Boston’s tech scene should shake off its inferiority complex: The “Boston Tech Party” revolution is starting to unfold.
After many years of under-the-radar growth and profitable companies, the arrival of General Electric to the Seaport District brings Boston the high-profile “anchor tenant” we’ve been seeking. It is one great step forward for Boston.
Not that Boston has ever had any real reason to feel second-rate when it comes to technology. Some of the world’s most successful tech entrepreneurs, including notables Bill Gates and Mark Zuckerberg, got their start as students in the Boston area.
We’ve got fantastic universities, unbelievable engineering talent, terrific sales talent and incredible marketing and customer service talent. Boston should significantly outperform other geographies pound-for-pound.
New hub for tech innovation
Unfortunately, for the last generation the reality is that Boston has not realized its huge potential for tech startups — at least in the software and Internet sectors.
It’s telling that Gates, Zuckerberg and other founders have felt more comfortable moving away and building their companies elsewhere.
Even recently, after promoting the Seaport District as a hub for innovation, the Boston startup ecosystem still hasn’t managed to rise at the same pace of some of the other hubs. Silicon Valley, Seattle and New York are absolutely exploding these days, and Austin and Salt Lake City are growing strong, as well.
Yes, there are great startups in this neighborhood. (My own firm, OpenView, has had our office in Seaport for nine years). And in the greater Boston area, there are some standout tech success stories, including EMC, PTC, Akamai, Nuance, HubSpot, Netezza, Endeca, Wayfair, Demandware, TripAdvisor and many others.
But for all the efforts of the mayor’s office and the startup community, and despite all the great things going on, Boston, in my view, is still not performing even close to its (superior) potential.
GE’s move here will make a difference, because it puts the headquarters of a major American manufacturer — one that has embraced the role of software and big data — in the heart of our city. But GE alone is not enough.
Boston will regain its former glory as a go-to tech center.
The big issue is that, while there have been some great and successful companies, Boston largely missed a market shift toward consumer technologies, the cloud and Software-as-a-Service (SaaS) in the 2000-2010 timeframe. As a result, our ecosystem has fallen behind a bit.
In time, Boston will regain its former glory as a go-to tech center. But Boston can reach even higher, and get there faster, if it addresses the four factors outlined here.
Early-stage funding
One of the weakest gaps in Boston’s tech ecosystem is funding for the earliest-stage startups. Boston missed its opportunity to own the big shift that happened between 2000 and 2010, from minicomputers and network equipment to consumer technology and the cloud. Many of the great early-stage VC firms in Boston then downsized, shut down, moved to Silicon Valley or evolved into growth-stage firms, leaving a real gap in early-stage funding.
My firm funds companies at a later stage of development, the expansion stage. We spend most of our time outside Boston only because by the time companies get to the stage where we’re ready to consider them, they have moved away — or they never got started here in the first place.
When somebody with a great idea gets started and wants to raise early-stage capital, the issue is that there isn’t the same early-stage capital in Boston as there is in New York, Seattle and Silicon Valley. Entrepreneurs may start in Boston, but when they start seeking capital, they’re still fairly mobile. So entrepreneurs are typically going to end up where their capital sources are.
More sources of capital, more companies.
An even higher aspiration would be to get companies to move to Boston because the VC funding and ecosystem is in Boston. I have influenced the move of several companies to the Boston area over time as an expansion-stage VC, including Acronis and Intronis, and it should be even easier at the earlier stage.
The more sources of high-risk early-stage capital there are in Boston, the more companies will get started in Boston. Yes, it is that simple.
There are signs that early-stage funding sources are increasing. There are still some great older firms in Boston like Sigma, Matrix, Charles River and Atlas. There are some newer firms that have succeeded for over a decade, like Spark, General Catalyst and Flybridge. And, perhaps most importantly, we’re seeing some great newer early‑stage firms like Hyperplane Venture Capital, NextView Ventures, Founder Collective, Assemble.VC and others that have not yet become public. Techstars is also here, and that provides a gathering place, training and some funding for startups that are just getting off the ground. But we need more to reach our potential.
More sources of capital, more companies.
Attitude
Several decades ago, Boston was a hotbed of innovation for then-cutting-edge technologies, like minicomputers, storage and network equipment. Lately, it’s developed strengths in Software as a Service and marketing technologies. So there’s nothing fundamentally wrong with Boston’s innovation culture.
But there is still an important difference. In Silicon Valley, the entrepreneur’s default attitude is “Why not try?” It’s an attitude that just assumes huge, world-changing inventions are possible. And if you fail, well, better luck next time — it’s all part of the learning experience.
In the northeast, the default culture is a bit more critical. The attitude is more aligned toward “Why try?” or “How about we try something [smaller] that we know we can do?” (Note: This attitude also helped to kill Boston’s Olympic bid before its backers had the chance to overcome the critics.)
I think we could do a lot to foster an attitude that’s more open to taking risk, less critical and more accepting of “failure” when it does happen.
Experience
For a robust tech startup ecosystem to develop, you need experienced people advising young companies and working for them. You need the larger companies to give the new companies’ products a try. You need entrepreneurs who created companies, experienced managers who helped build companies and executives of larger companies to embrace the young companies and help them get through their fragile early years. Boston lost a generation of this experience when we weren’t heavily investing in the new technologies of 2000-2010, and it will take a while to rebuild it.
As entrepreneurs find success here, they should stick around and start reinvesting in the area.
As the early-stage VC scene matures, a fundamental paradigm shift will happen after a series of these startups have successful exits. This is a core competency that Silicon Valley continues to build upon. Austin, Seattle, Los Angeles, Denver and a host of other emerging tech hubs are starting to follow this pattern, as well, as more and more entrepreneurs in these areas go public or get acquired. Boston needs to do the same: As entrepreneurs find success here, they should stick around and start reinvesting in the area.
In the long term, this will fix itself as we get more early-stage companies going. As they develop, experienced people will leave to start new companies or help other companies.
But in the short term, we need the current generation of experienced people and companies to do as much as they can to assist the startup community.
Big mouths
The final part of the issue is that Boston needs bigger mouths. Think Muhammad Ali, Alan Dershowitz, Donald Trump or practically anyone in Silicon Valley. These people are not shy about their great successes, and they all benefited from speaking up.
Boston needs to move away from being understated and cerebral, toward loudly and proudly proclaiming its benefits versus all other geographies. Even Bernie Sanders has figured out how to speak up and loudly communicate his ideas and differentiation in a very successful way.
If Bernie can do it and a Harvard Law School Professor (Alan Dershowitz) can do it, I think Boston can do it. Boston’s understated communication style just isn’t working when pitted against New York and Silicon Valley. It is a bit like watching Bush versus Trump, or O’Malley versus Sanders. Speak up with a big mouth, Boston!
Pay attention — Boston is on the cusp of something. With time, Boston will get better and better. If we can execute on the four points above, the Boston tech party revolution will really take off, and will be one to watch for many years to come.