2010 Startup Moves from Boston to San Francisco Offer Insights to the Perennial Coast vs. Coast Debate

1/10/11Follow @xconomy

The debate over the merits of Boston and the San Francisco Bay Area as startup hubs isn’t a new one, but looking back over 2010 has given us new food for thought on the subject. At least four Boston-area startups packed their bags for Silicon Valley, working on technology related to errand exchanging, used clothing swaps, person-to-person car sharing, and e-mail organization.

The startups were attracted by San Francisco’s vibrant community of related companies, a friendly environment for business, investors willing to take a risk, or a mix of all three. “Companies have always moved to SF now and then,” says Boston-based angel investor Roy Rodenstein. “But I think it’s a reminder that, as far as we have come in making Boston’s scene more vibrant, inviting to new entrepreneurs, [becoming] richer in financing options, et cetera, we still have a way to go for some consumer startups to feel as solid staying here.”

One of the splashier moves came from formerly Cambridge, MA-based Baydin, whose founder Alex Moore gave a ride to Bay Area angel investor Dave McClure, pitched him, and nabbed a $100,000 investment as a result. The startup, which develops tools for managing e-mail inboxes, was already considering a move West to be closer to big names in e-mail, but the check from McClure and the opportunity to work alongside other companies in his 500 Startups fund sealed the deal, Moore says. “San Francisco has been everything we hoped it would be—vibrant, passionate about new technologies and startup companies, and focused on opportunity over risk,” he says. “Having spent a month out here, I would encourage any Boston startup founder to pay the Valley a visit.”

TaskRabbit, a Web-based community (formerly known as RunMyErrand) for swapping errand services, raised money from Bay Area investors in October 2009, shortly after participating in Facebook’s fbFund incubator program. This past June the previously Boston-based company kicked off its service in San Francisco and relocated its operations there. But the move isn’t “an indictment of Boston as a city where startups thrive,” says R. Ann Miura-Ko, partner of Floodgate Fund, which backs TaskRabbit. The company moved because it was expanding its errand-running services to San Francisco and the principals wanted to be on hand there, she says.

RelayRides and thredUP, both of which moved from Cambridge, also attracted investments from out West and relocated. But neither necessarily saw the Boston area as unfit to fuel their company.

“We started off in Boston because it was a great environment for a car-sharing startup—it still is,” says RelayRides chief operating officer Desmond Pieri. “However, as we raised our Series A in December, our lead investors—who are from the Bay Area—preferred for us to base our headquarters there. Seeing as we planned for San Francisco to be our second city for expansion anyway, it made sense to move the HQ there.”

ThredUP, which moved to San Francisco in part so founder and CEO James Reinhart could be closer to his family, got a Series A investment from East Coast investors as well as Menlo Park, CA-based Trinity Ventures. West Coast investors weren’t necessarily more hospitable to a company like thredUP, a Web-based platform for swapping used children’s clothing. “I think all investors look for promising markets and good teams,” he says. Trinity was a good fit for thredUP, not because of its location, but because of its experience in backing companies focused on moms, says Reinhart.

A moved to the Valley doesn’t necessarily solve all money problems for startups, though, Reinhart says. The competition for engineering talent in San Francisco is thick—and pricey, he says. The same could be said, to a slightly lesser extent, of Boston and other innovation communities, but thredUP didn’t feel the pain here because it wasn’t adding engineers at the pace it is in the Bay Area.

The startup moves over the past year don’t necessarily mean that Boston is lacking, but they do say something about what types of startups each community is fueling.

Pieri says San Francisco investors and entrepreneurs were familiar with the “collaborative consumption” notion—where consumers use technology to share services—which RelayRides has built itself on. “They were able to very quickly get their minds around the concept,” he says.

Overall, the Bay Area has a louder crowd of companies in the fashion, gaming, and consumer services spaces, making investors more comfortable investing in those industries, Rodenstein says.

“The more companies in a given space in the local area, the more likely that the investor will have seen related companies and thus be educated enough to feel like they can make the call, [and] the better the network they’ll have to pull in talent, partnerships, or executive relationships to help a company along,” he says. “Outside of a deal’s intrinsic properties—team experience and qualities, opportunity size and feasibility, et cetera—the above factors are key to an investor’s decision whether to take the plunge or not.”

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  • http://www.launchbit.com Elizabeth Yin

    Nice post, Erin! As someone who is native to the Bay Area and just moved in the opposite direction by coming to Boston last week, a couple other tidbits that are often unmentioned come to mind. My $0.02:

    1) Location fragmentation: For those who haven’t been to the Bay Area, it’s largely comprised of 2 maybe 3 areas: San Francisco proper, the Silicon Valley, and the East Bay. Although the traditional “2 people in a garage story” that people read about has traditionally taken place in the Silicon Valley, that is changing in a big way. Many newer startups are now forming in SF proper and to a lesser extent, the East Bay. This doesn’t lend itself to the tight-knit entrepreneurial environment that everyone imagines. It leads to whacking through traffic 1-2 hours each way to attend meetups, meetings with investors/companies, etc, in a car, since the Bay Area was built with terrible public transportation. Not sure if Boston has this problem, but I’d imagine it’s to a less extent? The fragmentation will probably widen, and certainly road-based frustration will rise.

    2) Both a testament to its vibrant nature as well as the by-product of having everyone and his/her mother be an entrepreneur, the Bay Area actually has a lot of noise. You *could* attend a meetup every night if you wanted to. Many people I talk with who have never lived in the Bay Area point to this kind of activity as proof that the startup community out there is more “useful.” Like everything else, when there’s a lot of something, a lot of it is just noise.

    3. A number of people seem to think that because folks in the Bay Area are used to risk and startups, the odds of finding developers or funding increases significantly. That may be true to a small extent — seems to be true for the couple of data points mentioned in this article, but the fact of the matter is that finding funding and teammates is still hard no matter where one goes. I’d actually be curious what percentage of companies in the Valley actually get funding compared to elsewhere — I might even venture a guess that it would be a *lower percentage* than in Boston?

    Don’t get me wrong — I love the Bay Area. I’m from there, I met my co-founder out there in middle school, and everything I’ve learned about startups and entrepreneurship has come from living there. Yet, these are a couple of tidbits that I think often get overlooked when I talk to people who are thinking about moving to the Bay Area. Cheers.