near South Boston previously all-but abandoned waterfront that the city has made into an innovation district with lots of startup action including the Mass Challenge headquarters. In short, there’s a lot happening.

As TechCrunch writer Danny Crichton put it in a recent article on the Boston area startup scene, “…there are many here in Boston who believe that the region’s best times remain in its future, and that there is an opportunity to reinvent the city around deep, engineered technologies.”

Mark Andreessen once famously talked about a thousand Silicon Valleys. What he meant was there should be more than one place in the world with a startup ecosystem and we are certainly seeing that in Boston, New York, Berlin and other cities throughout the world. Each of these cities has its own startup scene complete with incubators, funders, startup spaces and of course lots of companies vying for fame and fortune (looking for a pot of gold). They may not be as large with as much money as the Silicon Valley, but they have the pieces in place to grow.

Boston is one such scene, but let’s not forget though that Boston has always been a hot-bed for this type of innovation in large part because of the first-class universities here. It has just ebbed and flowed. Early on there was Polaroid and don’t forget that for a time Route 128 was the mini computer capital of the world as companies like Digital Equipment Corporation, Wang, Apollo, Data General and Prime ruled the day. EMC came later.

Bill Gates and Steve Ballmer met at Harvard. Dan Bricklin developed the first spreadsheet VisiCalc at Harvard. Mark Zuckerberg wrote the first version of Facebook at Harvard.

Companies launched by MIT graduates include Bose, Akamai, iRobot ZipCar and the aforementioned HubSpot. On and on it goes. And that’s just the two of the more famous universities. There are 35 colleges, universities and community colleges within the city limits and many more spread throughout the state including 5 University of Massachusetts locations along with other state colleges and universities and community colleges.

And that provides a lot of smart young people with great ideas, and much like you see in Silicon Valley as groups like Y Combinator and others try to encourage the next group of entrepreneurs, that’s exactly what MassChallenge is doing, a group that gives young companies space and resources for a few months in a competitive environment that encourages these companies to grow up in a hurry with the lure of cash, services and funder recognition.

MassChallenge CEO John Harthorne says he’s hopeful the two big IPOs are the beginning of something much bigger for the Boston startup scene. “Maybe the rest of the country will finally realize what we’ve known all along –that Boston is the best place in the world in which to launch a high-impact startup,” Harthorne wrote me in an email.

One sign of a vibrant startup is how many of its alumni are working at other startups, and HubSpot actually brags about this on their Alumni Spotlight page. In sports successful coaches breed successful coaches and the same goes in startups. HubSpot alums are working at 25 startups and now that HubSpot and Wayfair are flush with their IPO cash, it’s possible that they could start investing their own money in other Boston startup projects –and keep the innovation cycle going.

Boston has a lot going for it and as we see more companies join HubSpot, Wayfair and others in successful exits, it’s only going to build on itself as more money and talent flow into the area. But the success of the last two weeks could be a sign that one of those alternative Silicon Valleys is already here.