This is a special, bi-coastal edition of the X Factor (it doesn’t usually run in Seattle). For my column on Tuesday, I surveyed seven Boston-area startup CEOs and asked them to characterize their company cultures in one word. Truth be told, I canvassed nine CEOs, but only seven got back to me before my deadline. The remaining two have now weighed in, so part of this post is to share their words with you.

The other reason behind this post is to compare the words chosen by the Boston CEOs I canvassed with the words chosen by some counterparts in Seattle. As you’ll see, there was a surprising trend that had at least one Xconomy editor (chief correspondent Wade Roush) wondering whether entrepreneurs on the two coasts have gotten their personalities mixed up in some kind of bizarre startup transporter accident. Read on for that.

Here are the last two Boston entries:

Taligen Therapeutics (Cambridge, MA)
CEO: Abbie Celniker
Culture: “Passionate”
Comment: Taligen, which moved to Cambridge from Colorado in mid-2008 and raised $26 million out of a planned $65 financing round in May, according to a regulatory filing, is developing drugs to fight arthritis and other inflammatory diseases. “We all passionately believe in the science. We are all passionate about winning and we are all passionate about how imperative it is to have fun while you are working to solve challenging problems,” Celniker says.

Visible Measures (Boston, MA)
CEO: Brian Shin
Culture: “Energetic”
Comments: Shin’s four-year-old company has raised nearly $30 million for its efforts to index and provide analytics around web video content. “We have a lot of eclectic and energetic folks and we try to foster an open culture to embrace and enable their success :),” says Shin in an e-mail.

Now to the East Coast-West Coast “word-off.” As I mentioned on Tuesday, I had “borrowed” the idea for my column from Greg Huang, Xconomy’s Seattle editor. Earlier in the month, in two separate stories, here and here, he had posted the one words (if that’s how you say it) from nine Seattle-area CEOs. He had nine, and now I have nine, so I thought, ‘Why not take this whole West Coast vs. East Coast thing to a whole new, no doubt meaningless, level and compare the words from both coasts?’

So, here, for your amusement and edification or whatever, are the nine Seattle CEO words stacked up against the nine Boston CEO words. As you will see, only one word, “focused” was mentioned on both coast. And only one other word, “passionate,” was mentioned twice (both times by Boston CEOs).

When Wade saw this comparison, his first reaction was to accuse me of mixing up the two lists. After I assured him that wasn’t the case, he said he thought most of the East Coast CEOs gave New-Agey, feel-good answers that seemed more reminiscent of West Coast lifestyles, while the West Coast entrepreneurs gave hard-edged, down-to-earth words that are more traditionally associated with New England’s Puritan work ethic.

What do you think? Have East Coast entrepreneurs been studying the West Coast playbook too hard, or vice-versa? Do you see other patterns? Which single word do you like best? My own favorite is “vibrant” (I was born in Berkeley, after all). But I think the best word for a startup culture to be built around is probably “focused.”

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Palo Alto-based Pinnacle Ventures is coming to town, according to a report in peHUB. The office will likely house one principle and two other professionals, according to peHUB’s Dan Primack, and should be up and running soon. Primack quotes the firm’s founder and managing partner as saying that Pinnacle already does a fifth to a quarter of its deals on the East Coast.

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At the outset of my career I had the great fortune of working with Bruce Wasserstein on Wall Street who made his reputation imploring CEOs that they should “dare to be great.”

Now as President of the New England Venture Capital Association (and a General Partner at IDG Ventures) I am focused on why we VCs don’t dare to be great and consistently, predictably build billion-dollar companies in New England. This “billion dollar dilemma” has many root causes and the solutions will be complex but I applaud Xconomy for at least providing a forum to debate these issues. This is a problem which needs our attention to ensure long-term viability for this region.

I see two fundamental cultural biases at work here. There is strong bias against failure—the scarlet letter is F. I see it when VCs consider candidates when recruiting for portfolio companies—boards and investors struggle to look past a failure notwithstanding other successes on the resume. My guess is that West Coast investors are more forgiving. Out there, unsuccessful entrepreneurs dust themselves off the next day and get back in the game.

The other bias which I find disturbing involves risk tolerance. My East Coast colleagues—I fear—have a stronger aversion to investment risk than my friends out West. Most successful venture funds will write off 20 percent of the capital they manage. In fact if you are not losing enough money you may not be taking enough risk—and our investors pay us to take calculated risks. While unbounded optimism is dangerous, there is a pervasive sense among West Coast VCs that all their portfolio companies will be enormously successful and have a chance of “returning the fund.”

