Posted on May 4, 2011
Filed Under Entrepreneurship |
A bunch of people sent me this article from The Boston Globe last weekend about what Boston can do to become more “awesome” for entrepreneurs. As an outsider who moved a company here one year ago, people seem to be interested in my perspective, so I thought it was worth a blog post rather than a bunch of emails.
My initial thought on this entire topic is that economies, particular sub-communities within economies, are complex. As with any complex system, the causal explanations and corresponding solutions proposed are usually too simplistic and show a lack of understanding of the value drivers in such systems. Let me give two examples.
First, many people say that startups and entrepreneurs here aren’t as “cool” as they are in the Valley. While that is possible, I think these people are mistaking “startup” and “tech”. Based on my experience, “tech” is what is cool in the Valley, whether it is big or small. Most people in the Valley work for big tech companies, not startups. I think the Boston economy is more diverse, and so what is really a large technical community in the Valley is perceived to be a large startup community instead. That isn’t necessarily true. I don’t know how Boston compares to NYC or the Valley in terms of number of people employed in startups, but I bet the gap is not as big as most people assume.
Second, there is a lot of talk about how VCs here don’t “get it.” They won’t fund consumer stuff and early stage stuff and as a result, those companies move to the Valley or New York. But, first of all, I don’t see that. I will tell you that VERY few people understood Backupify two years ago when we first started, yet my first investor was Dharmesh Shah, who was based in Boston. I have seen Dharmesh and several other Boston angels make some pretty gutsy bets on some crazy consumer ideas and very very early stage stuff. Plus you have Spark Capital, who sort of has a reputation for exactly that - having the balls to go in hard and early on a half baked idea that could be really really big if the market breaks a certain way. And you have Avalon, who invested in Zynga’s Series A at a time when no one thought you could build a business on Facebook.
Lumping all VCs together and branding them as “not getting it” isn’t very useful. In my experience, the views and styles of firms vary quite a bit, both over time and even among partners within firms. I’ve seen a lot of Boston based VCs make some aggressive bets on companies with no revenue but lots of potential.
And let’s not forget that it takes two to tango. Why doesn’t it occur to anyone that Boston has fewer good startup ideas at the moment, and that’s why there aren’t more early stage ideas getting funded? No one is blaming the entrepreneurs here, who surely deserve part of the blame for being uncreative.
Here is what I really think is happening.
1. Boston has no consumer homerun. Boston feels bad for not having a Facebook or Google, but these companies only come along once a decade. I see no reason Boston can’t have the next one.
2. Dumber ideas get funded in the valley. If you want to start a niche Groupon that targets just employees of daily deal sites, maybe you can get a $10M pre for that in the Bay area. Who cares? If someone leaves Boston to go get funded for that, it doesn’t matter. The Valley has more available money to invest, and as a result more overall ideas get funded, good and bad. Boston shouldn’t be envious because some of the dumb ideas that get funded in other places get some temporary press.
3. The tech press doesn’t reflect the truth of the matter. I know they want to do a good job, but I talk to entrepreneurs and VCs on a regular basis, and what I read in the tech press almost never matches what I hear from the people in the midst of it all. The picture painted by tech blogs isn’t accurate, so Boston shouldn’t get hung up on that.
4. It’s a PR problem, not a real problem. Carbonite, CSN, and lots of other interesting Boston companies don’t get nearly the same level of press as they would if they were in the Bay Area.
All that said, some people do leave to go to other places. Why? Maybe the weather. Maybe they were just restless and wanted a change. Maybe they had a dumb idea that could get funded somewhere else. Maybe they had a good idea but the ecosystem in Boston wasn’t right for it. But overall, I don’t see a massive problem.
I spent last night at an event put on by General Catalyst that had 700 entrepreneurs and VCs in attendance. I don’t see Boston going in the wrong direction. I think things seem to be getting better all the time.
But more importantly, the ecosystem required to build startups is complex. The initial matching of teams and ideas and capital is complicated and nuanced, and that is why dozens of matchmaker sites have all failed at trying to make it easier to get startups funded. Improving it requires either a massive juggernaut (HP, Google, etc) that drags everything along with it, or lots of small bottom up tweaks that don’t always show immediate progress. Blaming attitudes and offering simplistic solutions that sound nice but have little substance isn’t going to cut it.
I moved Backupify here last year after evaluating both NYC and Palo Alto. I was long Boston then, and I am long Boston now. We should never think everything is fine, because that leads to complacency, which actually would kill the startup ecosystem. But the sky isn’t falling. Startups take a long time to bear fruit. Be patient. The seeds have been planted, and I think they are being tended well.