If you’re from the Boston area and into technology in any shape or form, you
should be reading Scott Kirsner’s blog “The Innovation Economy”. Scott had an
article on his blog recently titled “Boston’s
Biggest Trade Associations Flunk the Student Test”. [Oh, and by the way,
Scott also writes for the Boston Globe].
The article builds on a theme that Scott has been talking about for some
time: How to keep all those great students that the Boston area is able to
attract every year.
Let me open by saying that I hate students just as much as Scott does — which
is to say, I love them. As an entrepreneur, my motives are
completely selfish. I want to keep as much raw, passionate and brilliant talent
in the area as possible.
In his most recent article, Scott looks at the local trade associations and
grades them on how well they are doing to encourage and engage students. (The
comments posted to the article are worth reading as well). I think getting the
associations to pull in students more is definitely a great way to keep the
So, in addition to getting our trade associations to step up, here are some
random thoughts on how we might lock up the students and keep the talent
1. Help students build a network locally. The more powerful and valuable
the network, the bigger the sacrifice of moving somewhere else.
2. Help students get new ideas off the ground in terms of capital and
3. Help students stay students. I think our academic institutions should
invest in ways that graduating students can continue to stay involved and keep
learning. The value of all of these graduate students is much higher than just
the potential alumni donations.
4. Help students have fun. I don’t mean in the “they need to learn how to
party sense”, but in the “creativity as applied to business” sense. Recruit
student talent to help experiment with some new ideas for your business. Try
unleashing some of their creativity. It’s not all going to work, but I’m
guessing that lately, not all of your projects are working anyways.
Would love to hear your ideas on how we could do a better job locking the
And, if you’re a student yourself, what are your thoughts on how we might
keep you and your awesomeness around in the Boston area?
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Last night, I attended an invitation-only event called "Thinking Big". It was organized by Scott Kirsner who is a Boston Globe journallist and also authors a blog called "Innovation Economy".
Update: Podcast Is Available Here
As an introvert, I usually don't like going to these social events (even if they're business/entrepreneurship focused). This one promised to be different because it was much smaller attendance (not the hundreds of people that were at the TechCrunch event held recently) and had at least some structure to the conversation. Besides, I like Scott and think he's doing a really good job drawing out an interesting mix of people at various types of smallish events. This is the second of his events of his that I've gone to (and I really enjoyed the first one, which was a small intimate dinner with a bunch of cool tech/entrepreneurship people).
Here's an overview of the "Thinking Big" session, as described by the organizers:
Are New England's most promising companies getting sold before they have a chance to get really big and really influential? If we're selling our seed corn, as Highland Capital co-founder Paul Maeder suggested recently, how can we cultivate a new generation of companies like DEC, Lotus, EMC, Akamai, Google, and eBay...companies that create entirely new business sectors, grow like crazy, and serve as the hub of new ecosystems?
Scott moderated a mini-panel with Paul Maeder (from Highland Capital Partners) and Michael Greeley (from IDG Ventures). I know and have met both of these gentlemen before -- they're smart and articulate. There's going to be a podcast of the event posted (recorded by none other than the software legend Dan Bricklin who I met for the second time). Dan's cool and very unassuming.
I'm not going to get into the heart of the discussion in this article (too much was said, and the podcast is likely to do a better job). But, will provide some of my thoughts and reactions:
1. Though I think Paul Maeder and Michael Greeley are both very smart and very articulate, they're both currently VCs. It would have been nice to have a current entrepreneur on the panel. But, there was sufficient interaction amongst the rest of the group, so this wasn't a problem.
