Greylock Partners on Why You Shouldn't Start a Company in... Boston

"It will take time to change, but Boston must have its Google," said Henry McCance in an interview with Xconomy. McCance is chairman emeritus of Greylock Partners, one of the world's leading venture capital firms, with investments that include Facebook, LinkedIn, Red Hat, and Zipcar, to name just a few. Last May, the firm moved its headquarters from Boston to Silicon Valley; today, McCance finally explained why.

"There is no compelling reason (like proximity to semiconductor companies) for the consumer e-commerce companies to all be in Silicon Valley, other than thought leadership," said McCance, who has been with Greylock since 1969. "But that was enough to have Google, Yahoo, CNET, Facebook, MySpace, YouTube, LinkedIn, Amazon, etc. all locate on the left coast." McCance points out that many companies were even founded in Boston, yet still chose to move from Beantown to the west coast tech-mecca. Mark Zuckerberg, for example, founded Facebook at Harvard, but "located in the Valley because of the virtuous circle," believes McCance. "Boston has virtually no important entrants in arguably the most important information technology segment of the last 20 years, in spite of the preeminent universities of Harvard and M.I.T."

Jeff Bussgang, though, of Boston-based Flybridge Capital Partners recently cited these universities as a reason to be optimistic about the city's potential. "There are a handful of ingredients that are required [to ignited a startup community]. One ingredient is, you need intellectual property," Bussgang said in an interview with Fast Company about why Boston is a great city to start a company in. "What I think is incredibly unique about Boston is that the university system generates so much IP."

Like Bussgang, McCance believes that MIT and Harvard will continue to be centers of innovation, but he says there may be a more technical reason for startups choosing California over Massachusetts. "There are small things that can be done to make the climate more attractive for startups. An example is to change the non-compete laws that are much more restrictive and enforceable in MA than in CA," McCance explained. "‘Hot’ engineers don’t want to worry about ending up in lawsuits and court if they leave one company to start or join a new company."

Another reason for Silicon Valley's success, McCance argues, may be due Boston having a more conservative culture, which he believes has led to more Boston-based companies being merged or sold out. But ultimately, the Greylock investor contends that it was the shift from the minicomputer to the PC which caused Boston to lose its edge as a tech leader. Originally, east coast firms such as Apollo and Stratus owned the minicomputer market. "When the technology moved to the personal computer, we overstayed the mark as a region," McCance said.

"We’ve concluded that the Boston area has not been as successful in spawning and sustaining great companies," said McCance. "It seems to me Boston needs to gain the thought leadership role amongst entrepreneurs in important future sectors of economic growth."

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  • Toby Elwin

    Companies succeed in Boston despite Boston:

    + Cost of living is not in line with quality of life (therefore top talent leaves)
    + Infrastructure is pitiful (many Eastern European cities have better transportation systems)
    + Government is broken, self-interested, corrupt, and mainly incompetent (last 3 sequential speakers of the House were indicted)
    + Old-world, tight-fisted money club (therefore entrepreneurs leave)
    + Harvard/MIT club connections (freezing out many graduates from other brilliant schools)
    + extremely conservative business climate in relation to the risks required for start ups (look at some of the companies in Boston: EMC, Genzyme, Akamai, they are all back office conservative companies, now compare that to Silicon Valley: Apple, Google, Intel, HP, many consumer-facing, high-risk companies/products/brands)

    That Boston has the highest concentrations of higher education in the world is a lost overwhelming competitive advantage because of the above factors.

    Every summer bright, young, people come from all over the world to Boston to start or continue their education, Boston and the 128 Beltway should be the leading tech/innovation corridor in the world with that constant influx of world-class talent.

    It is time for Massachusetts to really take a sober look at their failures. No sugar coating, no glad-handing economic statistics - the proof is there, many can't "make it in Massachusetts".

  • David Rosen

    To this day, I still don't understand why more software and tech startups are not created in Boston. It truly is a great place where talent is available. I think Boston is one of the greatest cities in the world to go to college, especially with all the Universities in the Metro area and the diverse student population.

    I lived in Boston and started up my software company in New Jersey! (No Jersey Shore puns please). My experience after college, was that Boston/MA was very conservative. So I moved to New York, Chicago and now Joisey to get closer to traditional industries.

    Boston does have its home to several industries though. Audio Equipment and Speakers (Spin-offs from MIT LIncoln Labs - Bose, B&W, Polk, etc), Bio-tech, Defense, etc.

    One big advantage that was missed on comparing Boston to California... You can play tennis (or be outdoors) 12 months of the year in California... not in Boston.

  • Peter Davis

    I live in Boston and couldn't agree more. With all the brainpower in this city, all the work being done in its universities, you'd think that more innovation would be happening here. But even with all of this, Boston is not a particularly innovative city. I work as a graphic designer, and I am constantly amazed at how the same ideas are continually recycled through the business community. Sure, there's some interesting stuff being done here, but very little of it is particularly unique. Much of it is simply recycled.

    I wish I knew why this was, but if pressed for an answer, I'd have to say that it's simply the culture, a culture that isn't based on taking risks. MIT is certainly innovative, but Harvard really isn't. I have friends and family who have attended Harvard and all believe that its reputation far exceeds it. What Harvard has really become is a name, a gold seal on a resume. A tradition-bound place in a world in which tradition is being outsourced offshore.