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INNOVATION ECONOMY

Tough going for start-up clusters outside of Boston

By Scott Kirsner
Globe Correspondent / October 2, 2011

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Last month, politicians, business leaders, and university administrators packed rooms at two separate events to talk optimistically about seeds they were planting in two struggling cities: Lowell and Fall River.

The hope in Lowell is that a new incubator, dubbed M2D2, will attract medical device start-ups and spur job creation. In Fall River, a new bio-manufacturing facility slated to open in 2013 will give biotech companies a place to do early production runs of new drugs. The Massachusetts Medical Device Development Center attracted about $4.5 million in state funding, and the 22,000-square-foot bio-manufacturing center drew nearly $50 million.

All around the Commonwealth, there are efforts to support new business clusters, whether fostering marine technology start-ups near the Woods Hole Oceanographic Institution or attracting clean-tech companies to a two-year-old incubator in Lynn. But looking back a few decades shows just how tough it is to create new clusters outside Greater Boston - whether bankrolled by state agencies or promoted by chambers of commerce and local entrepreneurs.

Back in the 1990s, two students who met at Williams College created a website and magazine geared to students about to enter the working world. By 1998, Tripod.com grew into the eighth-most-visited site on the Internet, and the company employed about 100 people - mainly recent college grads - in Williamstown. When the company was acquired that year for $58 million, it made its investors and early employees wealthy. But two years later, its new owner, the search portal Lycos, asked everyone to move to its Waltham headquarters or find a new job.

Cofounder Bo Peabody remained a vocal booster of the area, making it the home of a venture capital firm, Village Ventures, that would invest in smaller cities and college towns often overlooked by traditional venture firms. But these days, Peabody and Village Ventures cofounder Matt Harris live in New York. Just eight administrative employees of Village Ventures remain in Williamstown. “It was hard to scale the business in Williamstown,’’ says Harris.

Tim Rowe, founder of the Cambridge Innovation Center, says cheap office space and the lower cost of living promoted by regions outside of Boston are not enough to spawn a cluster. Entrepreneurs want to be around other entrepreneurs, he says, and they often want to be close to universities. “To be an authentic cluster, it has to be a place where smart people would say, ‘This is the right place for me,’ ’’ says Rowe.

His facility in Kendall Square, at the edge of the MIT campus, is home to 450 companies that employ 1,500 people. It has never received financial support from city, state, or federal agencies - or from MIT. Rowe estimates that more than 900 companies have come through the center since it opened in 1999.

By comparison, an incubator in Springfield that opened that same year has been home to 27 companies that created 250 jobs. It was started with funding from Springfield Technical Community College and the state and federal governments.

“We’ve got good bones and good infrastructure here,’’ says Scott Foster, a Springfield lawyer who earlier this year helped create a mentoring service for first-time entrepreneurs, Valley Venture Mentors. “But to younger entrepreneurs, there’s an impression that this place is sleepy. And even the angel investors who live here, a lot of them go to Boston to look at deals.’’

Worcester may be the state’s biggest cluster-creation success outside of Route 495, with a biotech office park that employs about 3,000 people. But the city’s efforts trace back to the mid-1980s, and the park’s biggest tenant is a research and manufacturing outpost of an Illinois company. (The city hasn’t yet produced an indigenous biotech biggie on the scale of Biogen Idec, Alkermes, or Genzyme.) Part of Worcester’s pitch, says Kevin O’Sullivan, who oversees the park, involved positioning the city as part of the Boston area. “We benefit from the reverberations coming out of Boston and Cambridge,’’ he says.

That strategy may not work as well in Holyoke, one of the state’s poorest cities, which is hoping a new $168 million Massachusetts Green High-Performance Computing Center will become the centerpiece of an innovation district. One problem: The scientists and researchers who access the computing center’s firepower will be able to do so over the Internet, without ever traveling to Holyoke.

Several young entrepreneurs from the Amherst area illustrate the challenges of cultivating clusters of new businesses.

Boris Revsin ran CampusLive, a website that connects marketers with students, in Amherst for two and half years after dropping out of UMass Amherst. But he moved the company to Boston last year. “To raise money, it seems like everyone in Amherst either moves to Boston or New York,’’ says Revsin. The company, which has 19 employees, raised $3.1 million earlier this year, primarily from a Lexington venture capital firm.

Aaron St. John and Paul Hake both earned degrees at UMass Amherst before forming HitPoint Studios, a video game developer in Hatfield, in 2008. “I decided to build the biggest game company in the area and created the environment that I wanted to work in,’’ says St. John. (HitPoint is based in a former tobacco barn.) The company has 27 employees, but as it has grown, it has had to start hiring experienced artists and programmers from the Boston area. The firm has rented a nearby house for the six employees who commute to Hatfield, dubbing it Club HitPoint.

The possibility of setting up a satellite office in Boston or New York “has definitely been on our minds,’’ says St. John.

Planting seeds in places like Lowell and Fall River, using taxpayer money, is the easy part of cluster creation. But the necessary fertilizer is something money can’t buy. It’s making locales outside Boston seem “safe’’ to investors and young workers and supporting small start-ups as they try to get big.

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