A Guide to the Boston Startup Scene – Fall 2016

Every fall, I deliver a presentation at Harvard’s iLab, open to the community, on what makes the Boston startup scene so special. It has become a nice opportunity to step back and appreciate all the rich resources entrepreneurs have at their fingertips in the Boston community. Here is this year’s version (which I’m delivering this afternoon), complete with a lot of updated content and data on our local tech hub:


Retaining Talent – Where Do Alums Go?

Written in partnership with Phil Strazzulla of NextWave Hire, an HBS student of mine who stayed in Boston!

Massachusetts is the land of colleges with over 114 high education institutions, and nearly 250,000 students calling it home.  These students represent an extraordinary talent pool that gets exposed to the local innovation ecosystem. Ideally, many of these students will stay in the greater Boston area upon graduation to pursue further education, their careers, and build their lives.

However, there are also many students who leave, namely for opportunities in other attractive locales, such as New York and San Francisco.  Because the flow of students in and out of Massachusetts is such a strategic issue for the state, we wanted to take a deeper look into which schools did the best job of retaining students as a way to understand how the region generally can retain its valued, young talent.

In the past, it was difficult to get access to reliable data on this issue. But, today, LinkedIn (soon to be Microsoft LinkedIn!) is a nearly universal professional directory and has an accessible API from which to pull data. Thus, we used LinkedIn’s API to look at some of the better known and largest of the Massachusetts-based schools to see where graduates were locating post-graduation. Here’s what we learned.

Bentley Rules, With Northeastern a Close Second

In the chart below, you can see what our analysis showed across a range of thirteen of the more popular schools in the state. We analyzed the percentage of graduates from each institution who are currently living in the Greater Boston Area, a data set that includes over 1.1 million professionals.

As you can see, the school on this list that retains the most graduates was Bentley University, where 59 percent of recent alumni are in the greater Boston, followed closely by Northeastern.  At the other end of the spectrum are Williams and Amherst, who both actually see higher numbers of alumni in NYC than Boston.  Williams and Amherst have 22 percent and 24 percent of alumni in NYC, respectively, as compared to only 13 percent in Boston.

Bentley is an interesting case study; it draws a national and international student population, perhaps because it performs so highly on many major rankings. Bentley was ranked No. 5 in the U.S. by The Economist for value (defined as median earnings as compared to expected earnings based on a wide range of factors) and No. 10 for undergraduate business schools by Bloomberg.

Why would some schools be better at retaining their graduates in state than others? One obvious driver for this discrepancy between schools is where the students originate from.  If a school has more Massachusetts-based incoming freshman, they will probably have more people who stick around over time.  Again, thanks to the LinkedIn API, we ran those numbers too using the same data set of 1.1 million alumni. Here’s what we found.

Northeastern Rules on a Relative Basis, UMass Amherst Is a Negative Outlier

This next chart measures the percentage of students who come from in state minus the percentage of alumni living in the Boston area.

Looking at the numbers on a relative basis, Northeastern is the stronger contributor to the state’s talent pool. At Bentley, 45 percent of students come from in state, and 59 percent of alumni are in Boston currently, which means that the school provides a net contribution of talent to the state of 14 percent.

UMass Amherst is a massive outlier – although the vast majority of their students come from in state, nearly half their alumni find from in state currently find themselves living outside of Boston.

It is interesting to see that nearly every single school on this list is a net contributor to the collective Massachusetts ecosystem.  In other words, putting aside UMass, nearly every school sees more students stick around Boston then grew up here.  MIT draws from only 10% in state students yet nearly 21 percent of MIT alumni are currently living here in Boston, thus a gain of 11 percent of their 117,000 alumni – a talented cohort that makes a substantial contributor to the local economy.

Why else might a school be a more positive contributor to the local economy? Recruiting patterns and school ranking could also be a factor.  Students from world-renowned universities like Harvard and MIT attract global employers. The graduating students are thus sought out by companies from all over the world who are willing to go to great lengths to recruit these students (e.g., Google and Facebook are particularly aggressive recruiters at those two schools).

Overall, Boston is a great place to get an education, and a great place to stay to build your professional career.  It’s clear that the ecosystem of colleges and universities contributes by bringing in great talent who stay after graduation.  While these numbers are encouraging in the aggregate, we hope they will allow individual institutions to set higher targets and provide greater transparency.  If each school were open in sharing their data (perhaps a statewide version of what the Obama administration has emphasized with their Open Data Initiative, College Scorecard), we could monitor this over time. As many undergraduate business school students know, paraphrasing management guru Peter Drucker, what gets measured gets done.

