Battle of the Tech Ecosystems: Boston vs. New York, with Mattermark Data
When it comes to Tech Startups Ecosystems in the U.S. outside of Silicon Valley, New York is undisputedly the “other” pole of attention, but suddenly, there is increased attention on Boston. Can Boston become the third pole? What’s the reality?
So, let’s review what is happening on the ground in Boston, then follow with an analysis of the last 100 venture funding deals in both cities, utilizing Mattermark data (published with permission).
What’s New in Boston
First, the Experiment Fund is a new $10 million fund that has partnered with Harvard University and operates along its School of Engineering and Applied Sciences to scout potential investments with students, on campus.
Then, the Dorm Room fund, managed by First Round Capital, is now expanding into Boston, its a fourth city.
Also, Polaris Venture Partners is moving its headquarters into the Innovation District, and it was recently reported that Mark Cuban has made 6 investments in Boston-area startups.
Barb Darrow at GigaOm names 8 ways Boston can nurture – and keep – more startups. One of them is to “raise the fun quotient”.
Jeff Bussgang of Flybridge Capital Partners, part VC, part professor at Harvard has a post with a Slideshare, What Makes the Boston Startup Scene Special? Among the many reasons, it has 74 universities and colleges with 265,000 students. This is probably Boston’s most important advantage, given that students are the next entrepreneurs, and Universities are possibly the next VCs, according to Fred Wilson.
Rob Go of Nextview Ventures has The Hitchhiker’s Guide to the Boston Tech Community (Fall 2013 Edition), a very comprehensive listing of the who’s who including Meetups, University resources, VCs, co-working spaces, accelerators, upcoming startups and thought leaders.
Back in the 80’s, Boston was the undisputed second pole for high-tech, especially around the famed Route 128 corridor. I used to work for Hewlett-Packard’s Medical Products Group during that time, and would travel there almost monthly. I vividly remember the names of many tech companies that peppered Route128 when I made the trek to I-93 from Waltham on the way to Andover: Nixdorff, Data General, Digital Equipment, Honeywell, Wang, Apollo, EMC, to name a few. These were the mini-computer hey days. Fast forward to 2013, and Boston is in a renewal mode.
Boston vs. New York, in Venture Capital (not Sports)
To get a reality check, I analyzed the Mattermark data on the last 100 VC deals in Boston and New York (as of September 10, 2013) to understand their make-up, and compared how the two cities relate to one another. But I backed out medical devices, biotech, clean tech and pharma companies in order to keep it to “Core Info Tech” companies that will be the subject of this analysis.
Boston | New York | Advantage |
|
|---|---|---|---|
| Last 100 VC Deals Total Value | $2.47 Billion | $1.56 Billion | Boston |
| Biotech, Pharma, Medical, Cleantech | 30 deals, $1.7 Billion | 10 deals, $156 Million | Boston |
| Core Info Tech | 70 deals, $777 Million | 90 deals, $1.4 Billion | New York |
| Average Funding per Deal (Core Info Tech) | $11.1 Million | $15.4 Million | New York |
| # of Days to 100 deals | 76 | 58 | New York |
| Pre-A Distribution | 35 deals or 50% | 42 deal or 47% | Boston |
| A, B, C | 25 deals or 36% | 41 deals or 45% | New York |
| Late | 10 deals or 14% | 7 deals or 8% | Boston |
Total Funding Levels
Total funding levels for the last 100 deals were higher in Boston, at $2.47 Billion vs. $1.56 Billion for New York. But that’s caused by the fact that Boston had 30 life sciences, biotech or cleantech companies who typically command much higher investments, whereas New York only had 10 in that same segment. By stripping that segment out, we were left with 70 companies in Boston that raised a total of $777 Million, vs. 90 companies in New York that raised close to $1.4 Billion. Therefore, the overall average per company tilts in the favor of New York, with $15.4 Million vs. $11.1 Million for Boston companies.
Stages Distribution
But when looking at the various funding stages, the differences were somewhat narrower. In the Pre-A segment, Boston had 35 deals or 50% of the 70 that were analyzed, vs. 42 deals or 47% for New York. In the A, B and C rounds, Boston had 25 deals (36%) vs. 41 deals in New York (45%). In late stage, we found 10 deals in Boston (14%) vs. 7 in New York (8%).
