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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