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Innovation Economy

The road to awesome

It’s not costs, but cool that attracts young entrepreneurs. How can Boston compete?

By Scott Kirsner
Globe Correspondent / May 1, 2011

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No hard feelings, Boston, but Tim Chae and Michael Maghsoudi are dropping out of Babson College, packing up Chae’s Mazda hatchback, and taking their start-up to Silicon Valley this month. Jeffrey Lu, 26, and Conan Jen, 25, are leaving too, to take part in an accelerator program for new ventures based in Mountain View, Calif., a stone’s throw from Google’s headquarters.

None of them have anything especially negative to say about the tech scene here, having participated in conferences, dinners, mentoring sessions, and business plan competitions designed to spur start-up activity. “I always wanted to experience the Silicon Valley tech lifestyle,’’ says Chae, who grew up in Sacramento. Lu, who met his cofounder while attending school in Andover, says, “I love the East Coast, but we want to be in the best place to grow the company.’’ They are developing The Daily Aisle, a wedding planning site.

Boston likes to see itself as a hive of innovation, and a fertile place for entrepreneurs with big ideas. But when it comes to young, first-time founders working on websites, mobile applications, and devices designed for consumers, the magnetic pull of Silicon Valley and New York City is strong. Despite Boston’s heritage of building sophisticated hardware and software for business and government, the city seems to be grappling with a coolness deficit when it comes to retaining twentysomethings and newly-minted college grads, who intuitively grasp — and sometimes create — the next big thing. Think Mark Zuckerberg and Facebook.

At Babson, to look at just one entrepreneurially oriented school, the percentage of graduating seniors who stay in New England has dropped from 77 percent in 2000 to 61 percent last year. (Babson officials note, however, that the school attracted more students from outside the region during that period.)

“There is definitely a feeling in the Bay Area that you’re hanging out where all the cool kids are,’’ says James Reinhart, who moved his 14-person company, ThredUp, from Cambridge to San Francisco last year. (ThredUp facilitates trades of children’s clothing, books, and toys among parents.) The Bay Area tech community, Reinhart adds, seems to orbit around high-profile chief executives from companies like Twitter, Facebook, and Apple. “Boston doesn’t have the star power or the glitterati,’’ he says.

And while Boston may claim a wider range of innovation industries — like biotech and alternative energy, for instance — its pin-striped rival to the south, New York, is also using an awesomeness advantage to lure an increasing number of Internet start-ups and young entrepreneurs, many of whom take the Bolt Bus down and don’t come back.

David Frankel, a Boston-based investor who spends a day a week in New York, and frequently travels to Silicon Valley, says simply, “There’s no question that the perception is that we’re not as cool.’’

So what constitutes coolness to techies not generally known for being the hippest of the hip? Accessible investors willing to take a risk on wild ideas. Hangouts that attract entrepreneurs and investors, and encourage serendipitous meetings. An endless succession of office-warming and product launch parties with open bars. Companies that make stuff that your friends from college actually use or have heard of. Chief executives with big personalities, and experienced entrepreneurs willing to mentor up-and-comers. Designers and programmers to turn ideas into actual products. Quality coffee and cheap burritos.

What doesn’t seem to matter are many of the issues that elected leaders and economic development officials spend endless energy focusing on, like corporate tax rates, the cost of housing, or traffic.

“The focus is 100 percent on the immediate goal, like launching a product or raising money,’’ says Rich Aberman, cofounder of online payment start-up Wepay, which left Boston for Silicon Valley in 2009, and later raised money from founders of PayPal and YouTube. “You don’t even think about those other factors.’’

Inaki Berenguer, an alumnus of MIT’s Sloan School of Management, moved his photo-sharing company, Pixable, from Cambridge to Manhattan, where he has raised more than $6 million from investors. He says he never worried that costs in New York might be 20 to 30 percent higher. “That shouldn’t be a concern if you are starting a start-up that is going to create millions in value, or at least that is what you think,’’ he says.