2. The thesis for the discussion was that we are selling companies too early and that particularly the VCs should take a longer-term view and encourage entrepreneurs to hold on to promising opportunities longer so as to create big, significant businesses here in Massachussetts. I somewhat disagree. Though it would be great to have successful companies here in the area that *don't* sell out too early (particularly to West coast firms), that may not be the best thing for the entrepreneur. If you are a first-time entrepreneur (as I once was) and you have all your net worth tied up into a single company (which you likely do) than even a $100MM or even a $50MM exit is going to be attractive. It's easier for VCs to push for the "big, swing for the fences" type outcomes -- but they have a different risk profile. They have a portfolio of companies to spread their risk. They do this for a living. They've already (in most cases) made their money. Many times, entrepreneurs have not. More to come on this topic later: The point is, in order to encourage entrepreneurs to grow their ideas into billion dollar companies, some changes to the VC/entrepreneurial relationship would help.
3. It's possible that too many promising young companies are being sold too early. The data that the panel shared certainly seemed to indicate that. However, I don't think we're talking enough yet about the potential loss of stellar early-stage entrepreneurs that *leave* the area and migrate to the West coast. before even starting their companies. I've seen this personally happen on a few occasions. This data is much harder to track. We can look at the big, billion dollar West Coast companies and trace them back to see where they came from. But it's hard to track the companies that *should* have been founded/seeded here, but weren't.
4. Frank Moss, the head of the MIT Media Lab challenged the group to better help commercialize the technology and invention that is coming out of MIT. I could not agree with Frank more. MIT produces an amazing amount of intellectual property, much of which never gets used in a meaningful way. Frank asked that investors stop trying to "graze" MIT for the best IP, and instead participate in the risk of R&D to get the best returns. He called for every investor to take 0.1% annually of their fund and invest it in MIT for research and development. Interesting idea. I'd need to know more about the structure that was being considered.
That's about all we have room for. A lot more can be written about the topic. I'll update this article once the podcast goes up somewhere for those that want to hear the discussions. My thanks to Scott and for all the event sponsors. I was humbled by the level of talent in the room. Some really big names in entrepreneurship and technology from the Boston area spending some quality time.
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Next weekend (March 17/18) is the second BarCamp Boston. For those
of you unfamiliar with the concept of BarCamp, it is an “unconference”
where the entire event is generated on the fly as emergent behavior.
OnStartups was a sponsor at last year’s event, but I
didn’t get a chance to actually attend. I’m a sponsor again
this year, and was close to missing this year’s event too (as I was
scheduled to be out of town this weekend), but have had a change of plans and
so will be attending after all.
Here’s a link with more details on the event: http://barcamp.org/BarCampBoston2
This year, the event is being held at MIT (at the Stata Center),
which makes it much more convenient for lots of people. It’s
especially convenient for me is this is a 2 minute walk from the HubSpot offices.
Though mostly a technical conference, there seems to be a
fair amount of interest in startups and startup topics. If you’re
in the Boston
area and are interested in software, startups or both I encourage you to attend.
It should be an interesting event.
Hope to you see there.
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A little while I ago, I wrote an article on this blog titled
West, Young Entrepreneur! Is The Valley Better For Software Startups?”.
Now, I’ve come across some new information that causes
me to reconsider this point of view. Business Week posted an article
recently titled “Ranking
The States For The New Economy”, which cites a recent study by the Kauffman
Foundation, a well-known private foundation that promotes entrepreneurship.
The study provides detailed rankings on how states in the U.S. are adapting
to the challenges of a global, entrepreneurial, and knowledge-based economy.
The study was previously conducted in 1999 and 2002.
I’ll jump to my punch-line first: In both 1999
and 2002, Massachusetts
topped the list. This year, not only did Massachusetts top the list, but increased its lead over the other states.
A few things from the article and the study that I found
- MA ranked #1 overall, and also
ranked #1 in “workforce education”, a weighted measure of
educational attainment of the workforce.
- MA also ranked #1 in the “Hi-Tech
Jobs” indicator defined as the jobs in electronics manufacturing, software,
computer-related services, telecommunications and biomedical industries as
a share of total employment.
- MA had the fourth-highest increase
in per-capita income.
