The Once and Future Hub
Fourteen reasons Boston is poised to lead America’s economic comeback. (Whenever it comes.)
8. Because the people who inhabit this ecosystem aren’t panicking.
Oh really, you say. Didn’t the investment bank Rodman & Renshaw just publish a report warning that 113 biotechs nationwide (a fair share of them in Boston, to be sure) have less than a year’s cash on hand and are in danger of going under? Yes, that’s a serious concern (and my, how well read you are!). There’s no doubt that some area biotechs will fold if the economy stays this scary. So many local jobs have already been cut that the tech website Xconomy keeps a deathwatch tally.
But none of this seemed to greatly trouble the businesspeople and biotechies at a recent MIT cocktail reception for alumni entrepreneurs. The function was held at the Stata Center, on a day when the Dow plunged 400 points. As the assembled entrepreneurs sipped wine, snacked on bacon-wrapped scallops, and made the networking rounds, no one threatened to jump out of the building’s famous herky-jerky windows. They all knew Boston’s hold on biotech is safe. Says Elton, who was among the minglers, “Here we have enough activity going on that even if one venture fails, the talent stays. We preserve not just our intellectual assets but our human assets, too, and that’s important as you’re going through a recession.”
9. Because retrenchment could help shore up Boston’s standing as one of the world’s top biotech centers.
According to Christoph Westphal, CEO of Sirtris (his fourth biotech), the loss of VC funds will “probably be more of a problem for the secondary biotech centers, like Raleigh-Durham, Atlanta…six months ago every little place was saying, ‘We want to be a biotech hub.’ I think there’s probably [going to be] this concentration of more and more money in Boston.”
Highland Capital partner Bob Davis adds, “When you find a challenging time and you hunker down, you hunker down in familiar territory where you know where all the tunnels and foxholes are.”
10. Because its ecosystem makes biotech different from the leading local industries preceding it.
Until recently, biotechs used initial public offerings to fund their midstage research. (It can be 10 to 15 years before a biotech startup thinks about profits.) But with that option shut off by volatile markets, companies at that stage of development have increasingly been forced to rely on big pharmaceutical companies like GlaxoSmithKline and Pfizer to come in with the money they need.
National behemoths buying out our local flagships may make Bostonians fidgety. After all, Manulife turned John Hancock into a Canadian, Gillette’s run by a bunch of gomers in Ohio, and the thing that used to be Shawmut/BayBank/Bank of Boston/BankBoston/Fleet Boston now sits deep in the vast belly of Bank of America in North Carolina. But Westphal, whose firm was acquired by Glaxo last spring for $720 million, says the life sciences are a whole other animal. His new parent company threw him a three-year, $200 million budget and has since more or less left him alone. “What’s really interesting is what these big [pharmaceutical] companies want…is literally, expressly, an access to this ecosystem,” he says.
A final example, for fans of symbolism: On December 3, the same day the news broke that the venerable company State Street would slash up to 1,800 jobs, a South Korean life-sciences firm called Oscotec announced the opening of a new Cambridge office. Like everyone else in biotech, the South Koreans saw what was going on here, and wanted in.
11. Because the biotech ecosystem provides a model for the emerging field of green technology, a.k.a. cleantech.
“There is some crossover in the underlying technologies,” Elton says, noting that biotech touches on certain aspects of energy generation and storage. That leg up could prove quite useful, because as big a boon as biotech has been for the local economy, it’s nothing compared with what cleantech could do. “We talk about how many billions in the tech world,” says Tim Rowe, CEO of Cambridge Innovation Center. “In the energy world they talk about how many trillions.”
Obama seems to be thinking this way, too: His environmental plan calls for investing $150 billion in private cleantech enterprises over the next decade. The $500 billion economic stimulus proposal he unveiled last month reportedly includes the first $50 billion of the sum. Essentially, he’s answering the fall of Wall Street by pushing the rise of alternative energy. That means the same kind of federal money that has powered the growth of Boston’s biotechs could also spark our budding green sector.
Investors, taking notice, are pumping their own cash into cleantech. Nick d’Arbeloff, head of the New England Clean Energy Council, says that as recently as 2007 “there might have been one or two venture firms that even mentioned energy on their websites.” Now there are at least a dozen local firms with a dedicated energy practice.