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.