Speaking from a mobile phone while stuck in traffic on Highway 101 in Silicon Valley, ThredUp founder Reinhart says, “You just want to be around other smart people, the arts, good dining, and decent public transportation.’’ He adds, “For entrepreneurs, especially very early in developing a company, it’s a binary thing: Will this be a better place to build my company? Corporate tax rates don’t really enter into the equation.’’

Much more important is the opportunity to rub shoulders with people building companies, and to be part of a buzzy milieu that helps spread the word about firms launching new products. Leah Busque says that over the course of 10 days in San Francisco last month, she met founders and executives from companies like Zappos, the online shoe store; online auction pioneer eBay; and photo-sharing site Flickr.

Busque moved her company, TaskRabbit, from Cambridge last year; it connects consumers with a network of people who will run errands and take care of small jobs.

“For me, the serendipitous moments to talk with other amazing entrepreneurs and influencers in the consumer Internet space has been the coolest factor, by far,’’ she says.

Boston can claim at least a few companies that can plausibly be called cool. Harmonix Music Systems developed the video games Guitar Hero and Rock Band, and has a new hit called Dance Central. TripAdvisor runs the Web’s most-visited collection of travel sites. IRobot makes robots that clean gutters, and Bose makes headphones that blot out the sound of obnoxious officemates.

There are signs that the culture in Boston is changing, becoming more urban, youth-focused, open, and supportive. “I came back to Boston from working in Silicon Valley in 2007, and the city has picked up a lot of momentum since then,’’ says Jennifer Lum, a veteran of two mobile advertising companies who started an investment firm, Apricot Capital, last year.

Lum threw a giant dance party for denizens of the tech community last year, which she dubbed “Playtime,’’ and she plans to repeat it soon. Voltage Coffee & Art, a Kendall Square cafe that opened late last year, has become a popular meeting place among techies, and a Venture Cafe plans to open a few blocks away, with an explicit focus on becoming a watering hole that attracts entrepreneurs and investors with regular networking events.

The MassChallenge, a nonprofit that claims to be the world’s richest start-up competition, launched last year with $1 million in prizes, as did Angel Bootcamp, an effort to get more wealthy individuals involved with backing new businesses. Venture capital firms like Atlas Venture and Highland Capital Partners are returning to the city from suburban office parks. (The founders of Facebook had to take a pricey cab ride to Waltham investment firm Battery Ventures, which ultimately passed on the deal.) Initiatives like Twelve by Twelve and Founder Mentors have cropped up to connect newbie entrepreneurs with those who have done it before.

“Now, we have more people starting companies, more mentorship, and more events,’’ says Rob Go, a veteran of eBay who cofounded the Cambridge venture capital firm NextView Ventures last year. “I think Act Two is that some of these guys need to be successful. You need monster companies.’’

Big firms that generate lots of wealth for founders, Go says, act like anchor tenants in a mall — they attract entrepreneurs and talented employees. “I don’t think people go to San Francisco because of the great parties,’’ he says. “I think they go because they want to be inspired.’’

So how can Boston progress further down the road to awesome? I’d suggest three steps. First, college students need to come into contact with cool companies located here before they graduate; that could involve internships, speakers coming to campus, or companies hosting student visits. Second, we need more programs like MassChallenge, Dogpatch Labs, and TechStars Boston (and Y Combinator, which sadly decamped from Cambridge in 2009) that provide postcollegiate entrepreneurs a petri dish in which their companies can grow.

Third, investors need to be willing to fund first-time entrepreneurs who aren’t just building products to sell to Fortune 500 companies, and help them build great teams. If the money isn’t here, they won’t stick around.

Of course, the final and most important step toward being cool may be the hardest one for data-driven Bostonians: to stop analyzing how you could be cooler.

Scott Kirsner can be reached at kirsner@pobox.com. Follow him on Twitter @ScottKirsner.