What Does It Take to Build a Billion-Dollar Company in New England?
It was only slightly colder in Vermont than in Boston. A small group of us had just flown in to Rutland, then taken a minivan to The Equinox, an historic resort in the picturesque town of Manchester Village. The group included well-known Boston area entrepreneur and Sycamore Networks co-founder Desh Deshpande; Jerry Fishman, CEO of Analog Devices; Patrick Cloney, executive director of the Massachusetts Executive Office of Housing & Economic Development; Ron Nordin, a former senior partner at Atlas Venture; and me.
The five of us had flown in to attend the New England Founding Entrepreneurs Summit on Technology, an event put on by Waltham’s Atlas Venture. Atlas held the event last week to bring together about 20 company founders, hopeful entrepreneurs, some of its partners, and a few others…and hopefully to serve up some inspiration as it focused on the pivotal issue of innovation in New England and how to build great, billion-dollar companies here. (Note: Xconomy pays its own freight on such trips, and we make no deals about what we will write, or even whether we will write. For more on our ethics policy, go here.) The Equinox is known for “country pursuits” like archery and falconry. I couldn’t restrain myself from mentioning the falconry symbology to an Atlas partner—you know, as a metaphor for how a VC might deal with entrepreneurs, letting them soar but keeping overall control. “That wasn’t lost on us,” he said (or words to that effect—I thought it would be too obnoxious to have my notebook out the whole time). “Neither was the fact that they have to come back for food.”
All fun-poking aside, we were there for a more serious purpose: to ponder the big question of growing great companies in New England. To that end, I conducted a pre-dinner chat with Analog’s Fishman at the nearby American Museum of Fly Fishing. Analog is a $2.5 billion company. It has stayed put in New England for 40 years, even as the semiconductor industry headed west (to California)—and farther west (to Asia). Fishman has been at the company since 1971; he and Ray Stata are the only two CEOs Analog has ever had.
The chat was conducted off the record, but with Fishman’s permission I’ll try to hit the high points. For starters, he cited consistency of purpose, including cultivating leadership that really understands the corporate culture, as key to Analog’s long-standing success. He also spoke passionately about the need to encourage rule-breaking, to recruit young talent with ties to New England (he rarely looks west of the Mississippi to fill positions in Massachusetts, because they leave for better climates!), and to reward talent in a variety of ways, not just monetarily.
Fishman also talked about Analog’s “chapel,” a sound-proof room complete with stained-glass windows that was built between the offices of Fishman and Stata, who’s still chairman. The two have had some big disagreements over the years, but they vowed to hash them out behind closed (and sound-proofed) doors and to emerge from the chapel with only one voice. If the top leadership of a company is not publicly in agreement, Fishman said, it invites divisiveness among employees.
After our chat, the group moved down the street to the Reluctant Panther restaurant, where Deshpande led a stimulating dinner-time discussion (I’m not sure he ever got his meal). Desh early on made the point that New England is rich in talent, money, infrastructure, and great universities and technological expertise—and so it really has all the ingredients to create great companies. As he later explained, “My agenda was to make the entrepreneurs realize that there are a lot of big problems to be solved in the world and we are well placed to solve them.”
Deshpande started off asking how many entrepreneurs were present: most of us raised a hand. His next question was, “What is stopping you from building great companies?” (Did I see entrepreneurial eyes turn toward the VCs in the room, or were they looking at Patrick Cloney, the state government representative?) That got the conversation moving, and I did my best to capture telling comments even as I wolfed down my Atlantic seafood bouillabaisse.
One person said that he was being thwarted in his company-building by the difficulty in finding domain-specific talent. This triggered some talk on why it is better to hire hungry, but less-experienced employees than experienced but possibly bored talent. From there the discussion moved to culture and the need to encourage more risky ideas and hire younger top executives—and, especially, to fund younger entrepreneurs whose companies are at earlier stages than many VCs traditionally seem to be comfortable funding.
This proved a hot-button issue for many in the audience, and we almost inevitably slipped into a discussion of West Coast vs. East Coast venture capital styles. One person spoke about the conservatism of Boston area venture capitalists, who in his view are overly fixated on ensuring that they only fund entrepreneurs with proven track records. “New England wants to bet on the same entrepreneurs, again and again,” he said. Barry Fidelman, an Atlas partner, countered that area venture firms are now starting to place smaller, 250K bets on seed-stage companies and the often-unproven entrepreneurs behind them.
A great question/observation came from Gary Pisano of the Harvard Business School. Could the East Coast-West Coast differences be more specific to sectors rather than across the board? he asked. This idea seemed to get a lot of currency. In cleantech, said Jeff Fagnan, another Atlas partner, “I’m not sure there is a difference.”
By this point Jerry Fishman, like several of our other dinner companions, had definitely had enough of this topic. “The California-Boston debate is old,” he said. “The real question is U.S. versus Asia. California in my opinion is yesterday’s battle.”
The entrepreneurs themselves did not escape unscathed, either. Don Dodge, director of business development for Microsoft’s Emerging Business Team, said that while area VCs might only want to bet on proven entrepreneurs, local entrepreneurs only want to hire proven talent. “It’s risk reduction everywhere,” he said.
New England entrepreneurs were also taken to task for not really being in it for the long haul and for selling out too soon. (This came up in my chat with Jerry Fishman as well, when he noted that Analog has bypassed many buyout opportunities over the course of its ascent.)
At this point, I confessed that it would be hard to turn down a great offer for Xconomy. But, in a way, John McEleney, former CEO of SolidWorks, took me off the hook. He pointed out that first-time entrepreneurs often sell out early to ensure their financial futures. The second time around, they might well take on bigger challenges and hold on longer.
Towards the end of the dinner, Deshpande looked at the big picture. In our connected world, technological and business process innovation are growing exponentially, and the next 10 years, he said, will probably see as much change as the last 100 years combined. He spoke about abundant opportunities for entrepreneurs, globally and locally. And as he later explained, “I am very optimistic and enthusiastic that Massachusetts, with its deep history in innovation and entrepreneurship, will play a key role in the global economy and get more than its share of the action.”
Desphande’s overall message, therefore, was that there simply was no reason New England entrepreneurs could not shine even brighter. And on that note, the dinner started to break up. Some stayed for dessert, others cut out to watch the Patriots—that’s the New England Patriots—devastate the Cincinnati Bengals (I don’t think there is a good West Coast football team this year). Then one of the event organizers stood up to announce that hiking and biking activities would start the next morning at 6:30.
“Can we do it at 10?” someone called out.
At which point Atlas’s Jeff Andrews chimed in: “That’s what’s wrong with New England.”