AGILEVC My idle thoughts on tech startups

July 16, 2014

spring waterOne of our portfolio companies, Plastiq, announced yesterday that they raised a $10M Series B led by Khosla Ventures and are planning to move their headquarters from Boston to San Francisco.  We’re thrilled for the company to have a great investment partner joining the syndicate and one with deep payments expertise having backed companies like Square, Stripe, Fundbox, and others.  In fact I introduced Plastiq CEO Eliot Buchanan to my former PayPal colleague Keith Rabois at Khosla.

Some lament the relocation of Plastiq and other companies who start in Boston but end up moving to Silicon Valley or other startup hubs.  To these folks, Boston’s founder pool is a leaky bucket… a young founder who moves to Silicon Valley, New York, or elsewhere is a sign of frailty of Boston’s startup ecosystem.

I believe this is completely the wrong way to think about things.

Boston is utterly unique as an innovation hub, particularly when looking at the pool of young entrepreneurs starting businesses just out of undergrad or grad school.  Yes the Bay Area has Stanford and Berkeley and New York has NYU and Columbia, but here we have this immense group of talented people… a quarter million in total at more than 50 colleges and universities in greater Boston, 7-10x the college population in other cities.  And this is a truly renewable resource as every year a new crop of smart, ambitious people with innovative ideas walks in the doors of Harvard, MIT, Tufts, BC, BU, Babson, Northeastern, and all the other schools just as one crop walks out.  Yes some will depart Boston immediately or in time, but an incredible number stay both short term and longer term.  Far more than the number of my classmates who stuck around Philly after Penn.

In that regard our startup talent pool here in Boston isn’t a leaky bucket… it’s a everlasting, self-replenishing spring.  And talent flows in many directions (all three co-founders of NextView are all Silicon Valley transplants to Boston).

At NextView we’ve been privileged to collaborate with Eliot and many other entrepreneurs who set out to build a company right after college or grad school.  In fact if you look just at Harvard, something like 15% of NextView’s portfolio was founders starting right after Harvard undergrad or HBS.  We’ve worked with entrepreneurs from other universities around Boston here too, but this is just an example of one university.  Plastiq has spent the last 3+ years building here in Boston, and even after their HQ moves a good chunk of their team including some core engineering will remain here in Boston.  Similarly ThredUp founder James Reinhart built his company here in Boston in the early years after graduating from Harvard (HBS/Kennedy) before deciding to continue building ThredUp in SF.  But others like InsightSquared (co-founder/CEO Fred Shilmover started after HBS, now approaching 100 employees) and Whoop (co-founded by Will Ahmed & John Capodilupo as Harvard undergrads) have remained in Boston and are building great businesses here for the long term.

The Boston ecosystem may have failed young entrepreneurs 7-10 years ago.  Facebook is of course the highest profile example, as Mark Zuckerberg famously moved to Palo Alto after early attempts to attract capital, advice, and mentorship here in Boston were unsuccessful.  We should rightly reflect when Boston fails young entrepreneurs as we might have in the past, but this isn’t the case today.  When our ecosystem supports founders and helps them thrive we should celebrate these companies, even if at some phase they expand beyond Boston.

As investors, once we join with entrepreneurs as capital partners we are 100% committed to their success.  For the record I believe Plastiq, ThredUp, and other startups which build early in Boston but ultimately relocate have ample access to talent, capital, and customers here to build very large businesses for the long term in Boston if they so chose.  Even Zuckerberg said shortly before Facebook’s IPO “If I were starting a company now I would have stayed in Boston.”

I would have been happy if Plastiq had decided to remain headquartered here in Boston.  But by the same token we support founders who decide that their company is best served by opening offices elsewhere and even relocating their HQ.  And I celebrate the companies like GrabCAD who relocate to Boston because they feel this is the best hub for their startup to prosper.

I hope that the Boston ecosystem can start to realize we don’t have a leaky bucket, we have an everlasting spring of talent which is a singular blessing.  Maybe it’s the curse of the Bambino from 100 years ago when some of the first young talent departed Boston.  But either way we should acknowledge that our startup hub is truly unique in terms of our constantly renewing talent pool, and celebrate when our ecosystem successfully supports these founders even if they don’t remain in Boston forever.

