The Boston Tech 30
Tech for Two
How does Boston stack up against Silicon Valley? What are local tech’s triumphs, challenges, and reasons for hope? Two members of the BT30—venture capitalist Jeff Bussgang and entrepreneur Jennifer Lum—sat down to dish about the scene.
Boston magazine: If I asked you to describe, in a word or two, the Boston tech scene right now, what would you say?
Jennifer Lum: “Mature.”
Jeff Bussgang: It’s so funny, I still think “fledgling.”
Bussgang: That’s so funny.
Lum: That is funny, especially given our opposite roles.
Boston: Let’s unpack that a bit. Jennifer, why do you say “mature”?
Lum: I think there are a lot of deep technical roots in Boston. And there are Boston companies, really starting from the infrastructure and networking days of technology, that have played a critical role in shaping the tech landscape. We’ve had many other waves of companies, but there’s great knowledge and talent and history all tied to technology in Boston.
Bussgang: I agree with all that. But “fledgling” and “striving” are the two words that came to my mind because although we have that great history, we have fallen behind. And there’s a sense in the culture of a little bit of a lack of confidence that we can be a great tech ecosystem, as opposed to a secondary or tertiary ecosystem.
I just dropped off my daughter at college yesterday—it’s her sophomore year. And the difference between freshman and sophomore drop-off is like night and day. At the freshman drop-off there’s a ton of anxiety and uncertainty because people don’t know where they fit. But sophomore year they walk in very cool; they run the campus. I still feel like we’re freshmen to some extent in Boston. And the cool kids in California are the upperclassmen, and we’re still striving to keep up with them.
Lum: I agree wholeheartedly with Jeff. And the frustrating thing for me is Boston has all of the right ingredients. We have the right schools, we have great, experienced technologists, we have amazing venture capitalists, we have a great community of bankers, lawyers—all the right things you need to build a proper company. But somehow we’re unable to have a major breakthrough.
Bussgang: If you had gone back in time and had this conversation 10 or 15 years ago and said, “There will be 150 to 200 companies that will be created worth over a billion dollars. How many of them will come out of Boston?” Fifteen years ago you would have said, “Maybe we’ll get 50 of those.” We’ve had, like, five. I mean, it’s been a stunningly low number. So I feel the same frustration because we have all the ingredients.
By the way, I don’t want to sound too down. Because this is like Olympic silver medal winners saying, “Gee, I really wish we could get the gold.” And there are thousands and thousands of communities that aren’t even at the Olympics. So we have a very special community.
Lum: And it is specifically work and technology startups that have kept me in Boston for the past decade.
Bussgang: Not the weather? [Laughter.]
Boston: Is something missing from the Boston scene compared with Silicon Valley? Or is there some luck involved?
Lum: I do think the serendipity factor is critical to making things happen in a timely manner. The proximity factor. Despite all the great benefits we have from connectivity and being able to communicate digitally, there’s something to be said for going to a happy hour and running into someone from Facebook, someone from Twitter, someone from Google. And that’s not going to happen for any top Boston company executive or technologist unless they happen to be spending time in San Francisco.
Bussgang: And if you think about the three companies Jennifer just mentioned, they’re all what I would characterize as platform companies. Every startup in the world wants to plug into Facebook; every startup wants to plug into Google. And those platform companies are in California. We haven’t built a platform company here in Boston. Our best and most valuable tech companies—Akamai, TripAdvisor, and Wayfair, more recently—are not true platform companies with huge ecosystems around them. So I think for us to really have breakout success we need to have our own platform company here.
Boston: What makes you hopeful about what’s happening in Boston?
Bussgang: One thing is just this time of year. Thousands and thousands of students show up. We are so blessed with so many talented people that just arrive and say, “Look at this incredible ecosystem.” They’re ambitious, they’re smart, they’re creative. And if they generate some fantastic ideas, we’re going to benefit tremendously from it. The other thing I would point to, and Jennifer represents this beautifully: There are a lot of entrepreneurs in that next generation of leaders who are very savvy about what’s happening in the Valley, who are very savvy about what’s happening globally, who really want to build world-class companies. And as long as we can keep those entrepreneurs here, we’re going to have a fantastic talent pool to draw from.
Lum: One thing that’s been exciting for me to watch in the past couple of years is some Boston-based companies going public. That’s really very inspiring to entrepreneurs and other members of the Boston tech community. And it also feeds into that cycle of people having that experience of growing and scaling a real business—understanding what it means to take a company public, to manage a company according to Wall Street, and then cycling back in to write an angel-investing check into a new company. That cycle, the more that we can spin that up, is going to greatly benefit Boston.
Bussgang: Yeah, it’s so true. I was part of the executive team in the mid-’90s of a company called Open Market, which went public in 1996 with a couple-billion-dollar market cap. And that leadership team, and the next level below it, and the next level below that, all went off to start interesting companies. There are 15 to 20 companies that are populated with Open Market alumni now in the Boston community. HubSpot is now doing that; Wayfair is now doing that as well. And so there is this sort of success-breeds-success dynamic that we are seeing with the next wave of companies that have gone public.
Boston: It’s interesting that an IPO is not just a financial event, but a psychological one, too.
Bussgang: It just raises the bar. If you’re an entrepreneur just starting out, your dream is to get to that first million dollars of revenue. And then you achieve that and you look around and say, “Wait a minute, maybe I can get to 10 million in revenue.” And then you achieve that and you say, “Maybe I can do a hundred million in revenue.” We have a lot of great companies that are going from 10 to a hundred, but we need companies that are going from 100 million to a billion.
