My worry is that we aren’t producing new “pillar’’ companies, which employ thousands of workers, recruit new talent to the state, and set the direction for their industries. If all you do is grow guppies, it’s hard for people to regard you as anything other than a small pond.
...Where is the new generation of Boston-bred biggies? Biogen was founded in 1978, EMC in 1979, Fidelity in 1946. When I went hunting for companies born in the past decade that now employ 1,000 or more people, I came up with one answer: the battery-maker A123 Systems, which has just over 2,000 employees (but only 330 work in Massachusetts).
I end the column by asking how we can create better conditions for building new "pillars" in Boston.
Here are some thoughts from Boston-area entrepreneurs and investors that didn't make it into the column in their entirety. I'd love to hear your thoughts via e-mail, or as a comment below.
Brian Halligan, CEO and co-founder, HubSpot
1. I think Bostonians are rational folks. When weighing the upside of an acquisition for enough money that will set the founders family up for generations, versus continuing to run as a stand-alone company with the hopes of long-term fame/wealth, Bostonians tend to make the very rational choice of selling it. I suspect that has got something to do with the fact that Boston was founded by religious zealots. When faced with the same choice, it seems like the Silicon Valley companies tend to make the economically irrational choice of going long. I suspect it has got something to do with the fact that San Francisco was founded by a bunch of gold rushers.
I feel like in recent years, the west coast investors have embraced a new playbook in the later venture rounds that involves buying some of the founders' shares from them. This play makes the move to go long a lot more rational for the founders when you can take some money off the table. The play has likely spread to the east coast at this point, but I can tell you from personal experience that the west coast investors led with this play in their playbook.
2. I think there is a negative reinforcing loop that is happening here around scale. For example, we are at 300 people at HubSpot and want to scale to thousands of employees over time. It turns out that there aren't a ton of tech companies who have done this around here, so there isn't a lot of institutional knowledge about what it takes to really scale and not a ton of executives who have "seen the movie." I saw an interesting movie at PTC in the '90's. Some folks have seen the movie at EMC, Constant Contact, and Vistaprint, but there's not a long list. In the Valley, folks have seen the movie at Google, Salesforce, Apple, Yahoo, Oracle, Intuit, LinkedIn, Facebook, VMWare (yes, the west coast growth engine behind the east coast EMC), Twitter, Zynga, HP, etc, etc, etc. There's so much more institutional knowledge and so many more executives who have seen the movie and can replay it.
Andy Palmer, serial entrepreneur / advisor (Recorded Future, VoltDB, Vertica)
Lever 1 - Attract and empower young and high IQ startup biz talent. We've lost too much of this talent to CA in the past 20 years. Many of these folks come to school here, but few of them stay here to start their companies. We need an all-out recruiting effort within the community to attract and retain these folks.
Lever 2 - Get the New England VC community to abandon their Yankee conservatism. This conservatism is evidenced in a few ways:
- NYC has left Boston in the dust in the past two years. Union Square is now the hotbed of startup activity on the East Coast. Could have been us.
- Unwillingness to give premium valuations to the best entrepreneurs. I have watched many people raise money from out West or NYC as the New England VC community "stuck to their models."
- Unwillingness to "pay up" for great young business talent.
- Unwillingess to seed lots of new ideas rapidly. More people need to behave like Eric [Paley] and David [Frankel] at Founders Collective
- Shifting focus/activity towards later stage deals/private equity, which are inherently less risky
I think for many of them, taking risk has become synonymous with "not selling for $300M so that you can sell for $1.5B." But in order to do this, the venture funds in New England need to have larger percentage of their capital come from the partners themselves, vs. pure institutional funding.
Building great companies that are independent requires complete and long-term commitment to these businesses regardless of potential exit. It requires truly mission-driven companies, entrepreneurs, operating people, and venture capitalists.
Russ Wilcox, Founding CEO, E Ink
Reform Sarbanes-Oxley to reinvigorate the IPO market.
When the only exits are mergers and acquisitions, the buyers are looking for bolt-ons and that is what gets funded. We need a healthy IPO market so there is a good reason to build a large independent company for the long haul.
Bijan Sabet, General Partner, Spark Capital
We just need more startups. The entire ecosystem needs to do their part, including the media. This is the part where we are behind in the consumer land. Our ecosystem isn't as energized. Or least it wasn't. It's getting better.
For the first time in a long time, I'm excited about the scene here. As a result, we have significantly increased our activity (Wayfair, RunKeeper, LinkWell, PeerTransfer).
TechStars is doing great after a slow start. It's happening. Time to work even harder, celebrate, and keep going.
I think the story is, things are looking good in the local start-up land, even if the global market is troubling.
Michael Greeley, General Partner, Flybridge Capital Partners
- In the spirit of [taxing] behavior one does NOT want to encourage, I would advocate that state employment taxes be suspended for 12-18 months on any new hires that a company with over 100 employees makes; the more new hires in any fiscal year, the longer the tax holiday. We need to lower the cost to employers to hire people and the benefit to sales/real estate, income, etc taxes will more than pay for the increased hiring.
- Encourage our medium-size companies to be more acquisitive, again through tax relief; perhaps certain M&A costs (fees and interest on any borrowings) can be tax deductible for state tax purposes.
- The Commonwealth should give away for free naming rights for very visible public infrastructure to the largest companies in town (“traffic is really backed up on the Boston Scientific Storrow Drive”)!
- Local media should laud the accomplishments of our large success stories ([Acme Packet CEO] Andy Ory should be a rock star in this town.)
Antonio Rodriguez, General Partner, Matrix Partners
Invest in more early-stage entrepreneurs who have done it before (and therefore put some eff you $ in their pockets already), are chasing monster big opportunities, and won't settle for anything that doesn't get into the top 10 companies world-wide in their particular sector.
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about the blogger
About Scott Kirsner Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.
June 24: Web Innovators Group
An evening of demos, plus two presentations from mobile execs Micah Adler of Fiksu and Wayne Chang of Twitter Boston.
June 25: TEDxBoston
The oldest and biggest of the locally-organized TED events is back, at the Seaport World Trade Center. Tickets are free, but tough to get. Also streams on the web and airs on WBUR.
July 16: Tech, Drugs & Rock and Roll
Barbecue, live music, and a spotlight on new technologies and science coming out of Boston University.