The data is really great – innovation is alive and well in New York, and that’s why I spend a bunch of time there and have made a number of investments there. I’m glad that the region has gotten the attention it deserves.
But as I dug into the numbers, I realize that it’s actually more than a tale of two cities. The message it paints about my hometown of Boston is pretty darn strong. And to be honest, I think that Boston gets far less attention than it deserves.
There isn’t as much of a hype echo-chamber around here, but let’s look at the data:
- Slide 5: MA is still by far the second largest state in terms of receiving VC funding. The second largest by a large margin.
- Slide 40: The internet sector is alive and well in MA. In the most recent quarter, we saw $98M invested in the internet space in 25 companies. Compare that to $131M in 36 deals in SF, $126M in 31 deals in NY. Not terribly different given that things can change quite a bit from quarter to quarter.
- Slide 40: In Fred’s post, he discusses the capital efficiency of these companies relative to the same data for Palo Alto. He writes: “The average internet deal in SF and NYC is $3M – $4M. In the Valley, it was over $8M”. MA’s average? $3.9M. Lower than NYC. So capital efficiency is alive and well here too.
- Slide 14: This is interesting. What you see over time is that the share of internet deals outside of CA, NY, and MA is INCREASING!. It seems like internet companies can increasingly be built elsewhere. It makes some sense actually given the trends of capital efficiency, our excellent communications infrastructure, and the rapid flow of information on the web. What’s that? You say that no “BIG” companies are built outside of the main hubs? Ahem. The biggest internet company of the last 3 years is being built in Chicago (Groupon). Don’t forget that that company probably has more monthly EBITDA than some of the “hottest” internet companies have annual revenue.
- Slide 14: BTW, note that MA has actually slightly increased share in terms of dollars in the internet, while CA and NYC have slightly lost share. I don’t read too much into this because you don’t want to draw too much from quarterly data. But it’s interesting nonetheless.
I’m excited about this region, and the data is promising. There are certain centers of excellence here that are really exciting – even though they don’t get as much play. For example, take mobile advertising (a pretty hot sector). Of the 4 $100M+ exits in this space, 3 have been in Boston (Quattro, Enpocket, and Third Screen). We also have some awesome companies in many other exciting sectors like ecommerce (CSN Stores, RueLaLa), travel (Tripadvisor and Kayak), SAAS (HubSpot, Constant Contact, etc), Cloud (Carbonite), the list goes on.
It’s an exciting time to be an investor in internet enabled businesses. You have never before been able to accomplish so much with so little. I’m thrilled to see the fervor around the NY market. I’m also thrilled to see such strong data in the BOS region, and the thought that we’ll see more exciting companies built anywhere there are smart, driven people with the will to solve meaningful problems. It’s an exciting time. It’s the best of times.