When it comes to building a startup in Boston, success becomes success


When HubSpot Founder Brian Halligan and Dharmesh Shah conceived their inbound marketing startup in 2004, they were still graduate students at MIT, and inbound marketing was not well understood. They were able to grow that idea into a successful company and eventually went public in 2014. Today, the Boston-based company has a market cap of more than $30 billion.

There were several elements that contributed to its favorable outcome. The founders met at one of the world's leading universities. They had an idea, but they were in a place where ideas were nurtured, in an area where there were experienced venture investors who saw the potential of the company. This gave them the ability to raise capital, refine their plans, and grow the company. All of this was possible because they were in the Boston area.

Every city needs a success story like HubSpot, but Boston has plenty of other names, including iRobot, Wayfair, Acquia, and Carbon Black. Just last year, Clavio went public and joined the list of startup success stories. Some were purchased. Some became public. But they all showed what was possible for many people who dreamed of building a successful business in the Boston area.

Since these companies generate wealth for the founders, this in itself provides an angel funding system where the founders take the cash from their exit to support a new generation of founders, and so on goes this virtuous wealth-generation cycle. . Additionally, these companies also groom other entrepreneurs, who leave and start their own companies, often financially supported by their old owners.

In the lead up to our early stage event in Boston on April 25, I spoke with some local Boston investors and advisors to help paint a picture of what makes the Boston startup ecosystem so successful.

Although there are many dimensions to a successful business ecosystem, we look at dollars invested to measure how well an area is performing. When we talk about Boston, the city is only a part of it. This is really a regional or statewide perspective, but whichever way you look at it, PitchBook calculates venture investment dollars and ranks the Boston area fourth nationally in Q4 2023. For a small town in a small state, that's pretty impressive.

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Two of the other four are in California. San Francisco (to no one's surprise) leads, followed by New York City, Los Angeles, and then Boston. Boston closed 208 deals in the fourth quarter of 2023, good for a total of $3.5 billion in investment in the region.

How does Boston punch above its weight when it comes to venture investing? Emily Knight is president of The Engine Accelerator, an MIT spinoff that works with founders trying to turn big ideas from research labs into startups, sometimes referred to as “hard tech.” She says it's a combination of factors, starting with the 35 colleges and universities in Boston alone. When you expand the map to include the Boston metropolitan area, which also includes Cambridge, this increases to 44 and adds Harvard, MIT, and Tufts to the list.

She says that these universities are breeding grounds for new ideas. “A lot of research and a lot of infant innovation is being translated into companies coming out of these universities,” he said.

Data from PitchBook is showing investment data across the US, with Boston ranking fourth in the total number of investments this quarter with 208.

Image Credit: pitch book

Lily Lyman, partner at Underscore VC, a Boston-based investment firm, says the university system is a big reason why her company decided to launch in Boston. “It's a big piece of the puzzle and, honestly, it's a big reason why we're here in Boston and why we're excited about Boston,” Lyman said. In fact, about a third of Underscore's portfolio came directly from university systems in the region, with a large emphasis on Harvard, MIT, and Northeastern.

This leads to another and related element of the pure talent coming out of all these schools. Rudina Cesari, Managing Director, Glasswing Ventures, says talent is very important and there is no dearth of STEM students consistently coming out of these schools.

“If you just think about raw talent, and then you look at where AI and ML talent is coming from, there is an incredible pool of talent that matches well with my firm's investments in enterprise and cybersecurity. eats, and this area has done very, very, very well in that regard,'' she said.

When you put it all together, you get some of the primary building blocks for a successful startup ecosystem, Lyman says. “The combination of technology, research and development that is happening here and the talent that is coming from here is unique,” he said.

That doesn't mean Boston doesn't lack some amenities, especially for young founders, that bigger cities have in abundance. These limitations are well documented. Affordable housing is lacking, the public transportation system is crumbling, traffic is terrible, bars close at 2 a.m. — and the city, with its Yankee politeness, is not good at promoting itself.

Cesari says that while Boston may have some limitations, every city has its own issues. She says what's really important is to offer a space where startups can thrive. “What we can influence is how enterprise-friendly and supportive we are. So from offering free space in incubators and accelerators and more and more areas for exploration, to providing access to clients and platforms that can accelerate innovation,” she said.

In fact, there are many incubator and accelerator programs, such as Mass Challenge, Greentown Labs, IDEA, and Roxbury Innovation Center, that provide space to nurture early-stage ideas.

And what Boston may lack in nightlife it certainly makes up for in brain power and a long history of startup success. As Cesari says, success breeds success.

“I would say more than anything that we need to support more founders. We need to support more successes. We need those successes to keep the wheels turning faster.”