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Summary:

It may not be Silicon Valley but the Boston-Cambridge metro area has a lot going for it — infrastructure expertise, a deep talent pool, and VC funding. Facebook famously went elsewhere, but here’s why other local companies started here (and will stay put.)

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The Boston metro area is no Silicon Valley. But it fields its fair share of startups and it raked in the lion’s share of the nearly $780 million in venture capital invested in the New England region in the fourth quarter of 2011.

While the area is more famous for the tech luminaries and startups it lost to other regions — Harvard alums Facebook’s Mark Zuckerberg and Microsoft’s Bill Gates being the most famous examples  – it still can claim a roster of impressive tech startups.

As a Silicon Valley-based partner for Boston-based North Bridge Venture Partners‘  Paul Santinelli has studied the differences between the two technology hotbeds up close and come up with a few conclusions. “Boston is strong in infrastructure, comms [communications], and enterprise software — the kinds of technologies needed to build businesses,” he said in a recent interview.

Silicon Valley — which led the league in VC money with more than $3 billion invested in Q4 2011, according to the PricewaterhouseCoopers/NVCA MoneyTree Report, is much more focused on the consumer markets, Santinelli said.

But in the post-minicomputer, post-PC world, why build a business in Boston? “That’s a question we had to answer in a very real way when we got started,” said David McFarlane, Co-Founder and CEO of Akiban Technologies, a Boston-based NewSQL database startup. Some of the company’s backers wanted it to relocate to Silicon Valley, he said, but Akiban resisted.

“There’s a tremendous amount of talent in the Boston area where there are quite a few database and data integration companies. There are a number of founding architects that came from Object Design, from Archivas, Blue Agave, and Oberon and InterSystems,” he said. Object Design was a pioneer in object-oriented databases; Blue Agave, a demand management specialist, was acquired by I2 Technologies (which was then acquired by JDA Software); Archivas was a storage startup acquired by HDS; InterSystems is the company behind the Cache database (an outgrowth of the  MUMPS database) used by many hospitals and healthcare organizations.

Ori Herrnstadt, McFarlane’s co-founder and Akiban CTO agreed. “The caliber of architects you found here in the database world was unmatched. The Vertica, the Netezza, the Object Design guys were all here,” he said.  (Vertica, Netezza and Object Design ended up at  Hewlett-Packard, IBM and Progress Software respectively.)

Other hot database or storage oriented startups in the Boston area include KinveyParElastic, Ginger.io, Sonian, Hadapt, Cloudant and VoltDB, the latest brainchild of serial database entrepreneur Michael Stonebraker, who backed Informix, INGRES, Streambase and, Vertica.

It doesn’t hurt that MIT, Harvard, Tufts, Boston University, Boston College, Brandeis, Bentley, Babson, UMass/Boston and other colleges are shoehorned into a compact area around the city. Those schools provide a steady stream of young talent to power startups. Another key part of Boston’s deep bench comes from its background as the home of the minicomputer — the mid-range machines that bridged the mainframe and PC eras. Those minicomputer companies — Digital Equipment Corp., Prime Computer, Data General, Wang Labs, ComputerVision — have gone the way of the dodo bird, but left behind an impressive array of technology experience that remains relevant.

Boston’s proximity to east coast financial companies is another plus. Those companies are not only a possible source of investment but a potential customer base, Santinelli said.

Still, as evidenced by the number of local companies snapped up by outside tech giants, the Boston-Cambridge nexus can feel more like a farm team to distant big leaguers. IBM alone has bought 20 local area companies since it purchased Lotus Development Corp. in 1995. IBM’s most recent purchase was Burlington, Mass.-based Emptoris last December.  Oracle (bought Cambridge-based Endeca in October) and others have cherry picked promising startups in the area. There simply aren’t many tech giants based here any more. On the plus side, the well of expertise still runs deep in the area that witnessed the rise (and fall) of the minicomputer era.

Photo courtesy of Flickr user John Stracke

  1. But oh the sunshine and beaches of california ………;)

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  2. No big secret, most Boston VC’s fund local people/companies. A more interesting story would be the quantitative data related to the success of ‘invest local only’ versus ‘invest globally’ – and to what extent the Boston VC’s have may hindered the returns of their Limited Partners by avoiding remote board meetings. I have no data either way – but would find the data interesting.

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    1. hi jeff. Are the boston-area VCs really more parochial than VCs of other areas? It is an interesting thought…will have to figure out how to investigate.

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    2. Jeff… Boston VCs, while conservative in nature, don’t support just a “local only” strategy. I travel quite often for board meetings on both coasts. It’s a little bit of a generalization… but I understand where that might come from.

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  3. concur on all fronts. we’re one of those NYC startups launching in Boston (yes I know it’s oxymoronish ;-)) . for us (“twitter for events” – mashable) it came down to a) being able to secure a robust and agile go-to-market partner (i.e.: Boston.com/NYT), b) great talent availability and c) right demographics for our product launch. given a chance we would do it all over again here. Initial results should provide ample confirmation for the nay-sayer (http://angel.co/schedit – see volume growth chart) #goboston cc: @SCHEDitBoston, @ohtellez ; ps: acela is fast and has ok wi-fi

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    1. @omar I would assume also that while Boston is expensive (to live, to hire etc.) it’s less so than NYC?

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  4. Hi – Betsy Aoki from Bing.com here. So thrilled to see Boston,the startup community I work on for the Bing Booster program, be written about by GigaOm (yay! waves at Barb!). Though historically Boston’s been strong fostering b2b entrepreneurs, I guess I would urge folks not be so quick to write off consumer startups, gaming, social and mobile as our work in the accelerators (Critical Mass, Mass Challenge, DogPatch Labs, Techstars) we’ve seen quite a few of those other types of companies making their way. And it’s great the article called out the student population -more programs are popping up in the universities to foster entrepreneurship (whether sponsored by professors officially or as clubs folks want to be in). MIT Startup Weekend last fall was run by a fellow out of one such MIT club. Boston has a lot going for it, and growing into its own all the time. It’s why we (Bing) thought it was important city to try and give a startup boost to. :) Yay! Thanks for writing this!

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    1. hey betsy, can you put me on your mailing list? barb dot darrow at gigaom dot com? thanks for pinging me, i’m just picking up startup coverage here.

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  5. Very excited to have the light shine on the Boston startup scene! There is a great presentation here (http://www.slideshare.net/bussgang/boston-startup-scene-picture-presentation-212) from Jeff Bussgang with some really interesting stats. One that stands out is that on a per capita basis, Boston has a higher level of VC investment than both NYC and California.

    I think the Boston startups scene tends to fly below the radar a bit for two reasons (a) culturally we’re less self-promotional than NYC or CA folks and (b) the mainstream media has a larger presence in CA and NYC and tend to cover what is geographically close to them more.

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