My former company, Upromise, is one of the few VC-backed consumer success stories out of the East Coast. The company has over 6 million households as members and a strong brand in the college savings community. That said, it’s hard to name many others from Boston, whereas the West Coast is full of them, from Google to TiVo, from NetFlix to eBay, from Amazon to Yahoo – world class brands have been created left and right in the Valley these last 10 years. And so many people in my travels ask me the question: "Why are there no consumer hits out of Boston?"
The conclusion I’ve come to is that Boston simply lacks the key ingredients for a great consumer start-up. All start-ups require the proper ingredients to succeed – visionary entrepreneurs, savvy professional managers and sharp VCs among them. Whereas you can find these ingredients in abundance throughout New England for software, enterprise IT, bio-tech, data communications, you can’t find it for consumer marketing.
When I was hiring Chief Marketing Officers at Upromise, the first three came from California, NYC and NYC. Why? Because there wasn’t very much consumer talent in Boston. In a meeting with CEO Larry Lucchino the other day, I pointed out to him that, arguably, the Boston Red Sox were the best consumer brand in Boston. When Interbrand published their 2004 BusinessWeek article ranking the top 100 brands, only Gillette (#15) hailed from New England, and we know where the brains of that operation are heading post P&G acquisition. The home of the other 99? NY and CA were very well represented. When the Fleet Center was looking for a new branded sponsor, no local ones could be found. Sports area sponsorships are hot stuff throughout the country, but it took a Canadian company (TD Bank North), to care enough to name Boston’s premiere sports arena. When consumer-oriented entrepreneurs pitch me, they always start their pitch by saying, "Thanks for meeting with us. No VCs in Boston seem to ‘get’ consumer plays".
On the flip side, Boston has done pretty well creating enterprise IT/software companies, although these companies do typically get acquired before they can really blossom into large, independent market-leaders. In fact, other than EMC, you’d be hard-pressed to identify a world-beater as opposed to nice, nichey companies. One depressing way to drive this home is to look through the Boston Globe’s weekly "High Tech 50" – the list of the 50 most valuable companies in MA. Only 3 are greater than $5 billion in market capitalization (EMC, Raytheon and Analog Devices) and 18 greater than $1 billion. Akamai is the only one of the 18 to have been founded in the last 10 years.
Back to the consumer angle, I predict things are starting to change. Investing behind consumer businesses is so attractive, and the general Boston-based start-up talent pool so strong, that I predict new, interesting projects will emerge that have a consumer flavor. Marketing technology talent is rife in Boston (Digitas and Hill Holiday are great feeders, as well as all the CRM software companies running around route 128). So let’s hope, like the Red Sox’s infamous 86-year slump, the consumer start-up slump ends for Boston soon! I’m eager to help fund that next winner!