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Can Boston rise again to tech's top tier?

Posted by Scott Kirsner  November 4, 2011 10:57 AM

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I was on WBUR's Radio Boston show earlier this week, talking about a blog post I wrote. From that post:
[Boston is a] second-tier financial services town. Second-tier tech town. Second-tier retail town. Second-tier defense contracting town.

[Boston has] an Avis strategy without the Avis motivation: "We're #2, but our sense of entitlement keeps us from trying harder."

On the show, entrepreneur and angel investor Bill Warner, a fellow guest, was hopping mad, and he pointed to many ways in which the tech scene in particular has improved over the past few years.

And since then, Bill and I have had two lengthy conversations about how Boston can do better.

Here's where we agree: the energy level in the Boston start-up scene has increased exponentially over the past four years. (I moved back to Boston from San Francisco in mid-2007, so that's the timeframe I think about.) There's much more support and mentorship available to first-time entrepreneurs. New programs like Dogpatch Labs, MassChallenge, CriticalMass, DartBoston Family Dinner, and TechStars Boston are helping to cultivate and fund companies that might have never got beyond the sketch-on-a-cocktail-napkin stage before.

But I think there are two phases to making Boston better.

Improving the entrepreneurial support system for people who are already here, or have come here for an education, is Phase I. If I were to grade our performance there, I'd say we get a B+.

Phase II is building giant businesses here that people outside of Boston recognize (Zipcar is one good recent example, and Kayak is on its way)...businesses that attract attention from the national media...and that serve as talent magnets, bringing in armies of new employees from elsewhere in the world. It's nice, for instance, that the online jewelry merchant Gemvara has recruited two or three people from New York City lately, but compare that to the hiring Digital Equipment did when it had 140,000 employees. (Gemvara has about 80.)

As I see it, Phase II is all about scaling, and then making sure we communicate our success to the rest of the world to create a virtuous cycle. When you're seen as a region that can spawn significant companies, people feel that they may be able to start their own significant companies there.

So far, I give us a D- on Phase II.

Some reasoning behind that:

1. A dozen years ago, you could still come to Massachusetts and work for an Internet company or a telecommunications company and legitimately say you were at the center of the action. (Remember CMGI and Cascade?) But between 2001 and 2009, 47,000 technology jobs vanished, according to the Bureau of Labor Statistics. Half of the jobs in computer and communications equipment manufacturing just went away for good.

2. In the past five years, we've seen VC firms that once considered Massachusetts their home turf move their headquarters to California (Greylock, most notably), and others set up new branch offices there (Polaris, Highland, General Catalyst, and most recently, Bain Capital Ventures.) In the most recent quarter, New York start-ups raised more money than start-ups in Massachusetts for the first time ever.

3. Even in the wake of Facebook's notorious departure in 2004, it's not hard to make a list of fast-growing companies that got their start in Boston, perhaps found some funding or key advisors here, but decided to decamp for the Bay area anyway. The list includes companies like GreenGoose (which went through the Betaspring accelerator program in Providence in 2010, and found angel investors in Boston), Dropbox (MIT alums who participated in the Y Combinator program in Cambridge), RelayRides (HBS grad who won a major prize in the inaugural MassChallenge competition), TaskRabbit (incubated at Zipcar's offices), ThredUp, and WePay.

4. It was nice to have Mark Zuckerberg say that if he had it to do over today, he might've kept Facebook in Boston. But those comments were followed by the announcement of a Zuckerberg recruiting trip to Harvard and MIT.

5. Success for Boston tech entrepreneurs and their backers is too often an acquisition by Microsoft, Cisco, Oracle, or IBM. As I've written before, instead of creating new Larry Ellisons here, we are creating VPs who report to SVPs who report to Ellison.

Now, maybe you believe that Boston's tech community had its moment in the sun in the 1980s, and can't reach the top tier again. (I don't; I'm an optimist.)

Or maybe you believe that Boston's strengths have shifted, and we are now leading the world in life sciences innovation, or robotics, or cleantech... just not consumer devices, mobile innovation, and the Internet.

I happen to believe strongly that in today's global economy, to generate jobs and wealth in our region, we need to focus on industries where we can dominate, not just be content to be a quiet and mildly profitable #2 or #3 player.

Entrepreneurs and investors play the most important part in doing that. But I see my minor role as occasionally aggravating people like Bill Warner by talking not just about what is going well, but where we're still falling short.

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Innovation and technology news that matters, on a new website from the Boston Globe, featuring Scott Kirsner and other original reporting.

About Scott Kirsner

Scott Kirsner was part of the team that launched in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.

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