- Another surprise: #2 and
#3 were New Jersey and Maryland. In case you’re
came in at #5.
- California ranked #1 in “Inventor
Patents”, defined as the number of independent inventory patents per
- The bottom two states that “didn’t
adapt well to the new economy” were West
Virginia and Mississippi.
- Vermont (yes, Vermont!) ranked #1 in entrepreneurial
activity. I found this surprising. The study states that this
may be due to fewer traditional employment opportunities in rural areas.
MA came in at #43 and CA at #9.
- MA ranked #1 for the “Venture
Capital” indicator (which I found surprising too).
So, what do you think? Do any of these results
surprise you? If you are an entrepreneur, does data like this influence
your thinking at all as to where you might kick-off your startup? Would
love to hear your thoughts.
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I want to start out by saying that this is one of the more
troubling articles that I’ve written for this blog. The topic is
something that is near and dear to my heart (i.e. Boston as a center of software
entrepreneurial activity). As much as it pains me to say this, there
seems to be increasing evidence that Boston (and New England in general) is
losing further ground to the West Coast as the place to be to start an exciting
new software company.
I’ve long accepted the fact that Silicon
Valley has the edge when it comes to the necessary ingredients to
foster the right kind of entrepreneurial energy for high-tech startups.
They’ve got more VCs and angels. More successful serial
entrepreneurs that are putting their cash back into new companies. More
startup employees that made money on earlier startups and going back and doing
their own thing. Generally speaking, The Valley has much more of the
right stuff to spark a ton of exciting new companies. I’ve known
this for a while, but was reminded of it today when I came across an article titled
Between The Coasts” in the Mercury News. If you’re
involved in startups on the East coast (either as an investor or an
entrepreneur), you should read it. Hopefully, it’ll keep you up at
night, like it will do for me. Another article (which cites the original)
that I didn’t really agree with is the one from Venture which claims that
coast loses the modesty game too. Hard to believe
I want to get on the record that I love living in Boston. My wife does too. We
wouldn’t rather be anywhere else. We love the culture, the academic
institutions and the overall energy of the city (we’ve lived here for
about 7 years now). I’ve been an active member in the startup
community here, invested in a few early-stage companies and have co-founded a
new startup of my own in Cambridge.
But, the evidence is mounting that Boston
may not be the place to be for software startups (particularly world-changing
software startups). A number of people for whom I have great respect are
beginning to convince me that the Silicon Valley
edge is large and growing. From the above cited article, Harvard
Professor Josh Lerner says “There’s considerable evidence that
except for biotechnology, where Boston has a
strong advantage, the advantage of California
is becoming more pronounced.”
What’s Wrong With Startups In Boston?
Here are some random thoughts and ideas I have on the East
Coast vs. West Coast theme.
- Where did we go wrong? On
a relative basis, Boston
is still the second best
place to be if you’re involved in startups (of the software
kind). There’s no decision or moment I can point back to and
say, “There! That was moronic, we shouldn’t have done
that…” Reality is, we still have lots of the right
ingredients here too (just not as much as what can be found in the
- As an entrepreneur that has
bootstrapped two prior companies (and working on my third), I think one of
the biggest “costs” of raising capital is not dilution, but
distraction. I wrote about this in my article “Fatal
Distraction: The True Cost Of Venture Capital”.
Though not specifically targeted at Boston, I think the problem is worse
here than in The Valley. We simply take too much time and energy to
get early-stage companies funded. Instead of spending time building companies,
our entrepreneurs are spending too much time raising capital.
- As investors on the East coast,
we are too careful. As entrepreneurs, we are not careful
enough. This is the point that keeps me up a lot, because I think
I’m part of the problem. Or, more accurately, I’m not
enough a part of the solution, and so I’m part of the problem.