3 Responses to “Boston Startup Talent: Leaky Bucket or Everlasting Spring?”

  1. avatar
    Scott Kirsner
    July 21, 2014 at 10:32 AM

    Thought-provoking post, Lee.

    I think we need to play to win in certain fields. Keep the best talent, grow the best companies, and have the best investors who can support them through every stage of growth. There are enormous benefits not just to having indigenous 1,000 or 10,000 or 50,000 person companies in your region from an employment perspective. And those big successes also tend to produce a whole community of angel investors when they go public and their stock does well.

    And I think we are winning in certain fields today — biotech, robotics, 3D design/printing would be three good examples. But it feels like the subtext of your piece is arguing that even in consumer tech/web/mobile, it is somehow a win to have students start companies, maybe go through an accelerator here, raise their first million or two, and then built the company somewhere else.

    To some people that may feel like a win. Maybe to the school they went to (rich alums), to the accelerator program, or to those seed-stage investors who have a small stake in a monster success. I just don’t think it’s a win for the ecosystem. It feels to me like a statement that we can’t support those kinds of companies through their toddlerhood and adolescence here. And many of those companies create lots of jobs and wealth at those stages – and they become talent magnets pulling more experienced folks to them…

    But I suspect we agree on much of that. And you guys at NextView have been doing a good job providing early funding for some of these consumer-focused companies that haven’t previously been well-understood or well-supported here. I am just not yet ready to throw a party or declare victory when any promising company decides to move out of Boston. To me, it’s an indication that there’s more support needed and more work to do.

    • avatar July 21, 2014 at 11:50 AM

      Thanks Scott for a well-reasoned comment here.

      I wholeheartedly agree that it is important for Boston to continue producing and retaining very large standalone companies in tech/web/mobile. As you point out there are meaningful ecosystem benefits from anchor companies (employment, source of next gen of founders, angel investors, partnership magnet for smaller startups, etc). So I share your belief that this is a critical part of of the ecosystem around here, arguably one that’s been most lacking in recent years and needs to be fostered. TripAdvisor remains a pillar, but unfortunately many of the companies that IPO’d in the last 5-6 years ended up getting acquired and didn’t remain standalone businesses (e.g. Kayak, Acme Packet, Netezza, Bladelogic). So certainly this is something we can and need to improve upon.

      To be clear I’m not saying we should throw a party because a company decides to relocate from Boston. What I am saying is that *in addition to* fostering the growth of large, enduring businesses here is that we ought to view our entrepreneurial talent pool (esp folks starting right out of college / grad school) in a different light. We can take the glass half empty approach and say any young founder who leaves means that something is wrong. But given our very unique, and constantly renewing pool of young founders or would-be founders we ought to take a glass half full approach.

      Furthermore I think it’s worth recognizing progress where and when it’s made and not simply reiterating self-criticisms that are widely understood. The Boston startup ecosystem arguably failed Mark Zuckerberg in 2004 and he got little of the mentorship, capital, and talent he needed to build his business. I won’t claim to speak for him, but my impressions is the same is not true for Eliot Buchanan in 2011… the Boston ecosystem has provided him with all of those elements as he’s built his business.

      • avatar
        Scott Kirsner
        July 22, 2014 at 9:39 AM

        Here’s my concern… I worry that we are like the parents at the sidelines of a middle school soccer game cheering on our kids. We think they are so wonderful! And the Valley is playing at the Word Cup level. Let’s create more industry-defining companies, more platform companies. That’s the game we should be playing.

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  • I'm a former Silicon Valley entrepreneur turned East Coast VC. I co-founded NextView Ventures, a seed-stage VC firm based in Boston, in 2010. Read More »

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  • Rob Go
     - 1 hour ago
    So, main lesson. Founders of great companies don't get too excited when momentum is high and fight ferociously when times are tough
  • Rob Go
     - 1 hour ago
    Also important to keep in mind that a lot of great companies struggled in the valley of death but fought their way to the other end
  • Rob Go
     - 1 hour ago
    RT @adamnash: When markets fall, you are not an idiot. When markets rise, you are not a genius.
  • Rob Go
     - 1 hour ago
    Learned that a lot of "it" companies I thought were doing well are really struggling. Good reminder that building a great business is tough

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