It’s interesting to note that I had to go back 76 days to find the 100 deals in Boston (June 24-Sept 10), whereas it took only 58 days to find New York’s last 100 deals (July 12-Sept 10). This means the velocity of investment is higher in New York.
Top Deals
For each stage category, here is the list of the top deals, including all the VC firms that participated from the beginning, for each company.
Boston
Stage | Company | Description | Total Funding | Last Round | VCs |
|---|---|---|---|---|---|
| Pre-A | Ellevation | Education software | $3.85 Million | $2.35 Million | NewSchools Venture Funds, Rethink Education & angels |
| A | Anaqua | Intellectual asset management SaaS | $100 Million | $100 Million | Insight Venture Partners |
| B | Jana Mobile | Mobile rewards platform | $24 Million | $15 Million | Spark Capital, Publicis Groupe |
| C | Paydiant | Mobile wallet | $34.6 Million | $15 Million | Sands Capital Ventures, North Bridge Venture Partners, General Catalyst Partners, Stage 1 Ventures |
| Late | Quandia | Online community for physicians | $63 Million | $10 Million | Fuse Capital |
New York
Stage | Company | Description | Total Funding | Last Round | VCs |
|---|---|---|---|---|---|
| Pre-A | EquaMetrics | Financial trading software | $4.5 Million | $2 Million | Angels |
| A | Vice Media Group | Online video for youth | $70 Million | $70 Million | 21st Century Fox |
| B | Fancy | Online magazine and bookmarking | $110 MIllion | $7 MIllion | Allen & Company, General Catalyst Partners and angels |
| C | GetTaxi | Taxi booking app | $42 Million | $12 Million | Inventure Partners, Kreos Capital and angels |
| Late | Fab | Online design store | $336 Million | $5 Million | Baroda Ventures, First Round Capital, Zelkova Ventures, SoftTech VC, SV Angel, Menlo Ventures, Thrive Capital, Pinnacle Ventures, DoCoMo Capital, Mayfield Fund, Atomico, Andreessen Horowitz, Pinnacle Ventures, RTP Ventures, SingTel Innov8, ITOCHU Corporation and angels. |
Top VCs by Recent Activity
The VC distribution was very spread across these deals, as I counted over 80 participating VCs in the New York deals vs. over 70 in the Boston ones. Only one firm, Lerer Ventures was in 5 deals in New York. Most others were in just 1 deal, and a handful in 2 or 3 of them. This is the short list of VC firms that participated in more than one of the analyzed deals, by alphabetical order:
Boston Top VC’s (in the last 70 deals)
- Bain Capital Ventures
- General Catalyst
- Insight Venture Partners
- Lerer Ventures
- Spark Capital
New York Top VC’s (in the last 90 deals)
- Accel Partners
- Battery Ventures
- ff Venture Capital
- First Round Capital
- Gemini Israel Ventures
- Google Ventures
- Index Ventures
- Lerer Ventures
- Lightspeed Venture Partners
- New York Angels
- Social + Capital Partnership
- SoftTech VC
- Spark Capital
- SV Angel
Summary
There you have it. Boston vs. New York. If you compare sheer volume and density, New York is ahead, outside of Cleantech, Biotech, Pharma and Medical Devices. Boston is slightly leading in the distribution across early stages, and in the late stage category. The velocity and density of deals is higher in New York, but Boston could show new momentum because of the increased attention and activity levels.
For Boston, the battle may be an internal one, because the dollars are still titled towards Medical Devices, Pharmaceutical, Biotech and Clean Tech. Boston needs to grow its share outside of these traditional sectors, but regardless, Boston is definitely in a solid third place and will remain that way for the foreseeable future.
(Note: Thanks to Mattermark for allowing me to publish this analysis, based on their data.)
Excellent analysis – thank you for that. As an ex-New Yorker (born and raised there for early part of my life) and current Boston resident (been here 28 years now) and a startup founder, what I see is that New York has a certain “energy” in the city that Boston lacks, being more laid back (and, according to some cynics, more parochial). There’s an immediacy in New York that makes getting together in a cafe so much faster/easier than here. There’s a wealth of resources in New York that are more easily, more quickly accessible than in Boston.
