Boston: No More Silicon Valley Envy!
A friend just sent me a link to a story by E. Douglas Banks entitled “Enough already: Get over the West Coast envy”. I agree with him: Bostonians feeling bad about “losing” to Silicon Valley have gone way overboard. Banks is responding to an interview with Henry McCance of Greylock Partners, a venture capital firm that moved from the Boston area to Silicon Valley. I want to amplify Banks’s comments.
Banks’s first two paragraphs are dead-on right. I have heard that story over and over again, at many gatherings. Usually, the comparison is between Silicon Valley and the Boston area. The good part is, after talking about how Silicon Valley is doing so well compared to the Boston area, the speaker goes on to the positive part: a call to action, for all of us to work together to improve the Boston startup and tech ecosystem. Henry McCance’s statement is largely lukewarm or worse about Boston. And, as Banks point out, McCance pits the entire West coast, including the whole Seattle area, against Boston alone. From now on, I’ll just say “here” to mean the Boston area, and “there” to mean Silicon Valley.
I don’t know, but I’ve been told: investors here are different from investor there. But I’d use the word “careful” rather than “risk-averse”. It’s not the same. There is more and more seed funding around Boston. Seed funding is very risky. It’s just that you’re risking less money. So startups can fail at the correct point, having not used up so much capital that providers of capital will be scared off. If our VC’s and angel groups were reckless, they’d just all fail, and then where would we be?
Yes, there are a few very wealthy “super-angel” investors who evidently toss off cash with very little scrutiny of a startup, and that might also describe some wealthy high-tech founders. It’s true that there are more there than here. They have a larger “ecosystem”, and centers of high-tech are created by ecosystem’s positive feedback. Being smaller isn’t all bad. For example, we have a higher degree of interconnection. But I would not claim that smaller is better.
McCance talks about Boston being poor at “spawning and sustaining great companies.” What, exactly, is this criterion?
He disparages the minicomputer companies, but look how long they lasted: Prime (20 years), Data General (31 years), Digital Equipment (41 years), and so on. If these are supposed to be failures, how long does a company have to live to be a success? 50 years? 100 years?
Compare this with Google (12 years so far), Yahoo! (15 years but being overtaken), CNET (not the same kind of company), Facebook (6 years so far), MySpace (7 years so far and in decline, YouTube (5 years so far, no longer even exists as a company), LinkedIn (7 years so far) — you get the idea. How sure can anyone be that they’ll last 50 or 100 years? The industry changes even faster now than it used to. All things must pass.
Banks mentioned Harmonix, Zipcar, iRobot, Carbonite, LogMeIn, Monster, Bose, and Staples.com. In a comment, Scott Kirsner added A123 Systems, Akamai, Starent, ITA Software, EnerNOC, GlycoFi, Sirtris, and EqualLogic.
I’d immediately add two hugely successful companies: Cognex, the world leader in machine vision, going very strong for 29 years and MathWorks, going strong for 26 years.
Also: Ab Initio, Active Endpoints, Akiban, Apperian, Automation, CloudSwitch, Daily Grommet, Droid Works, Expressor, GateRocket, GenArts, Goby, Harvest Automation, Heartland Robotics, Hocoma, InterSystems, Kayak, Netezza, Nimbit, Progress Software, Rational (now part of IBM), Skyhook Wireless, Streambase, Timetrade Systems, Vela Systems, Vertica, VoltDB, and Xconomy. This is just off the top of my head, so I apologize if I missed any of my friends’ companies!
There are plenty more, and you can find them in Xconomy and Boston Business Journal and Mass High Tech.
I’m an M.I.T. alumnus, and, as the Engineers Drinking Song says of the “small liberal arts college down the river”: “MIT was MIT when Harvard was a pup/And MIT will be MIT when Harvard’s time is up”. But the Boston area get great engineers and entrepreneurs from Worcester Polytechnic, Rensselaer Polytechnic, Rochester Institute of Technology, Babson College, Bentley College, Boston University, and so on.
There are also many tech incubators such as TechStars, and several working spaces such as Betahouse and the Cambridge Innovation Center, where entrepreneurs can get office space and interact with other.
And everybody is working together to grow the ecosystem, help promote entrepreneurship, and establish even more “sustaining great companies”. Silicon Valley, just you wait!
July 28th, 2010 at 7:06 pm
California has the “work done on your own time/equipment belongs to you, no matter what your employment contract says” law. That makes it easy to head off to a startup without worrying too much about being sued for your employer. New York has no such law; how about Massachusetts?