Ironically, investment-returns data from Cambridge Associates suggests that performance by East Coast VCs over the long term is actually better than that of West Coast firms (nearly 150 percent Internal Rate of Return for New England-based funds versus 85 percent IRR for California firms over the last ten years). Results over the last five years are quite different, though (-4 percent IRR versus 6 percent, respectively). My fear is that we are not backing as readily the “out of the box” opportunities which become the companies that establish new industries. Facebook was started by Harvard students yet was backed primarily by West Coast VCs and is now resident in the Valley—that is very disturbing.

There are a number of structural issues at work as well but I will highlight just a couple—and it is not all about how bad the weather is here. The proliferation of “non-competes” makes it exceedingly difficult to recruit for early stage companies and fosters an environment which shuns startups. These employment terms are much less prevalent out West, underscoring the West Coast entrepreneurial culture. New England is also in some sense saddled by its historic industrial successes. Old line industries have been challenged to retrain workforces and reorient business models in the face of new technologies. New England was dominant in the data communications industry yet today many of the new Internet-centric businesses are based elsewhere.

New England continues to be dominant in one particular industry—the life sciences. Arguably there is no better place in the world to launch a life science company. The entire ecosystem surrounding these ventures is robust and improving. Governor Patrick’s recent billion dollar initiative will help to support future vitality. The continued health of the hospital systems and strength of the academic centers are crucial. And our ability to attract major R&D labs of multinational pharma companies will ensure the health of the ecosystem.

Arguably there are important parallels between life sciences successes and the next great wave of innovative companies in the “cleantech” field. These businesses share long product development timelines, important chemistry and biology innovation, the need for creative sources of funding and partnerships, and complex distribution and customer relationships. As much enthusiasm as there is in cleantech, there is also keen investor debate as to whether this will be a near-term profitable investment area. There is no doubt that the overarching trends are real and the needs for innovative solutions are acute; but will these early companies be good investments? Not clear yet.

But what is clear is that New England needs to support this field. Arguably all of the regions in the country started at some level of parity earlier this decade. But there are troublesome signs that the cleantech ecosystem out West has rallied quickly to foster a very friendly startup environment. It would be a tragedy, given the historic dominance of the life sciences, and the strengths of Harvard and MIT, if New England was not able to maintain a position of leadership here.

So we need to dare to be greater. I fully accept the solutions are difficult to identify, much less implement. For instance, I would like to see New England retain more of its young technical talent (we should offer more affordable housing to all recent grads who want to work in the high tech and life science industries). I would also like to see greater support for commercial infrastructure. I would like to see Harvard be more accommodating to its faculty and students who want to start companies (probably another column altogether).

Maybe I will finally draw up that VC Christmas wish list this year…

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If there is a central incubator for “clean-tech” businesses, it’s California. Stiff environmental regulations, generous tax incentives, top-ranked research universities and national labs, abundant capital, a huge potential market, and a Governator who takes global warming for real make the Golden State the nation’s undisputed leader in renewable energy innovation. Of the 10 investment firms worldwide that closed the most clean-energy deals in 2006, five are in California, where there are plans to draw 20 percent of the state’s energy from renewable sources by 2010.

So why would any young, ambitious, California-based energy investing insider even consider moving to Massachusetts? Ten words: “The opportunity to participate in some great early-stage ventures.”

That’s how Rob Day, 34, sums up his decision to leave San Francisco’s Expansion Capital Partners and become a principal at Wilmington, MA-based @Ventures in February. Of course, there was also the lure of free babysitting—Day’s young family is now much closer to the grandparents. But the reality is that Massachusetts lags so far behind California and other states in clean-energy business development that it’s an ideal hunting ground for budding dealmakers, Day says. “There’s so much world-class research here that even though there’s a good, strong energy startup cluster, I would expect it to be twice what it is,” he says. “Helping to make that come out in what ever little way I can is exciting.”

Andrew Friendly, a newly minted senior associate at Advanced Technology Ventures in Waltham, gives remarkably similar reasons for his own defection from California to Massachusetts in April. “Some of it was a personal decision to come back closer to family on the East Coast—but the other part was the opportunity to be involved in a growth industry in an area that has considerable growth potential,” says Friendly, who is 38. “As opposed to being a me-too investor in the Bay Area, I can help grow a smaller industry with an equally large potential in New England.”

