Vertex, Heartland Moves Call Attention To Boston-Cambridge Rivalry

2/25/11Follow @xconomy

Boston has been vocal about its intent to transform its Seaport District into an “innovation district” for fueling job creation and attracting cutting-edge companies. Just last month, the city’s odds of making this vision a reality seem to improve, with the news that two Cambridge, MA-based companies—Vertex Pharmaceuticals (NASDAQ: VRTX) and Heartland Robotics—would be relocating to the waterfront neighborhood. (The Vertex move is contingent on the company nabbing FDA approval for its hepatitis C drug telaprevir.) And last year, the $1 million state startup competition MassChallenge set up shop in the Fan Pier area of the district.

I’ve been hearing word around Cambridge that Boston’s moves in promoting itself as a home to innovation have created a bit of good old inter-city competition, so I informally polled folks working on each of side of the river to see if the Vertex and Heartland transplants mean that Beantown is gaining some serious ground.

The rivalry is real, says Tim Rowe, founder and CEO of the Cambridge Innovation Center in Kendall Square. “I think Boston probably feels that way more than Cambridge,” he says. “But there is a sense of competition, and, as I’ve said elsewhere, I think its good for both Boston and Cambridge. Competition pushes us all to be at our best.

Actually, the Cambridge City Council seems a bit bent out of shape by Vertex’s move, if you ask me. Massachusetts offered the drugmaker $50 million in public infrastructure financing to construct its new $800 million facility in the state, and $10 million in life sciences tax incentives from 2010 to 2014. In return, Vertex has pledged to create 500 new full-time jobs from 2011 to 2015 and to retain its existing 1,350 jobs. The offer letter from the state doesn’t peg the incentives to a certain Massachusetts city in which Vertex should construct its new facility, but notes Vertex’s plans to build in Boston. According to reports in the Boston Herald and the Boston Business Journal, Cambridge city councilors slammed Boston politicians for drawing Vertex across the Charles, and even voted 7 to 1 for a resolution to name the incentives for Vertex’s new office space, “especially egregious.”

Vertex—which just this week announced it its cystic fibrosis drug had passed a pivotal clinical trial—didn’t jump ship from Cambridge because of a particular penchant for the city of Boston, but because the space is there, many people tell me. And that space is a result of a decade of planning, says Boston Redevelopment Authority spokeswoman Susan Elsbree. “Physically it’s very different: buildings are already built, planned, and permitted,” she says of Boston’s Seaport District. “As the economy begins to take off again, there’s room for growth—significant room for growth. Cambridge has historically been for the smaller startups. They need room physically to grow.”

Companies starting out in Cambridge and leaving is nothing new, says Travis McCready, executive director of the Kendall Square Association. “People come from all over the world to participate in this uniquely Cambridge culture…we grow companies, commercialize innovation, and quite frequently see companies ‘graduate’ to other environments,” he says, noting that just under a quarter of the 25,000 active companies in the U.S. founded by MIT alumni have remained in Massachusetts.

Elsbree also has a bit of a friendlier outlook on the dynamic between the two cities. “We really don’t see it as two cities divided by a river, but rather what is the economic impact,” she says. “We’re looking at the state as a whole and how we can all benefit.”

The Vertex move represents a win for the state and not just a city, says Kimberly Haberlin, director of communications for the Massachusetts Executive Office of Housing & Economic Development. “Despite offers from competitor states, the company made the decision to build an $800 million facility—a private development that will provide a shot in the arm for the local construction industry at a critical time—and hire 500 more workers while maintaining their current workforce here at home in Massachusetts. That is a clear victory, and one we should be very proud of,” she says.

So where does all this leave Cambridge? The city has some big innovation mainstays (call them MIT and Harvard), that give it a natural advantage, but that doesn’t mean it can get lazy, Rowe says. “The truth is that Cambridge has been so successful historically, and Boston has had such great needs, that Boston’s administration has been much more proactive about attracting companies than Cambridge’s has,” he says. “I think this is a natural consequence of Cambridge’s success. This said, Massachusetts is losing market share in the sectors where we are strongest, and none of us can afford to sit on our laurels.”

Part of maintaining that edge means adding more commercial space, which Rowe says can be done without trampling down residential areas, by cutting down on new parking spaces and “improving other, non-car forms of transportation.” Increasing Cambridge commercial space could mean building out the more untouched area of the city from Northpoint to University Park, he says.

Cambridge also needs the supporting infrastructure and amenities to encourage companies to stay, the Kendall Square Association’s McCready said in an e-mail. “Kendall Square still has work to do to improve its product, particularly increased retail services & amenities and a comprehensive transportation strategy for the district,” he says. “The KSA, its members and the City of Cambridge are collaborating on both.”

Boston’s innovation district has added 29 new businesses and 1100 new jobs since January of 2010, according to the Boston Redevelopment Authority. The industries the neighborhood houses span the legal, financial services and insurance, marketing and advertising, retail, architecture and design, software, life sciences, and cleantech spaces.

“What’s happening in the Cambridges and Route 128s is geographic location and collaboration by proximity, but not collaboration by design,” says Michael Turillo Jr., vice chairman of Spencer Trask Collaborative Innovations, a firm focused on public-private collaborations that’s offering $25,000 for a startup to expand or relocate in Boston’s waterfront area, as part of a competition called the Innovation District Welcome Home Challenge. “In the innovation district, the whole impetus behind it is collaboration by design,” says Turillo. “The innovation district is not only creating housing situations for those business, but providing infrastructure and support deliberately and consciously to stimulate and enable true collaboration.”

Ultimately, it’s about creating an environment for businesses to house employees once they have the money to hire them, Elsbree says, “so when the markets come back and when people need to grow, they will be ready.”

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