- In my own small way, I’m
trying to change this. Last year, I made three early-stage
investments (and when I say early stage, I mean early-stage). The average due diligence for
each of these investments was < 24 hours. Actually, to call what
I did due diligence is a grave distortion. I really didn’t do
any due diligence at all. I tried to understand the idea (as best I
could), I tried to understand the entrepreneur (as best I could), and I
made my bets. That was it. For those deals I said no to, I
said so quickly and convincingly. At some level, I think
that’s how it should
work. This is why I have a fair amount of respect for Paul Graham
and Y Combinator. You may not
agree with their investment thesis, but I think it’s closer to what
entrepreneurs actually need.
[Interestingly, the smart folks at Y Combinator actually divide
their time between both coasts].
- This year, I joined
CommonAngels (a local angel investment group here in Boston with a great reputation).
There are a great bunch of folks involved in CommonAngels,
and they are certainly moving in the direction that I think early-stage
investing should go, but we’re still not quite there yet. It
simply takes too long.
It doesn’t matter if the startup doesn’t have financials to
ponder or customer references to check up on. It still takes months
to get a deal done. That’s
too long. But, it’s changing for the better and
I’m encouraged by this.
- As for the entrepreneurs
themselves, I think many of them are not understanding the reality of the
mindset here. Sure, you might have a game-changing,
paradigm-shifting, belief-shattering idea for a consumer Internet
play. But, you’re going to spend a couple of months finding
the right people to talk to, another couple of months educating these
right people and the last couple of months (if you make it that far)
convincing them to invest. At the risk of alienating a lot of the
people I know in the investment community (and even a few entrepreneurs),
I’ll give you my sound-bite: Many
software entrepreneurs may be better off moving to the west coast than
dealing with the pain of trying to get funded on the east coast.
There, I said it. I’m going to walk around for a little while
now because I feel so traitorous. … pause… As much as I
hated to do it, I think it needed to be said.
If I sound frustrated, I don’t really mean to. I
think I’d sound a lot more frustrated if it weren’t for the fact
that I’m not really looking to raise large funding for my own startup,
HubSpot, which is in the online marketing for small business
space. I’m fortunate in that I can bet on myself and keep writing
checks until the money runs out, sanity runs in, or the idea itself succeeds.
Let’s see what happens there. But, not everyone else can do
that, and there are lots of entrepreneurs here in Boston/Cambridge that have ideas
and would possibly make great startup founders.
For all of you budding software entrepreneurs (and the
investors that invest in them), am I off-base? Is the East Coast actually
closing the gap (instead of widening it) when it comes to being a great place
to launch an exciting new software startup? Is raising money even
necessary now for software startups? Can’t most people just
bootstrap? Would love to hear your thoughts in the comments. This
is one of those cases where I’d really, really like to be proven wrong.
I really like it here in Boston.
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If you’ve been doing any amount of reading about
startups (or for that matter, business strategy in general), you’ve
probably heard at least a few times how important it is to focus
. I find it interesting that
though there is general consensus among successful entrepreneurs on this topic
(i.e. focus=good, lack of focus=bad), the advice to focus continues to be hard
to follow. I’ve struggled with this challenge myself, even though I
how important it is to
This past week, the topic of focus came up again in
discussions with a startup team that I’m involved with. Brian
Harrington and Josh Lesnick are the co-founders of a cool new startup here in
In (disclosure: I’m an advisor to the company). After
months of development, the I’m In team
launched their consumer product last week. I encourage you to check it
out. Their offering allows for the creation and coordination of
gender-based trips. For example, you and a group of your guy buddies from
grad school want to coordinate a ski outing. Or, you and the gals want to
coordinate a New Years party in Vegas. The idea is interesting and the user
experience is pretty slick. Create your own group and try it out.
But, this article is not about I’m In the company, or
its product. It’s about focus. I asked the co-founders what
big lesson they have learned now that they have a product out there.
Their response can be paraphrased as follows: “Focus!”.
But, if it stopped there, it wouldn’t be particularly interesting.
So, let’s take a look at why
focus is important andwhy it’s just so hard
sometimes to focus.