Immigration Reform – A Stubborn Issue

I’ve written a lot in the past about our country’s need for immigration reform. As the son of an immigrant entrepreneur, it’s an issue I care deeply about. That is why I’ve partnered with business and civic leaders to try to do something about it through the creation of the Global EIR program: a public-private partnership where universities can sponsor H1-B visas for immigrant entrepreneurs, avoiding the luck-of-the-draw annual lottery system.

It’s also why I’m calling attention to the Partnership for a New American Economy’s (NAE) Reason for Reform campaign, which launches today. NAE, of which I’m a member, is a bipartisan coalition of over 500 civic and business leaders from across the country who support common-sense immigration reforms that will support and create American jobs. They’ve marked today as a National Day of Action with events in all 50 states and the release of new, state-specific research highlighting the economic contributions of immigrants in each state—as well as Washington, DC—and the costs borne in the absence of reform.

The Reason for Reform campaign invites all those affected by our broken immigration system—including farmers, faith leaders, business owners, students, tech leaders, and others—to record a brief, 30-second clip of themselves from their phones or computers giving their reason for immigration reform. These videos will be immediately sent to Congress and can be shared through social media to encourage others to join the movement. Visit www.ReasonForReform.org now to add your voice to this national effort. Our elected leaders have stalled enough. It’s time for all of us to make it known that we demand real action on immigration.

Each day we wait, we lose out on what could be tomorrow’s next big innovation. Our nation was built as a land of immigrants. Think about all the products and services we’d miss out on were it not for ambitious immigrants who came to America to turn their visions into realities. Companies like Google, eBay, AT&T, and Kraft. Today, 40 percent of Fortune 500 firms were founded by immigrants or their children, and foreign-born entrepreneurs are behind 51 percent of America’s billion-dollar startups. Here in Massachusetts, at least one in every five entrepreneurs was born in another country. These innovators are helping to ensure that America remains a global business leader and a top destination for talent from around the world.

Our elected leaders need to know just how frustrated we are with our current system. This isn’t an immigration system that can respond to today’s business landscape and market realities. We demand a revised system that allows business opportunities to flourish and creates jobs for more Americans.

Please join me in the fight by recording your Reason for Reform now. Congress needs to hear all of our voices demanding real change. The economic future of the United States depends on it.

Hamilton and Non-Competes

My house is smitten by Hamilton. We listen to the music incessantly, my wife and I are both reading the Chernow biography, and the kids are fighting over who gets to use the third ticket to the Broadway show when we go to New York in the fall.

So in thinking about the recent conundrum facing the state legislature with respect to reforming non-competes in Massachusetts, you’ll have to forgive me if I contemplate: WWHD (What Would Hamilton Do)?

First, some background. Non-competes are odious devices used, often surreptitiously, by corporations to suppress workers from freely pursuing opportunities. Their use hinders innovation, as demonstrated by numerous academic studies — creating “career detours” and “skills atrophy” warns one MIT professor while the Kauffman Foundation notes non-competes represent an “obstacle to labor mobility”, which is so critical in a dynamic economy.After many years of studying the issue, the White House has decided to weigh in, with Vice President Biden warning that non-competes creates unnecessary friction in preventing a fair marketplace for labor (his “regular Joe” explanation of why non-competes are bad, by the way, is one of the clearest and most direct you’ll ever read).

In Massachusetts, many of us have been working to get rid of non-competes for a long, long time. I give Bijan Sabet credit for first sounding the clarion call on the issue almost a decade ago with his December 2007 post on the issue. Since then, policy makers, entrepreneurs, labor leaders and investors rallied together to educate legislatures on why they are so corrosive, negatively impacting camp counselors, sandwich shop makers and PhDs alike.

At first, this broad coalition of reformers were set on eliminating non-competes entirely. But in the last year, those of us who have been engaged in this issue have come around to compromise. In business, you get to make crisp decisions — ship a product, include or delete certain features, make hardchoices about raising capital and signing partnerships. But in politics, compromise is the lingua franca. Even the most ardent supporters of eliminating non-competes have begun to realize that pragmatic compromises are the only path to achieving real reform.

So when Massachusetts House Speaker DeLeo signaled his willingness to take on the issue of non-compete reform, many of us were heartened. The bill that the House unanimously approved is a good one but has a few flaws. On Thursday, the Senate addressed these flaws and passed a stronger reform bill and now the two bodies will convene to try to negotiate a compromise.

