Boston’s Next Tech Gold Mine
Silicon Valley VCs like Kleiner Perkins Caulfied Byers, NEA, and Sequioa Capital might have multiple billion-dollar funds, and they occasionally invest $200 million, sometimes $500 million. New England firms typically put in far less, and demand quicker buyouts. To demonstrate the shortsighted nature of local VCs, consider that TripAdvisor will hit a billion dollars in revenue only now, 14 years after its launch and a full decade after its local investors sold it. Google, which hit a billion dollars in revenue in five years, and Facebook, which did it in six, regularly rebuffed substantial buyout offers.
So what does the ad-tech sector have going for it? That all of these companies launched around the same time gives the industry a huge boost. “Clusters [of talent] are very important,” says Bill Aulet, managing director of the Martin Trust Center for MIT Entrepreneurship, which supports MIT students who want to become entrepreneurs. “A cluster allows for more-rapid iterations on ideas, which allows you to be more competitive.” Micah Adler, president and CEO of Fiksu, has experienced the benefits of the ad-tech cluster firsthand: “We become like a center of excellence in an area. I can call up Ric [Calvillo, CEO of Nanigans] and say, ‘Hey, what do you make of this? or any of those guys.”
One can witness the cluster effect in action in the field of large-data storage: As Massachusetts’ biggest tech company, EMC serves as a storage-related epicenter, inspiring those around it to explore data management in ever-more-innovative ways. Waltham’s Actifio, for example, is a storage-related company that pulled in a $100 million venture-capital round in late March, valuing it at a billion dollars. That’s the first Boston-area startup to achieve unicorn status since the travel site Kayak went public in 2012.
Venture capitalist Jeffrey Bussgang can put all of Boston’s startup travails in perspective. He’s one of the four general partners at Flybridge Capital Partners, an up-and- coming venture capital firm with about $560 million under management, and is also an investor in DataXū. “There are three distinct stages in a company’s development: jungle, dirt road, and highway,” he says over breakfast one morning at Rebecca’s Café, on Boylston Street.
The toughest part around here, Bussgang says, seems to be getting from dirt road to highway. Sure, the region’s plethora of entrepreneurial programs breed plenty of creators who thrive in the early stages—that heady period during which anything anyone does can move the needle. But those same entrepreneurs often cool when things become more routine. The trick is to find sales and marketing executives who know how to grow a company from $100 million in sales to $1 billion in sales—something that, according to many experts, is difficult to do in this region, thanks to the dearth of big businesses.
Bucking the trend, he says, DataXū may have all the pieces it needs to make it onto the highway. Its technology is based in sophisticated mathematical algorithms developed for NASA over three and a half years by DataXū CTO Bill Simmons while he was at MIT. The tool analyzes the 35 billion possible paths we could use to get to Mars, how many astronauts to send, what sort of engine to use, what kind of trajectory to take, and what kinds of missions to perform.
In the end, Simmons realized he had an excellent all-purpose decision-making tool, and he suspected that his technology could have applications beyond aerospace. In 2008, when Simmons was getting his Ph.D. at MIT, the head of his lab, Edward Crawley, introduced Simmons and analytics specialist Sandro Catanzaro to Bruce Journey, a former Time Inc. executive who’d been running MIT’s Technology Review. The three began to meet on Monday nights to brainstorm how they could capitalize on their math. Then came the “aha” moment: Could Simmons’s Mars algorithms help develop a way to sell ads by predicting consumer behavior? To find out, they needed investors.
Enter Mike Baker. When I meet Baker on a breezy day in March, at Barrington Coffee on Congress Street, he is walking like a man on ice—stiffly and gingerly. Baker had torn his ACL doing an inadvertent cartwheel while heli-snowboarding in British Columbia a couple of weeks earlier, but he shrugged it off. Later this spring, he’ll have Thomas Gill, former team physician for the Patriots, take care of it. “I’ll be back heli-boarding this time next year,” he says.
Baker, who’s made 29 investments as an angel investor, is known for making quick decisions when it comes to money—and attracting other investors in his network to his ventures. “I put my money in, people go, ‘Mike’s not an idiot,’ and I bring people in with bigger pockets,” he says.
Baker is a Boston cheerleader; he moved one of his startups here from New York, and made one of the companies he invested in relocate from Silicon Valley to Boston. He was at CMGI in the late ’90s, when it had naming rights to what we now call Gillette Stadium. Baker ran two marketing-tech companies, one of which, Engage, pioneered the development of an ad network built around targeting consumers’ online behavior. It went public in 1999. The other, Enpocket, an early mobile-advertising company, was purchased by Nokia. Baker retired at 41, planning to teach and act as an angel investor.