But Boston has a quality of life factor that beats New York (major reason I moved out of New York and came here). The wider, more open spaces, easy access to the ocean, less congestion and noise, and a slower pace of life. Not that any of these latter contribute much to a startup’s success, but depending on the individual (esp. for older types like me), they could play a role in attracting talent.
Ultimately, Boston will rise in the ranks. It has so much going for it already: as you pointed out, a gilded history and deep-set precedents for innovation, a huge number of schools, a vibrant youth-oriented culture, and more.
Money goes to where it’s most welcome. I believe Boston, with new initiatives such as the Innovation Center, more Meetups forming, more startups appearing on all the right radars, will quickly become a most welcoming home for money (and in turn more investments, more startups, more exits, more success in general).
Then, the only rivalry will be the most long-standing one: Boston Red Sox vs. New York Yankees!
(BTW, I used to be an analyst at Aberdeen Group during the dot-com heyday; interesting to see your history with that firm.)
More cargo cultism. You should locate your business in the city that makes the most sense for your business, based on your business needs. Not chasing after venture capital. If you’re building a BS “startup” whose primary product is it’s own equity, then locate in San Francisco and be done with it.
If availability of venture capital is a key requirement for where you locate your business, then you’re building a BS business.
If you want a successful startup, build one that can survive without venture capital, and thrive without it…. then if you do take VC you’ll take it on better terms.
Also the idea that some VC firms are “good” is silly. VCs are dumb money. NEVER TAKE ADVICE FROM A VC that you disagree with, and never find yourself in a position to be forced to take bad VC advice. This is what kills companies. Lord help you if you a majority of your board members are VC “representatives”. Your company should be in the hands of 19 year old MBAs with zero operating experience? Who are barely old enough to grow hair on their balls? El Stupido.
Thank for your great comment. True that the energy, urgency and intensity levels are higher in New York.
I like the ambitions of tying New York. Definitely possible. Boston’s ace card is the universities. If students can come out of there, start companies and stay there, that’s a big bonus.
Yeah- I didn’t mention my 6-month stint at Aberdeen in Boston in 2005, on Franklin Street!
Agreed on both counts. But startups aren’t just made by students or new graduates or youngsters in general. Some compelling research by Vivek Wadha concluded that the average age of a successful entrepreneur in high-growth industries such as computers, health care, and aerospace is 40. Twice as many successful entrepreneurs are over 50 as under 25; and twice as many, over 60 as under 20. The vast majority — 75 percent — have more than six years of industry experience and half have more than 10 years when they create their startup. Nearly 70 percent start their companies to capitalize on business ideas that they have — which they see as a way to build wealth. His thrust is that ideas come from need; understanding of need comes from experience; and experience comes with age.
And from that perspective, older folks may find Boston to be an easier fit for lifestyle; New York’s energy and intensity may be fine when you’re in your 20s, but later in life, a less taxing environment is often preferred — especially if you have a family. And all the excitement you want is but a 3-hour Acela ride away.
If you like to ski, lots of places in the winter are a couple or more hours’ drive from the city. An hour west and you’re picking apples and blueberries. Sailing is easy. If you’re a private pilot (as I am), the Vineyard is a 15-minute flight from Plymouth; P’town is 5 minutes. Not even remotely as easy from New York. I could list many more examples…
So I think that one of the drivers to help Boston hopefully tie with New York is the presence of more mature (in age) entrepreneurs who find the lifestyle in Boston more suited to their preferences. Not the only driver, clearly, but one of them — and not an insignificant one either.
I was at Aberdeen between mid-99 and early 02, before it was sold, when it was still at One Boston Place. So much had changed with Aberdeen, and now it’s completely unrecognizable from its founding days. Anyway, small world, isn’t it!?
Cheers,
Great data, but IMO you should match your title to your story. After subtracting bio tech and clean tech from both cities’ totals, you aren’t comparing their respective TECH ecosystems. Rather, this is a story about INFO TECH startups. And, I find it odd that you refer to info tech as “core” tech. Bio tech and clean tech are peripheral?
I love Boston too. True not all students found startups, but they all become part of the talent pool to other existing ones.