July 28th, 2010 at 9:32 pm
I don’t know. At the time I joined BEA (a California company) in 2002, I don’t think that law was in place. I remember having to modify the contract that they wanted me to sign. It looked at first as if the contract said just that. But then I checked with an IP lawyer, and he said that the way they had phrased the contract, they relinquished patent rights if you did your own stuff on your own time. But they said nothing about relinquishing copyright rights. It was just a drafting error in their part. But if such a law had been in effect, it would never have been an issue at all.
Meanwhile, there has been a lot of discussion in the startup community about outlawing non-compete clauses. They are not allowed in California!
July 29th, 2010 at 12:40 am
I’m pretty sure that California Labor Code section 2870 is quite a bit older than that. I can’t find definite confirmation, but the statute itself refers to the date January 1, 1980, suggesting that that’s when it went into effect. It’s possible that BEA handed you a contract that wasn’t consistent with the law, in which case I would think you could have had that clause invalidated in court if necessary (IANAL, though).
But yes, along with emulating that statute, Massachusetts should definitely outlaw non-compete clauses. Those two steps will, over time, make a huge difference in the vitality of the startup culture there. There’s no shortage of brainpower in the Boston area… there just need to be some structural adjustments to better foster startups.
July 29th, 2010 at 6:11 am
OK, I checked. BEA’s contract explicitly referenced Section 2970(a). My lawyer was pretty sure that it only applied to patent rights, so we checked with an intellectual property expert at Gunderson, Detmar, a well-known Palo Alto law firm that does exactly this kind of law. The attorney there said he was extremely familiar with 2870, and it absolutely only applies to patent rights, not to copyright rights. My friend in Mass. was right.
As it happens, the only time anyone has won a non-compete lawsuit in Mass (at least as of 2002) is when suing a salesperson for stealing away accounts. But that doesn’t say anything about how the threat of such a suit may have been used. (Citation: A law professor at Harvard Law who did a study on exactly this question; my brother was a student there in 2002 when I was being hired by BEA and learning all this.)
July 29th, 2010 at 9:50 am
To paraphrase James Carville/Bill Clinton, “It’s the non-compete, stupid!”. Got a good idea? In MA your current employer owns it (unless you’re prepared to go to court over it), in CA, you’re more or less free & clear leave and start a company.
Who needs a lawsuit when you’re starting a company? Who’s going to invest in a company where the founders spend more time in court than the lab/office?
Until MA outlaws non-competes and until employees have the mobility to move from company to company without fear of legal reprisals, the MA high tech sector will only continue stagnate compared to Silicon valley.
http://www.boston.com/business/globe/articles/2007/12/07/contract_clauses_called_stifling/
July 29th, 2010 at 11:19 am
Great plug for Boston, Dan. Anecdotally, there seems to be an ever growing number of seed opportunities in Boston. One of the bigger, organized efforts this summer/fall is Mass Challenge (http://www.masschallenge.org). I’d love to see some stats on seed funding on the different coasts.
Perhaps my perspective is skewed because I’m starting a Fashion 2.0 company (i.e. Fashion==NYC), but I’m seeing a big Boston vs. NYC rivalry, too. The membrane between the two cities seems to be very permeable for the VCs, but the Angels seem to stick to their own turf (i.e. I don’t run into them at events).
GILT is on everyone’s tongue of course.
July 30th, 2010 at 1:02 am
Boston: No More Silicon Valley Envy!…
I don’t know, but I’ve been told: investors here are different from investor there. But I’d use the word “careful” rather than “risk-averse”. It’s not the same. There is more and more seed funding around Boston. Seed funding is very risky. It’s just th…
August 1st, 2010 at 7:48 am
Another great tech incubator that has started up recently is Dogpatch Labs Cambridge: http://dogpatchlabs.com/
August 2nd, 2010 at 10:30 pm
I don’t know about similarities and differences between the venture communities, but I do know this: I looked for and found The MIT Drinking Song Dan alludes to in his post and enjoyed this rendition of “We Are the Engineers” very much. http://www.youtube.com/watch?v=CsFeKhjvpSg
March 12th, 2011 at 3:27 am
There is a reason why Silicon Valley can be in CA only:
http://www.netvalley.com/silicon_valley/Legal_Bridge_From_El_Dorado_to_Silicon_Valley.html
March 12th, 2011 at 8:39 am
@Terry: This is about non-competes being null and void in California. I discussed this in an earlier comment. I hope we can get this in Massachusetts!