And here’s where my mind drifts to Hamilton. This orphaned, immigrant Founding Father was an ardent advocate for his beliefs and values. His intellectual battles with other Founding Fathers over the fundamental pieces of the very formation of America, particularly James Madison and Thomas Jefferson, are legendary. Yet, in situation after situation, even hot-tempered Hamilton learned to compromise.

So let’s not allow this moment to pass and result in yet another legislative session consisting of debate and hearings but nothing to show for it. Inspired by Hamilton, as they take up the final details of the bill, I implore our state legislators: let’s not throw away our shot.

If you want to reach out to the legislators who are on the joint House-Senate committee to negotiate a compromise solution, email:

An Audit Is Good For You (Honest)

There is a funny ritual in board rooms when it comes time to determine which board members will go on which board committees. I have seen the same pattern almost every time on every board I have ever been on.

“OK,” intones the CEO hesitantly. “It’s time to select committees. We have the compensation committee and the audit committee. Who wants to be on audit?”

Smirks and eye rolls ensue. A deferential kabuki dance begins. “Well, I’d be pleased to take compensation even though I know it’s a lot of work,” begins the largest shareholder, staking their claim on the juicier post. “But if you prefer comp, I suppose I could take audit.”

Every VC worth their salt knows that the compensation committee is where all the power is – setting the CEO’s compensation, evaluating her performance – whereas audit committee is a snooze. Reviewing revenue recognition policy, discussing the finer points of GAAP and interacting with auditors is less fun than a visit to the dentist. And, besides, in the early days when there is little revenue to recognize and the numbers are too small to merit much debate, there is little reason to even form the audit committee and bother with the expense and time of conducting an audit.

Or at least that is the conventional wisdom. In recent years, I have changed my views. Serving on the audit committees of a venture-backed startup is no longer rote but rather a central and strategic function. Further, I think entrepreneurs should embrace going through an audit rather than holding off as long as possible – which is the typical modus operandi for startups in the first few years.  Let me explain (as succinctly as possible, before I put you to sleep since this topic is not known to be particularly scintillating !).

In a private company, the audit committee’s purpose or charter is typically:

  • hire the auditors and oversee their work, including reviewing the financials
  • recommend monitoring procedures to improve operations
  • deal with any complaints associated with the financials or controls
  • adhere to any relevant compliance matters

The audit committee is thus where the “rubber meets the sky”. Entrepreneurs are dreamers and optimists, always looking to the future. Audit committees are evaluative and grounded in what actually happened, not what might happen. That is why the audit committee’s role becomes so central at the time of exit. In either an IPO or an M&A transaction, suddenly everyone is focused on financial results and controls and what actually happened and how it was reported and accounted for. If entrepreneurs and boards took the audit committee more seriously from inception, they would save themselves a lot of heartache at the time of exit, never mind avoid some of the classic scaling pitfalls when operations get sloppy.

Let me give you one painful example I recently experienced. I served on the audit committee of one of my portfolio companies. The company was scaling fast and we found ourselves in the enviable, yet still problematic position, of many scaling companies:  our finance and operations team was too thinly staffed, our VP of Finance was a bit over their head and we were scrambling to bring in a more senior finance and operations executive. Because I was busy and sitting on a lot of boards and committees, and because I trusted that the CEO and VP of Finance were on top of things, I was not particularly worried about the fact that our audit seemed to be delayed. No alarm bells went off when the typical audit period of a private company (May, June, July) went by without the audit committee being called to convene and review the completed audit.

When the new head of finance showed up and finally dug into the audit process, he discovered that we had inappropriately accounted for some of our transactions. A company we thought was EBITDA positive suddenly turned negative and our accelerated customer acquisition was proving to be unprofitable. We caught the problems in time to hit the brakes, but I know that if I had been more proactive in my role on the audit committee, we could have mitigated the impact.

Mistakes like these happen in good companies run by good people because everything is moving quickly, everyone is spread thin and everyone is focused on the next product release, the next deal, the next quarter, the next year and the next valuation inflection point. The audit process is that point in time where you bring in skeptical outsiders to slow things down and look backwards. Immersing yourself in that process is a valuable function for a board and any entrepreneur – and an underappreciated one.

Welcoming Jesse Middleton as our Newest General Partner

I am thrilled to welcome Jesse Middleton to the Flybridge family. Jesse is joining us as a General Partner to help lead our NYC office.  This hire is a big deal for us.  Jesse is the first General Partner we’ve hired in over a decade.  Jesse is a tremendous entrepreneur and executive, having for over the last five years been a part of the creation of one of the most successful start ups in history – WeWork – and serving as an active angel investor in NYC.

