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Can Boston dethrone Silicon Valley as the world’s top start-up hub?

Local entrepreneurs Joanne Domeniconi (left) and Jeanne Connon tested a SodaStream product for the Daily Grommet. (Aram Boghosian for The Boston Globe)
Local entrepreneurs Joanne Domeniconi (left) and Jeanne Connon tested a SodaStream product for the Daily Grommet. (Aram Boghosian for The Boston Globe)Credit:

When people hear the words “venture capital” or “start-up,” they tend to immediately associate those terms with Silicon Valley or Sand Hill Road. I can’t say I blame them.

After all, California’s Bay Area is home to a number of the nation’s best-known VCs and tech start-ups. It’s also close to a number of fantastic schools (Stanford, Berkeley, Cal Tech, etc.), has a culture that encourages people to quit their day jobs and build something great, and an has amazing heritage of successful companies that have created massive wealth. That’s basically the perfect recipe for a prosperous start-up ecosystem. And, frankly, there’s no other region of the world that’s close to surpassing Silicon Valley as the center of the start-up world.

Yet.

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Lately, the tides seem to be changing and great start-up scenes are popping up all over the world. Entrepreneurs can build a business just about anywhere and, thanks to the access provided by virtual and social networking, the incentive to leave that home base is dwindling; virtual workers, even virtual offices, are becoming more and more common.

This is part of the reason why I think an argument could be made that Boston may be on the verge of becoming the world’s next great tech hub — maybe even surpassing Silicon Valley as the start-up hub over the next decade.

A few of the factors working in the city’s favor include our:

— Proximity to amazing schools in a highly concentrated area (sound familiar?)

— Large quantities of senior-level professionals who are used to experiencing the ups and downs that many start-ups must manage

— Excellent East Coast location, which allows businesses to have simultaneous North American and European coverage

— Local government that’s investing significantly in the space, infrastructure, and resources necessary to attract new businesses

— Reputable investors who can provide the capital, coaching, and operational expertise that young companies often need

Of course, some of the other tech hubs around the country (New York, Austin, Seattle, etc.) could make an argument that they possess many of the same attributes. And any challenger to Silicon Valley commonly falls short in one big area: the sheer volume of large, namesake exits that the Bay Area has cranked out over the years.

In Boston, for instance, we can’t boast of IPOs like the ones LinkedIn, Facebook, and WorkDay have achieved in recent times. Similarly, by missing out on companies like Paypal, Apple, and Google, we lack the wealth and talent that Silicon Valley has continually pumped into its ecosystem, creating an almost-flywheel type of effect toward success, wealth, and value creation. 

That’s not to say that we haven’t had our fair share of winners (and likely have many more to come). But not having the founders and employees of the marquee businesses mentioned above entrenched in the Boston ecosystem is a significant disadvantage. After all, it’s those individuals who spawn new ideas, invest in new businesses, and become the next generation of VCs.

Then again, those advantages may not be sustainable indefinitely.

With a marked shift in the tech world toward enterprise and B2B SaaS solutions (and away from the consumer Internet companies that have made Silicon Valley famous over the years), Boston is in an extremely strong position to ride the next wave of tech growth.

Why? For starters, Boston has a great B2B software heritage, which translates to a strong populous of senior leadership and talented young people who are capable of supporting that industry. It also means that our city has one big advantage working in its favor: The opportunity to win the talent war.

Truthfully, there’s very little allegiance or loyalty in Silicon Valley. Workers are transient, moving from start-up to start-up for increased pay and perks, and in an attempt to build their own personal portfolio of stock options. This culture is most evident in the Bay Area, where the war for top tech talent can be vicious.

In coming years, I think entrepreneurs will begin to flock to areas where employee loyalty is higher and tech talent is still strong. That may lead some businesses to migrate to Southern California, Chicago, Austin, New York, or other areas of the country, but I think Boston stands to benefit the most for the reasons I listed above. We’ve got great schools, an engaged and talented workforce, and an abundance of good investors — all things that are highly important to start-up founders.

No city or region will overtake Silicon Valley as the start-up hub overnight, but I do think it could happen. And if it does, why can’t Boston be the one that captures the throne?

Ricky Pelletier is an Associate at OpenView Venture Partners, a Boston-based venture capital firm focused on investing in expansion-stage SaaS companies.

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