While it could be argued that venture capitalists spend most of their time in the air and therefore aren’t based anywhere, there is anecdotal evidence that a handful more are landing on the East Coast and staying—or at least keeping their clocks on Eastern Time. Day and Friendly are joined, for example, by Susan Wu, a partner at Charles River Ventures. Wu works from the firm’s Menlo Park, CA, office but spends more and more of her time lately overseeing the company’s Boston-area investments, including open-source software consulting firm Optaros and onling gaming company Conduit Labs (see our recent profile). “I think companies like Conduit Labs are proof that there are fantastic entrepreneurs and exciting ideas in the area,” says Wu. “I’m looking forward to spending more time in the Boston area. Imagine that—a Silicon Valley VC coming East.”

But it’s the energy sector that seems to generate the most magnetism for the region among young VCs. The New England area is already home to more than 150 clean-tech companies, which means there’s a good base of experienced energy entrepreneurs. The big problem—read, opportunity—is overcoming what Day calls the “enterprise formation gap:” a lack of support in New England for early-stage ventures trying to turn proof-of-concept gadgets into customer-ready prototypes.

“There is an assumption that if there is a money-saving innovation out there it will get adopted, but the fact is that non-economic factors often make that difficult,” says Day. “I see my job as taking the innovation and not only helping the management team get the capital resources they need, but also helping them make connections so they can build out their teams and raising awareness so that the marketplace is clear about the economics.”

Day’s first assignment at @Ventures was to help align a startup called Powerit Solutions with its natural customers and partners. Powerit builds “demand response” systems, software and switches that allow businesses to smoothly power down equipment and facilities at times of peak electrical demand, freeing up power for a utility’s other customers and earning bonuses or rate breaks as a result. Powerit’s software “helps you figure out, when you get the call, how much power you can free up across your facility without sacrificing productivity and without hurting the bottom line,” explains Day.

“It’s a no-brainer” to install Powerit’s system, since “there’s an infinite payback period,” Days says. To get Powerit going, he helped arrange conversations with utilities and “demand aggregators” such as ComVerge and EnerNOC (NASDAQ: ENOC). (EnerNOC went public in May, becoming one of New England’s biggest clean-energy success stories). PowerIt is the sort of company that wouldn’t have trouble finding customers in California, Day suggests, but needs a bit of extra help in New England.

Beyond helping companies grow, Day says he’s encouraged by his partners at @Ventures to spend time promoting a healthier clean-energy technology cluster in New England. He sits on the advisory board of the nascent Massachusetts Clean Energy Council and also works on business-development initiatives with the New England Energy Innovation Collaborative (NEEIC), an @Ventures sponsoree. Day is also a member of the advisory board for new clean-tech news site Greentech Media and recently merged his blog Cleantech Investing into Greentech’s network. He and Friendly, who were classmates at Northwestern University’s Kellogg School of Management, have launched a Boston chapter of the Renewable Energy Business Network, a Bay Area group to which they both belonged. “REBN East” has so far sponsored one networking happy hour in Kendall Square and plans a second on September 11.

Friendly says he was drawn to work with Advanced Technology Ventures in part because it, too, is involved in cluster-building efforts such as NEEIC and the Clean Energy Council. The firm “has an appreciation for the challenges the [energy] sector will face—the capital intensity and the long development times,” says Friendly. “They are not scared by that, and they also understand what I call the four-legged stool of the sector: Not just the business opportunities, the markets you are attacking, and the technologies needed to address them, but the public policy drivers.”

Indeed, if Massachusetts’s clean energy industry is ever to catch up with California’s, Friendly explains, investors and businesses will need to lobby the state and federal governments for more California-style clean-energy incentives, rebate programs, and regulatory standards. “When the government sets a clean-air standard, that forces industries to look for solutions,” Friendly says. “New Jersey, for example, has learned from California, and they are reworking their solar energy program. Massachusetts has a long way to go.”

But even if government policies changed overnight, there would still be lingering cultural differences in the way energy businesses and other technology startups are funded on the two coasts, Friendly says.

“I think the cliche of people on the East Coast being a bit more pensive or spending more time analyzing something, whereas on the West Coast there is a tendency to be a gut investor and be a little faster to move—it isn’t fully true, but I have seen a little bit of it,” says Friendly. “New England is a harder area to break into. That being said, there are fascinating people and very dynamic innovation communities in both places.”

But if more folks move east from the West, maybe that, too, will change.

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