Boston Vs. New York: Tech Startups and Investors Add New Spice to Classic Rivalry

1/15/11Follow @gthuang

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of New York’s startup ecosystem, especially around Union Square, says Rodenstein, the Boston-based angel investor and entrepreneur (and AOL day worker). With “Chris Dixon playing the young Paul Graham role in indirectly leading the community through blunt anti-establishment rhetoric, as well as the rise of emphasis on [user experience] design which is a strength in NY, it makes sense for nearby investors in Boston to get more involved,” he says.

So what does this portend for Boston startups? “I get asked by VCs all the time where the great companies are in Boston. Some I certainly know about, and some great ones we just lose/let go,” Rodenstein says via e-mail. “I believe there are many others hiding at non-Ivy schools and other areas that are not being explored as thoroughly as could be. So in some ways NY may seem like lower-hanging fruit even though competition for deals is much higher than if you find a gem on your own here.”

One interesting angle is to look more closely at a firm like Spark Capital, which has invested nationally in companies such as San Francisco-based Twitter and Seattle-based ThePlatform (acquired by Comcast). Spark seems pretty focused on New York now, and has invested in many companies there—OnSwipe, Tumblr, Boxee, OMGPop, and 5min (acquired by AOL) come to mind. I’ve heard complaints from Boston entrepreneurs that the VC firm should look in its own backyard more.

But, in fact, it has. Spark has recently invested in a number of Boston-area companies including peerTransfer in Cambridge, 8D World in Woburn, and (more quietly) Linkwell Health in Needham. Last month, Linkwell closed a $6 million Series B round from investors including Spark. (I haven’t seen this news reported elsewhere.) Linkwell works with the healthcare, food, and advertising industries to develop nutritional incentive programs for people with chronic health conditions like obesity and diabetes. It seems like a pretty novel approach—maybe even one of the “gems” that Rodenstein referred to.

So my take is that Boston entrepreneurs need to raise their game and put out more stuff that’s unique. New York startups may not be the clear-cut competitors that the Jets and Yankees are (or Silicon Valley for that matter), but they are capturing a growing slice of the investor pie. Meantime, the VC and angel money is still here in Boston—but it might not be for long.

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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  • http://tydanco.com Ty Danco

    Where’s the new age love? Investors without borders? I myself am a totally partisan sports fan (unfortunately, Cleveland Indians, Browns, and Cavs), and so I see the emotional need to hate the enemy. But you can be a local booster but still invest out of state, as is shown by the track record of the best firms, who as you noted go all over. With the flat world, all you need is that skype connection. As for myself, I try to think global, act regional, and that includes going to Montreal, where the investor/startup ratio is enticingly low.

    I’ll leave the partisan bashing to those still mad at Paul Graham for leaving Boston. As an outsider in little Vermont, I’m envious of all of you big city guys, at least until each big snowfall.

  • http://www.dailygrommet.com Jules Pieri

    Greg, I love it when you talk trash. Seriously, this debate and the SF/Boston one, are so chronic they feel like pesky outbreaks of excema in the press.

    BUT….I just spent a week in NY with a bunch of startups and I did want to share one theme. The entrepreneurs who have worked in Boston (and the West Coast) and are now in NY complain that the NY startups (and their investors) confuse sizzle with steak. These entrepreneurs miss being on teams that know the difference, and who put their heads down, and really build a business. I was visiting some of the “flashiest of the flashiest” and they all quietly brought up a version of this topic. That was a new one on me…kind of rings true, just from a common sense standpoint. The vibe of NY is all about flash so it would easily permeate startup culture.

  • http://www.krush.com Gina Ashe

    Greg, rapidly becoming a big fan of your writing…love the drama. How about a new spin on the NY vs. Boston investor for real? Entrepreneurs with a good idea usually have a choice about who they take money from. It’s almost like “getting married” and there’s a lot more to it than a city and some cash. It’s about a special combination between an entrepreneur and an investor that accelerates a new business, disrupts an industry, excites a consumer who thinks they’ve seen it all. A plug for Roy Rodenstein…any high tech founding team that has him as an investor gets a “real catch”–discriminating eye for product design, business models, and consumer appeal.

  • http://www.OnSwipe.com Jason L. Baptiste

    Great article Greg.

    I just don’t see it as competition. Both cities have certain advantages that might be helpful to each. We chose New York because our customers are here. I’ll still be in Boston often and still a part of the Founders/Mentors group.

    The distance isn’t a huge factor either. Grab a bolt bus for 15 bucks with wifi and a power outlet, then you’re good to go.

    I think a good followup would be: where can each city help fill the gaps of the other? NYC has a lot of design talent, which can help Boston’s strong software focus.

    @Gina Yes, we’re beyond lucky to have Roy involved. He’s a great friend and a great investor.

  • http://www.wire-spring.net Lily

    Roy is a great a great investor.

  • http://www.xconomy.com/author/ghuang/ Gregory T. Huang

    Thanks for the comments, guys. I’m in mourning after the Pats game–remembering what it’s like to be a true Boston sports fan. But I’ll give the NY trend some more thought. I’m sure it’s ultimately good for startups and innovation.

  • http://www.commonangels.com James Geshwiler

    The whole NYC vs. Boston thing is overblown and the wrong focus. It’s Boston AND NYC vs. Silicon Valley. The I-95 corridor combines software skills, technology and digital marketing to make a powerful combination against the Valley. Go East Coast!