The Phenomenal Force Of Focus
- The Temptation Of The Big Market: Because software is so malleable
and we’re all so smart, we tend to think that our product can (and
should) have a nice, big market to address. For example: In
the case of I’m In, they could
have easily tried to argue that the product is could be easily “reused”
for organizing trips for small businesses. Just a tweak hear and a
tweak there and instead of limiting its market to gender-based social
trips, it could expand the market considerably. The same can be said
for many software products. There’s no technical reason to limit your
software to a niche market. Why not “go broad”?
- Figuring Out What The Customer Wants: One of the biggest reasons not
to “go broad” is that it becomes very difficult to figure out what to build. For example, in
the case of I’m In, small business group travel and social group
travel have lots of overlap – but vary in some key ways. Businesses
might care about things like rules and policies for travel – social
travelers care more about fun, bonding and memories (like photos of the
trip). By trying to address the needs of two different customers
(despite the fact that there are some needs they have in common), you end
up compromising one or the other.
- The True Cost Of Broad Products: Lets stipulate for a moment
that you and your team are smarter than average (just like all founding
teams believe they are). Despite your brilliance and the unquestioned
ability of the team to create an exceptionally cool product that can
address the needs of millions of users, the harsh truth is that broad,
flexible, products that can address the needs of many types of users are
almost always more expensive to build and maintain than products that only
address the needs of a small group of people. The larger the
divergent needs of a group of users, the more complexity that has to be
baked into the software to address the needs of these disparate
users. Even with our brilliant ability to deal in high-order
abstractions, the very fact that we have to have lots of high-order
abstractions makes the product harder to build and get right. If you
ever run into someone that tells you that they can build a really flexible
product that can do lots of things (add an option here, set a
configuration there…) at the same cost or lower than one that doesn’t have that much
flexibility, run. Certainly don’t send them my way and make me
expend the effort to resist the temptation to smack them upside the head.
- It’s Not Always About The Product: Lots of software people fall
into the trap of believing that the primary cost factor is product
development. This is not always true. The primary cost is
often not building the right
product, but getting it into the hands of the right customers. This
is where focus really starts to play a big role. By focusing on the
needs of a small subset of the potential market, lots of things become
much, much easier. A direct quote from Josh at I’m In:
“By focusing on a tight customer segment (gender-based travel), it
has been much easier to write copy for the site, select photography,
create tonality, and develop a list of targeted fulfillment
partners.” Though I don’t know what the heck tonality
is, what I do know is that it is
much easier to figure out what you’re going to say (your message)
and get the word out there when you have a smaller, more focused audience
that you’re trying to reach. It’s really hard to believe
how much of an impact this has until you actually experience it. Literally
overnight (the day you make your decision to tighten your focus), your
discussions become clearer, your meetings more productive, your product
roadmap more defined and you become immensely more attractive to members
of the opposite sex.
- Restrictions Are Not Permanent: Just because you start with a narrow niche and focused
strategy does not mean you have to remain there for all eternity.
It’s simply a better
way to start a company because it makes the early stuff so much
easier. As the company evolves and you learn more and
more about the market, you can decide whether you want to go broad (i.e.
tweak the product to meet the needs of another segment of customers) or go
deep (build more products/features that serve the needs of the customers
you already know). The point is, don’t convince yourself that
you have to widen your potential market now – because you
don’t. In most cases, you’re better off starting narrow
and broadening later.
If you’re interested in this topic, I’d strongly
recommend “Crossing The Chasm”. It’s on my permanent
list of recommended
reading for entrepreneurs.
I’ve had several startups in the past that I’ve
been involved with that could have benefited from more focus. What do you
think? Are there situations where an early-stage startup shouldn’t
focus? Would love to hear your thoughts.
Finally, my best wishes to my friends at I’m In.
Look forward to watching your progress. If any of you end up
setting up an entrepreneurial group trip to Las Vegas, I’m In!
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