Boston’s Next Tech Gold Mine

The region’s newest multibillion-dollar industry is massive and invisible. It is a tech revolution that is silently and stealthily connecting companies to us in ever-more-cunning ways. And it may be the one enterprise that locks in Boston’s hegemony over tech for years to come.

When the DataXū trio presented their business idea to him in early 2008, Baker didn’t like it—they didn’t have a product yet, so it was hard to see how what they were proposing would be different from what he’d done at Engage. But he liked the math, and thought they could use it to help companies automate their advertising decisions. So he gave them $100,000 and started introducing them to friends in the venture capital world. Trouble was, nobody wanted to invest. The market had crashed, and everyone was spooked. “I was like, ‘This is going to be my quickest fail ever,'” he says.

Eventually, in December 2008, a VC told Baker, “I’ll do a deal if you’re in,” meaning if he’d become the CEO of DataXū. Baker felt torn. On the one hand, he’d promised his wife he’d retire, maybe do a little teaching. Running a company takes a lot of time. But he had already been trekking in from Needham every day to be with the DataXū team at their offices in the old American Twine Building, in Cambridge, and he wanted the idea to succeed.

So he told his wife his dilemma, and his intended solution.

“What? Are you crazy?” she replied. What he is, Baker says, is addicted to the business of business. And he’s good at it, too. Bussgang, who led Flybridge’s investment in DataXū, says, “Mike can go from jungle to dirt road, and I think he can go from dirt road to highway.” But not without some “oh, shit” moments.

Under Baker, DataXū now offers big companies that spend a lot of money on advertising—Ford, Lexus, Sony, and Universal—the ability to make ad-buying decisions in fractions of a second, a process called real-time bidding. It sees 800,000 opportunities to buy ads every second—50 billion a day. The software decides what to bid on in less than 10 milliseconds, or 40 times faster than we can blink.In that time, DataXū learns a lot about us—all anonymously, mind you, but still eerily specific. For instance, it can tell you that 25- to 34-year-olds in the Great Lakes region and on the Pacific coast are looking at ads for a certain American-made luxury car typically favored by the geriatric crowd. That requires deep algorithmic chops, and it’s incredibly valuable technology.

 

DataXū isn’t the only Boston ad-tech company heading for the highway. Founded in 2006 by Brian Halligan and Dharmesh Shah, HubSpot touts the concept of “inbound marketing,” which basically means getting people to find your site instead of some other guy’s. Once you’re there, sites use HubSpot’s tools to personalize what they show you, hoping to turn you into a consumer. With its business website tools, HubSpot has become very popular among small companies, claiming to have more than 10,000 customers and $78 million in sales last year, a 50 percent increase from 2012.

HubSpot is a great Boston story. Halligan, 46, went to Westwood public schools, then to the University of Vermont. He worked at Boston-area companies such as Parametric Technology Corporation and Groove Networks, which was started by the local tech legend Ray Ozzie and eventually bought by Microsoft. Shah had built a financial- services-software company called Pyramid Digital Solutions, which he sold to SunGard, part of Bain’s private equity portfolio, in 2005. He runs a blog, OnStartups.com, and has 225,000 followers on Twitter.

Halligan and Shah started out in the Cambridge Innovation Center, an accelerator in Kendall Square, and they became one of its biggest successes. They pulled in $65 million in venture capital from blue-chip firms like Boston’s General Catalyst and Matrix Partners, and West Coast stalwarts such as Sequoia, Google Ventures, and Salesforce .com. The company is known for its fun culture—it even has a nap room. But it isn’t slothful: Employees gather during the week to do pushups in the lobby.

HubSpot wouldn’t make its executives available for interviews, citing schedule conflicts. But it could also be that the company isn’t talking because it’s close to filing the paperwork it needs to go public—speculation is rampant.

Another promising company is Fiksu, which applies its algorithms to the $26 billion app market, working through several hundred ad networks to help apps get noticed. Fiksu (Finnish for “clever”) was founded by Micah Adler, a peripatetic Finn who was born in Australia, spent his formative years in Finland, graduated from high school in Concord, New Hampshire, and got his BS at MIT and Ph.D. at Berkeley. He came back to Massachusetts to teach computer science at UMass Amherst, publishing papers with titles like “Towards Asymptotic Optimality in Probabilistic Packet Marking.” Fiksu is his fifth startup. He says that the company has been used to promote more than 2,300 apps, which have been downloaded 2 billion times. At peak usage times, Fiksu’s algorithms are choosing among 150,000 potential ad placements a second. “The speed of light matters,” he says. The company has raised $18 million, and Adler is wary of seeking more funding, as raising more money can mean ceding control. Instead, he says he wants to grow Fiksu into a long- term business.

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