I have been sitting on this post on the BUZZ in theHUB weblog asking whether the Boston VCs let the seed corn rot.
The pithy paragraph from this post reads thus:
With the VC’s in Boston taking a powder, the field became infertile and now is in need of some serious fertilization. Adam pointed out that while the Boston VC’s waited out the downturn, the ecosystem withered. We know that while nothing was going on here, there was still activity in Silicon Valley, ie… PayPal IPO 2002, Google IPO 2004, etc… The end result is that Boston is now playing catch up in the Web space. Another issue that has compounded the problem is that the continued activity in Web businesses out West has created a class of investors that does not exist here. A lot of companies are funded by angel investors that are seasoned Web entrepreneurs using significant amounts of cash to seed the next generation of up and comers. We don’t have the equivalent here.
Now I will be the first to admit that I am no expert in these matter, but I have some historical perspective on the issue having moved to the Boston area in 2002, and starting a new business here in 2003.
First it is easy to forget that Boston was hit really hard in the last dot.com crash, in fact there is good evidence that of all the tech hubs, it was hit the hardest. I think that would have made both entrepreneurs and VCs very gun-shy. Even as a tech, it was hard to get a job in this area.
Second, with the devastation that ensued, a lot of techs either moved to greener pastures, or just plain got out of the sector. I think this attrition can still be felt today in the Boston area because it seems to be really hard to come by qualified techs.
Third, I have talked to enough people here, both entrepreneurs and VCs, who noted that there is quite a cultural difference between the Boston area and the West Coast. It is hard not to miss when you live in this area and worked on the West Coast (like I did for four years).
Fourth, the PayPal and Google IPOs were silver linings in an otherwise dark time on the West Coast, Boston is not the only area that got hit.
Fifth, I started to see things changing on the West Coast in 2005, the Boston Area did not seem to wake up until 2006.
Lastly, one should note that there is now a thriving startup community in the Boston area, with lots of activity in the web 2.0 arena. You only need to look at how many networking events are now taking place, such as the Web Innovators Group, Tech Cocktail, TechCrunch, and how these events are regularly over-subscribed.