AUTHOR: Scott Kirsner
DATE: JULY 29, 2016
In January, around the time General Electric executives were ratifying the decision to move the conglomerate’s headquarters from Connecticut to Boston’s Seaport District, David Hurley was living in an Airbnb apartment rental in the same neighborhood. Hurley had landed some early funding from two Boston venture capital firms, and he had decided to move the headquarters of his startup from Raleigh, N.C., to Boston.
GE will no doubt be the trophy relocation deal of the year — if not the decade — for city and state officials. But it also required a pretty rich package of incentives. Plenty of companies in software, biotech, medical devices, and energy regularly put down roots in Boston without any tax breaks or promises of rent-free facilities, without much fanfare at all.
And even if they’re tiny at first, like Hurley’s marketing software firm, Mautic, they’re typically coming to hire. “The density of talent makes Boston a great location for our business, since there are so many other marketing tech companies and open-source companies here,” said Hurley, who has hired four people locally.
A few months back, I interviewed company founders who had made the decision to leave Boston for New York or California, to better understand why they had split. This week, I’ve been talking to people about all the things that pull them to Massachusetts.
The top three reasons are “workforce, workforce, and workforce,” said Susan Houston, executive director of MassEcon, a nonprofit economic development firm that helps tout the state. That’s true whether you are LEGO Education North America, a division of the Danish toy company that moved to Boston from Kansas in March, or Kanyos Bio, a biotech company developing drugs for diabetes and celiac disease that was formed through a partnership between a Swiss and a Japanese company.
Lausanne, Switzerland, is a university town and a great place to hire researchers, said Stephan Kontos, cofounder and vice president of research at Anokion, one of Kanyos’s two parent companies, “but the pool is substantially smaller” than Cambridge, where Kanyos can hire people who understand the complexities of shepherding a new drug from the lab into clinical trials. Kanyos has already assembled a team of 18 people in Kendall Square, and Kontos says that Anokion, which is working on ways to reduce the body’s immune system response to certain kinds of drugs, has also begun hiring for its own research site in Cambridge.
Funding is another factor that attracts entrepreneurs. “Ideally, I would’ve loved to stay down in the South,” said Mautic’s Hurley, who was born in South Carolina, “but the South just does not have very deep pockets.” He ended up raising about $600,000 from two Boston firms, Underscore VC and G20 Ventures. The investors didn’t require that Hurley move the startup’s headquarters to Boston, but they did make lots of introductions to people who might advise Hurley, and they hooked him up with free temporary office space.
Bruce Booth, a biotech investor at Atlas Venture in Cambridge, rattled off a list of five companies that he nudged to set up a presence in the Boston area after supplying them with capital. The companies had begun life in Singapore; Toronto; Copenhagen; Cambridge, England; and Rhode Island. How does he make the case for setting up shop in Boston or Cambridge? Booth calls the local life sciences ecosystem “the best place in the world for creating, building, and scaling biotech companies,” in part because of the array of investors, the close proximity of companies to each other, and the “high cultural risk tolerance,” or a willingness to fund or work for companies that are exploring uncharted terrain, and have only a small chance of succeeding.
Two entrepreneurship programs in Boston, Techstars and MassChallenge, have also begun luring fledgling businesses from countries like Estonia, Venezuela, and Israel. Both offer free office space, educational programming and mentorship, and introductions to investors over the course of about three months.
Mo Plassnig, an Austrian entrepreneur who participated in the Techstars program, said via e-mail that although he and his cofounder considered moving to the Bay Area, “Boston was far better, time zone-wise, than San Francisco.” Though 20 of Plassnig’s employees are in Boston, some are still in Europe, and many customers and partners are in California. This week, Plassnig’s company,Codeship, which helps software developers test and deploy their work, announced $7 million in new funding.
“Bostonians take it for granted that every week, there are thousands and thousands of networking events and conferences going on around town,” said Chibueze Ihenacho, CEO of ARMR Systems, which is developing a medical device to stanch blood loss after battlefield injuries. Ihenacho came to Boston from Atlanta last year to participate in the MassChallenge program, which receives a small amount of funding from the state, in addition to corporate sponsors.
But the vast majority of these companies don’t get a dollar in public funding or incentives for moving here (unlike GE.) Incentives, said Houston at MassEcon, “are not a driving force” in pulling companies to the state.
Of course, even those who choose Massachusetts as a corporate address still have gripes. The cost of housing and office space — especially in Kendall Square, a hotbed for biotech and pharma companies — comes up often. Hurley says it would be easier to grow a company if employees weren’t tied up by noncompete agreements, which can prevent them from leaving one company to join a competitor for a year or more. Plassnig said “public transportation is definitely something that should be improved,” and knotty commutes are something that Ros Deegan of Bicycle Therapeutics, a biotech company founded in the United Kingdom, mentions. Also: Remember that sometimes-slushy season between fall and spring?
David Goodtree, an investor in startups and a board member of the New England-Israel Business Council, said that when he talks with Israeli companies about where they are considering setting up a US office, “the top eight places are all around Silicon Valley, number nine is New York, and number 10 on their list is Boston — sometimes tied with other cities.” But Goodtree makes the case that when it comes to many industries, like cybersecurity, robotics, or enterprise software, Boston deserves to be much higher on the list.
In other parts of the world, Goodtree said, “People’s perception of Boston doesn’t yet match up to the reality.”
Perception is not an easy thing to change, but it is definitely well worth hammering away at.