New York City and Boston: The Entrepreneurial Dream Team
Far too much has been written about Boston versus New York City. Sports rivalries and cultural differences have a way of coloring our world view to include startup companies and venture capital. However, the past few years tell about a much closer relationship. The real story is Boston and New York City, particularly versus Silicon Valley.
This week, we welcome Xconomy’s most recent addition to its coverage, New York City! While having started in Boston and expanded across the country, Xconomy’s newest addition reflects the growing ties and teamwork between New York and Boston.
Let’s start with a few data points. It’s always been easy to think about Boston and New York as separate worlds. After all, it’s 225 miles between downtown Boston and Manhattan—a journey that takes typically takes 3 ½ hours. In contrast, the trip from San Francisco to San Jose is only 48 miles along the 101, which in the middle of the night is under an hour. With traffic, well, that depends and can take as long as the Boston-NYC trip.
Somewhat ironically, the technology created by entrepreneurs and the VCs that back them have been shortening these distances. Wi-Fi on the Acela and 3G mobile networks let entrepreneurs and venture investors stay productive on the Boston-NYC journey, making the trip seem a lot shorter. Personally, I love working on the Acela. It’s some of my most productive time, and I feel like I’m in the office. I can even have meetings, particularly if I secure the seats facing each other with the table between them. Web networking and collaboration tools make sharing information and coordination much more effective as well, not only between these two cities but across the world.
Venture capitalists and angel groups are expanding and coordinating financing activities between Boston and New York City. “New York is clearly on a roll here. If anything we’ve seen the presence of several Boston firms either opening offices or having affiliations,” said long-time New York venture capitalist and founder of Greycroft Partners, Alan Patricof. Matrix Partners recently opened an office, headed by Nick Beim. New firms like Founder Collective operate fairly seamlessly between the two cities. TechStars’ recent expansion to New York has been a great success. The Golden Seeds angel group several years ago opened chapters in New York City, Boston, and Philadelphia that systematically collaborate. Syndication among angel groups more broadly in New England and New York got started around 2005 and has been going through various iterations and improvements.
How does this then play out in the numbers? Silicon Valley may have had the lead for many years, but looking at emerging companies, the Boston-New York team looks like it’s been running a fast break. According to the most recent PwC MoneyTree data, the gap between New York/Boston and Silicon Valley for seed and early-stage companies has closed, whether looking by total deals or by dollars.
Five years ago, Silicon Valley did nearly twice the number of seed and early-stage venture deals compared to Boston and New York combined, 338 versus 178 in 2005. For 2010 the two regions are essentially tied with 400 for Silicon Valley and 392 for New York/Boston. Dollars tell a similar story. For 2005, the ratio was 1.3:1 in favor of Silicon Valley, growing to 2.2:1 by 2007. By last year, that gap had closed to 1:1 with $2.16B invested in Silicon Valley seed and early-stage companies and $2.05B invested in those in New York/Boston (see charts above.) “The startup and entrepreneurial environment in New York is the strongest I’ve seen in the past 40 years,” says Patricof.
But it’s not just adding numbers. The rapid growth of consumer-oriented, ad-tech, and fin-tech ventures makes Boston and New York City highly complementary and drives increasing collaboration. Brad Hargreaves, founding partner of General Assembly in New York, says, “New York companies need engineers from Boston. Boston startups need design and sales talent from New York. And, New Haven and Providence have great pools of young talent that need more exposure to the startup community.” Josh Grotstein, CEO of Motionbox, adds, “Boston and New York can become a more effective super-regional hub for entrepreneurship, leveraging the technological prowess in the Boston area and the front-end/marketing and media services expertise in New York.”
As my colleague and long-time NYC venture capitalist Bob Greene at Contour Ventures similarly puts it, “The VC industry across the country has realized that New York City is a vibrant and successful market to launch ventures. In particular, the ad-tech and fin-tech sectors are very strong in NYC, given the local depth of developers and customers.” He adds, “Just keep putting up the numbers, success stories are the proof!”
It’s one thing to launch a consumer brand, but Boston’s enterprise-class software and networking technologies help expand and support it. An example from CommonAngels’ own portfolio: OwnerIQ started in Boston with its ad-technology targeting consumers, but recently opened an office in New York to be close to customers and partners. This adds to CommonAngels’ existing NYC investments that include three other companies, or 15 percenpt of our portfolio and growing.
Boston-New York winning isn’t a slam dunk yet. “From a funding standpoint, we may be at parity [with Silicon Valley], but we’re not there yet from a cultural standpoint,” said Adam Neary, founder and CEO of Profitably who recently wrote a detailed blog post on the dynamics of fund raising in the Boston-New York area. “We’re getting there, and I’m really upbeat about it. It’s not just the tech community but so-called normal people [in New York who are now into entrepreneurship]. You go to a bar, and people know what TechStars is.”
Travel and communication could be better. As Hargreaves puts it, “Unfortunately, there is no easy and cost-effective way to travel between the major cities of the northeastern US. That is the region’s single greatest limiting factor.”
While there’s still plenty of room for improvement, it’s been a pleasure for us at CommonAngels to have been early investors in Xconomy. Its strong reporting, events, and commentary should help build more communication and teamwork among the entrepreneurial communities in New York City, Boston, and all points in between. Welcome, Xconomy to NYC! (And, look out, Silicon Valley.)