Info Tech! That’s much better than Core tech. I was having a total mental block yesterday on that one. I should have emailed you…really. Then, I was thinking of the hardware related startups that have hard and soft in them like Thalmic Labs or a Fitbit. Is that segment Info Tech too, or we need another naming to depict the Tech minus the clean/medical/bio tech?
You are a natural born analyst it William. Thanks for crunching these.
These numbers tell a tale from the top down, from the bottom up its all about infrastructure and culture, talent and market connections.That’s what people care about when they decide where to build companies.
Thanks. Some of the issues you named are mentioned in that GigaOm article “8 ways Boston can nurture…”. Eventually, the top-down meets the bottoms-up, and you have a perfect storm, like in NYC now.
And to think that in the mid-80’s, Boston was so much ahead in overall tech. I used to spend a few days working in Waltham or Andover, then end it with a week-end in New York which was pretty tech-less at the time.
Yup
That is my experience as well.
This is really great analysis. Coming from a biomedical research background, I know that Boston is undisputed as a leader for biotech. However, it clearly is a aiming very well in the other tech space. Any future plans to compete LA or the Boulder ecosystems?
The numbers aren’t there yet for Boulder & LA. I ran them actually, prior to finishing this article.
But it begs the question about who is #4 in reality.
Austin? In the early days of AngelList this city had more representation outside the big 3 . Don’t know if that translate to VC.
Update: I renamed it to Core Info Tech. Thanks!
I think Austin is quite diversified in addition to info tech, it has pharma and cleantech. We’d need to peel those back to compare apples to apples, but it would probably be in the top 5 is my first guess.
This is an interesting point. Is it really justifiable to segment various tech sectors when all forms of tech are starting to blend? most successful and future technology ventures are leveraging strengths in software, hardware and other more core sciences depending on their focus. I wonder if NY’s lack of a deeper tech industry will limit it to media products and hold it back…
Definitely there’s a blend when it comes to smart hardware products like a fitbit, nest or square. But the ones I was excluding were the pure cleantech or pharma or medical devices where the round sizes are an order of magnitude higher than soft/hard info tech startups.
That round size differentiation will obviously have a significant effect on the results, but the willingness of investors to invest those larger amounts means that they expect larger outcomes. Those outcomes form an integral part of the overall local tech ecosystem, especially as the application use cases when combined with interactive application can be far more profitable and life changing.
I am a New Yorker so i’m not trying to promote Boston here, but the trend of NY leaving the heavy research to others is IMHO its Achilles heel.
There’s nothing stopping NY from becoming a capital of innovation in the medical and bio-sciences fields as we have one of the largest and finest medical communities.
I think the issue that separates them is that VCs who invest in cleantech, biotech, medical, pharma are not the same ones that invest in hard/soft info tech businesses.
True, but their lack of presence in NY says a lot about the entire NY ecosystem, although some of the recent moves by NYU have the potential to begin changing it.
The point I was trying to make was that while I understand that removing those segments from the equation says a lot about a particular segment, it hides an important fact that can shed light about the entire tech ecosystem and its future.
Ok. I understand. How do you think are the 2 sides related to one another?
I think NY definitely has a deeper bench of tech relating to the other industries in the city, i.e. advertising, media, shopping, design, etc. but take a company like 23andMe which combines genetics with user apps or health tracking companies such as FitBit which cross disciplines.
NY largely does superficial things while Boston and to a greater degree the Bay area does the life changing things. There are obviously some exception but i’m talking generalities.
Fitbit is an example that’s still in its early days. They have hardware, application/web service and they have tons of growth in life sciences to both collect health and lifestyle data for diagnostics and general learning about our bodies as well as any consequences of our action or lack thereof. Obviously life sciences and other sectors have different use cases but with the ever more powerful and pervasive smartphone, they have the potential to get deep in our lives.
How many NY companies have that type of deep integration or deeper vertical capabilities to tap into? The lack of VC’s and funds in NY addressing this is also concerning.
NYU Poly opened NYU Wireless to explore the possibilities in the combination of wireless and medical fields. The lack of investors lining up and looking for exploitable technologies is sad, contrast that to Boston and the Valley.
I see. Thanks for this insight. That segment should be interesting to watch.
Really insightful data. Both the NY and Boston economies are very diverse too outside of technology. Both have strong healthcare/pharma, financial, etc.