Here’s his blog post announcing his arrival:

My venture into venture (capital)

In February I took a look at my journey into the angel investment world. I had been doing it for only a little over a year, but I learned a ton. I learned that I loved discovering and getting to know new founders. I learned that I enjoyed helping to solve some of the earliest challenges that those founders face. I learned that I had the ability to celebrate with the people I backed when they had huge wins and, more importantly, I learned I could be a shoulder to lean on when things (often) didn’t go as well. But my biggest takeaway was a personal reflection: that I wanted to focus on investing in and supporting these amazing founders full time.

These last five and half years helping build WeWork have been a wild journey and I’ve loved every second of it. I got to experience the earliest days of startup life when we all came together at 3am to put the final touches on our first WeWork buildings. I also got to experience the meteoric growth and success as we barreled past 1000 employees and announced our 29th city. Thank you to everyone at WeWork for every single moment. But, as I announced in May, it was time for me to leave WeWork and become a full-time, professional investor.

Today I get to share the next big step of my adventure — I’m joining Flybridge Capital Partners as a General Partner. I will be leading our New York office alongside the one and only David Aronoff. I couldn’t be more excited to be a part of the Flybridge team!

David and I met five years ago at a Flybridge event. We became fast friends and I’ve been able to look to him for guidance and mentorship (and he’s always up for a drink) ever since. I met the Boston team a few years ago when I helped launch WeWork Boston and have loved our interactions as well. Flybridge has had a strong presence in New York for years. David opened the office here four years ago and the partners have invested in some amazing companies including 33Across, BetterCloud, Bowery, Codecademy, MongoDB, NS1, Raden, Shine and tracx. With my arrival, we plan to support our “family” of portfolio companies here even more while also doubling down on investing in the New York City startup ecosystem.

When I first sat down with the Flybridge team, we talked about what they were looking for in a new partner and where I wanted to take my journey next. Two things became abundantly clear very quickly:

  1. They were great investors, board members and champions of their portfolio companies and their founders.
  2. As good as they were at being great investors, they were even better people.

Every single person I talked to throughout the process echoed these two things. As I got to know them better, it quickly became clear that working alongside the whole Flybridge team just felt… right.

WeWork’s mantra is to “Do what you love” and that’s what I know I’m continuing to do now. I’m excited to dive in, to get to know the Flybridge Family (52 active companies and their thousands of employees) and to continue to support the New York community that I love.

If you’re working on something interesting, are looking for feedback on your new idea, thinking about raising your first round or simply want to shoot the shit about startups and NYC over a drink don’t hesitate to say hi. You can reach me at jesse@flybridge.com, on Twitter and on Facebook.

More Visas for Immigrant Entrepreneurs – Babson and Alaska

“…a state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”

  • Supreme Court Justice Louis Brandeis, 1932

A few years ago, I was frustrated with the lack of progress on immigration reform out of Washington DC. I brainstormed with an immigration lawyer friend, Jeffrey Goldman, and came up with the idea of the Global EIR program: a public-private partnership where a university could sponsor an H1-B visa for an immigrant entrepreneur, avoiding the onerous lottery system. Last year, we partnered with the state – with the support of the legislature, the governor and the Mass Tech Collaborative – to launch the first global EIR program in Massachusetts in partnership with the University of Massachusetts under the leadership of vice provost Bill Brah. That program is now over one year old and has seen tremendous success thanks to Bill’s indefatigable drive as well as the support of the state and private sponsors SVB, Goodwin Procter and Mayor Bloomberg’s foundation.  Specifically:

  • 20 visas issued to immigrant entrepreneurs (100% approved by USCIS)
  • 16 companies (most of whom wouldn’t be in the US if not for the program)
  • Over 200+ jobs created across those companies
  • Over $100 million raised by those companies

In partnership with my friend, Brad Feld, we created the Global EIR Coalition to take the program national and hired Craig Montuori to lead the new non-profit. Brad helped extend the program to Colorado in partnership with the University of CO Boulder.

Earlier this year, New York got into the act, partnering with the CUNY system to launch their version of the Global EIR program. They plan on issuing 80 visas to immigrant entrepreneurs.

And today, I am thrilled to report that both Babson and the University of Alaska have announced that they are launching their own Global EIR programs. Babson is consistently named the top ranked entrepreneurship school in the world and so a bellwether in the field. Alaska is the first West Coast program and has the opportunity to draw from its strong relationships with Asia and Russia.

If you’re interested in learning more about the program, supporting it philanthropically, applying for it, creating it in your home state, or whatever, contact one of the local chapters or get in touch with Craig via the Global EIR Coalition website.

Onward towards rational immigration reform – state by state!