Why is Boston Really Hitless?

In a great post by Jeff Bussgang, he laments the fact that there are so few VC-backed consumer hits coming out of the Boston area. As a Boston-area VC with a consumer/media background myself, I’ve thought a lot about this question, too. Jeff concludes “that Boston simply lacks the key ingredients for a great consumer start-up. All start-ups require the proper ingredients to succeed – visionary entrepreneurs, savvy professional managers and sharp VCs among them.” At fist read, his basic argument makes sense: the best talent around Route 128 lies in the enterprise IT/software realm, so that’s where the strong companies emerge.

But I think that the reasoning runs much deeper than available talent. I believe that it rests on the foundation of Boston culture. California’s roots are in the risk-takers who left their original situations on a “hunch” that a better life could be found out West. I think that this theme bleeds into the mind-set of the rest-coast entrepreneur, willing to bet their company on a belief in his or her intuition of consumer adoption. It’s an “all or none” proposition. By contrast, Boston’s strong heritage lends itself to entrepreneurs who take calculated, formulated risks – more akin to the step-wise function of the early adoption of big enterprise customer sales. It is this cultural difference, coupled with the available human resources, which creates a self-reinforcing circle. Enterprise companies are started, VCs and the talent pool develop domain-specific expertise, and the cycle is further perpetuated.

Regardless of the complex and subtle reasoning for why this situation exists, I agree that the situation is ripe for change. It is true that the talent that has immigrated and emerged here in the past ten years, which will provide a solid base for innovation. But more importantly, the current economic landscape dictates a shift away from innovation in enterprise information technology. The fact that the demand for such technology has severely declined leaves Boston-based entrepreneurs and VCs no other choice but to look elsewhere. With corporate IT spending expected to grow at just 4-5%, how can that industry support a supply of new innovation at return prices that venture capitalists expect? It seems very difficult to me. The upcoming demand for consumer-centered technologies (including the infrastructure to support them) nearly requires that Boston (at least partially) shift its focus towards away from enterprise IT in order for it to survive as a viable region for entrepreneurial innovation.

So I for one am personally looking forward to an upcoming consumer hit coming out of the Cambridge/Boston area.

David Beisel

David Beisel is a co-founder and Partner at NextView Ventures. He has been focused on early stage Internet startups his entire career, both as an entrepreneur and venture capitalist. As an investor in the digital media space, David was most recently a Vice President at Venrock and previously a Principal at Masthead Venture Partners. Prior to becoming a venture capitalist, David co-founded Sombasa Media, an e-mail marketing company best known for its flagship product BargainDog. Sombasa was successfully acquired by where David served as Vice President of Marketing. David holds an MBA from the Stanford Graduate School of Business and an AB in Economics, magna cum laude and Phi Beta Kappa, from Duke University. He also founded and leads the Boston Innovators Group, an organization which holds quarterly entrepreneur events drawing a thousand attendees.