Venture capitalists -- Boston's lure for start-ups
Boston isn't the cheapest place to do business. Living and housing costs are steep. And you can't play golf year round.
Yet the Boston area continues to attract more than its share of high-technology and life sciences start-ups -- just the sort of companies economic development types covet -- from other states and countries.
Some of the reasons are easily recognized: Greater Boston's universities, medical centers, and research labs act as magnets for technology talent. But one largely invisible driver is venture capital firms, which fund and advise emerging technology companies and relocate dozens to the Boston area each year.
Boston and its suburbs are home to the second-largest venture capital cluster in the nation, after the San Francisco Bay Area and its Silicon Valley technology hub. And venture capitalists usually prefer to have their portfolio companies nearby so they can visit frequently, sit on their boards, and staff them with executives they know and trust.
''There's this little engine that's pulling these potential winners of the future to the Boston area," said Roy Hirshland, president and chief executive of T3 Realty Advisors LLC in Waltham, which has helped many venture-backed companies find office space. ''Is that going to make up for the fact that Bank of America lays off a division of 1,000 people? Not in the short term. But one out of 10 of these start-ups could become an established company with 800 to 1,000 employees within a decade."
No one keeps records on how many companies relocate to the Boston area at the urging of their venture backers, but business leaders in the Route 128 technology belt will tell you the trend is significant and increasing. These are under-the-radar moves that often take place when companies are still in ''stealth mode" -- before they've announced their technologies, products, management teams, or initial funding rounds.
From his office at the Bay Colony Corporate Center on Winter Street in Waltham, Hirshland is in an unusually good position to see this trend at work. He calls it the ''innovation convergence effect," a virtuous cycle of technology, capital, and people, and he has positioned his boutique real estate firm right in its epicenter.
Hirshland and cofounders Mark Cote and Greg Hoffmeister formed T3 Realty in August 2001 to focus exclusively on emerging technology companies. ''It was the absolutely worst time for technology in New England, and we couldn't have started at a better time," Hirshland said.
At first, much of their business was in helping irrationally exuberant tech start-ups from the dot-com era ''unwind" bad real estate leases. But they also worked to build a client base ranging from such growing companies as RSA Security Inc. and Alnylam Pharmaceuticals Inc. to three scientists in an MIT lab.
As it scouts for clients, T3 has struck alliances with a dozen top venture capital firms in the Boston area, from Kodiak Ventures (from which T3 subleases its own space at Bay Colony) to Charles River Ventures to Commonwealth Capital Ventures. In some cases, T3 helps the VCs find offices for themselves; in other cases, it handles referrals from the firms for their portfolio companies.
Hirshland said his firm has worked with 10 emerging technology companies, with an average of 25 to 50 employees each, that moved to the Boston area in the past year or so. They are following a well-worn trail blazed by such companies as Lycos Inc., backed by Highland Capital Partners, which started in the Carnegie Mellon labs in Pittsburgh but was moved to Waltham by venture capitalists.
Among the new transplants are PanGo Networks Inc., which moved to Framingham from Pittsburgh and is backed by IDG Ventures; Airpath Wireless Inc., which moved to Waltham from Dayton, Ohio, and is backed by Boston Millennia Partners; Invoke Solutions, which moved to Wellesley from New Jersey and is backed by Bain Capital Ventures; Q1 Labs, which moved to Waltham from New Brunswick and is backed by Polaris Venture Partners; and Optovia Corp., which moved to Acton from Florida and is backed by Atlas Venture and North Bridge Venture Partners.
More are on the way, including several from overseas that have yet to make their intentions public, Hirshland said. ''We're a day closer to Europe and Israel than Silicon Valley is," he said.
Robert Weisman can be reached at weisman@globe.com.