If you look at Silicon Valley, they laugh at our billion-dollar-value companies. They say, “Ten billion dollars is interesting; a hundred billion is really interesting.” It’s a completely different mindset. That raising of the bar is what we need to do collectively, and it’s happening.
Boston: What does GE’s move to Boston mean to the tech community?
Bussgang: Have you been watching their commercials? GE’s a tech company. We just got our platform company. Hundreds of billions of dollars in market cap just showed up, and we didn’t even have to create it! I think it’s spectacular. And I think every decision GE has made has been spectacular. Going into the city. Going into the Fort Point Channel area. Having a very visible headquarters. They’ve reached out to many of us in the [tech] community and said, “We want to meet the companies here. We want to be plugged in. We want to contribute. We want to be invested here for decades.” So I think it’s a spectacularly, fantastically, massively awesome thing that GE has done that, and I’m thrilled to see what comes out of it.
Boston: Would you use those same adverbs, Jennifer?
Lum: Absolutely. I’m very excited. I think it’s going to be a great catalyst to continue growing our community here in Boston. And by observing what GE has done in terms of community outreach and just building a set of resources for startups in New York—if they do a good job of replicating that here in Boston, it’s going to have a meaningful impact.
Bussgang: And it’s such a great fit for our community. Because GE is a serious technology company. They do deep technology. The whole IOT—Internet of things—space is extremely promising. Industrial engineering, cloud computing, cybersecurity, next-generation energy…the areas that they’re particularly interested in are fantastic fits for the Boston community. So I think there’s a ton of opportunity ahead of us.
Boston: You both deal frequently with young entrepreneurs in Boston. I’m curious what you see these days.
Lum: I think with the rise of blogging and social media, there’s a lot of transparency and access to information about how to build a company, how to fundraise for your company, and how to learn about how investors think about putting money into companies. So with that increased access to information, many entrepreneurs are just a lot smarter as they embark on these new challenges. But I do think there’s also a set of entrepreneurs who are very focused on just founding a company so they can be an entrepreneur. And that’s interesting to watch.
Bussgang: Yeah, that’s well said. Entrepreneurship is cool now. It wasn’t as cool 10 or 20 years ago. And so because it’s cool and there’s so much more information, people think it’s easy. I was chatting with a former student of mine—he’s the CEO of a startup that he founded right out of business school about five or six years ago—and I said to him, “How’s it going?” And he said to me, “Jeff, you told me it was going to be hard. You said, really, really hard. And you were wrong. It’s harder.”
Boston: Jennifer, do you think your path has been any different because you’re a woman? And is the community here supportive?
Lum: I’ve been fortunate in that I had the opportunity to work with two great teams. First the team at m-Qube, and then a subset of that team started another company called Quattro Wireless. And both of those companies built great products, great platforms, and achieved successful exits. And as I ventured out to start my own company, I think I earned some credibility by working with those teams. And that put me in a slightly different light in trying to build relationships with investors, potential team members, and partners versus if I were a female founder starting from scratch.
I would say I’ve had just excellent experiences and opportunities to build great relationships with female and male mentors here in Boston. And the openness and level of accessibility I’ve had to some really special people has really helped me. That is something that’s unique and special to Boston. People really care.
Bussgang: I think we have a pretty good culture of openness, that our culture is more accepting of diversity of all types. That’s a real attribute of New Boston, as compared to Old Boston and the old stereotypes that Boston used to have from the overhang of the busing crisis and everything in between. I also think we’ve got a long way to go. We have a huge amount of work on the venture capital side, which I’ll be the first to admit is a travesty. I believe the numbers are—one study said 94 percent of partners in the venture capital industry [nationally] are men. And I believe that number has actually gotten worse in the last 10 years.
Lum: It’s interesting, if you look at the Boston venture community, most of the women investors that I can think of have started their own firms. I think it would be great to see the established firms inviting women into their partnerships because it affects everything from deal flow to decision-making around the partnership table.
Boston: Look ahead five years: What do you see for the Boston tech scene?
Lum: Five years from now I hope that we have a dozen breakout companies that have gone through that upper threshold that Jeff mentioned earlier. We have a good crop of companies that have been at it for, let’s say, five to eight years, and I think many of them will reach the point where they’re breaking through on not only a national but a global level. And they’ll do a great job of putting Boston tech on the map.
Bussgang: I’ll add two more things. One is that I hope that we have some mature clusters that are truly world-class. The life sciences cluster has grown extraordinarily in Boston in the past decade. And we have a few microclusters that are candidates to be world-class, whether it’s cyber security or health IT or robotics or AI or the Internet of things. And I hope that one or many of those matures to be truly world-class.
The second thing is that I hope policymakers in our state will begin to implement some policies that are more innovation-economy friendly. Whether it’s meaningful non-compete reform, whether it’s more-meaningful immigration reform and support for global entrepreneurs, whether it’s meaningful patent-troll reform. There have been some big policy issues swirling around Beacon Hill that have not settled in an innovation-friendly fashion. Yet. And I hope that in the next five years we can look back and say that the regulatory and legal framework that we’re operating in Massachusetts is superior to any other state. Because our schools are superior. Our community is superior. Our intellectual capital is superior. So why wouldn’t we want to have a superior regulatory framework as well?
Lum: One other thing I would like to see five years from now is more companies relocating to Boston because they realize that we have tremendous resources.
Bussgang: That’s a great point. Let’s throw in there another Fortune 500 headquarters relocation.