Boston Unicorns

Last week, I used Aileen Lee's excellent TechCrunch article on Unicorns as a jumping off point to analyze the role of the MBA in creating these unusually valuable companies.  This week, I want to take a local lens and analyze these special companies that have been created in Boston.  As was the case last week, I was ably assisted by HBS 2nd year MBA student Juan Leung Li.

In order to have a reasonable population of companies to assess, we tweaked Aileen's definition.  We looked at the companies in New England (call them "Boston and surrounding") that had exited in the last 10 years (2003-2013) with greater than $500 million in market valuation.  Some of these companies had been around for a few years, but we felt this slice would allow us to assess companies that had recently created extraordinary value in a relatively short period of time.  In the case of M&A situations, we value the company at the time of the M&A.  In the case of public companies, we valued the companies at the market close of 11/15/13.

We found 50 such companies (updated from 43 originally).  That is, 50 companies in the Boston and surrounding area that had achieved > $500 million in value during the last ten years.  19 of these had achieved > $1 billion in value (Aileen's cut off, although she had constrained the founding date to the last ten years rather than the exit date, which obviously yields a broader population).  A chart showing these 20 companies can be seen here:

Boston Unicorns 3 v3


A few interesting observations about the full set of 50 companies:

  • Lack of Massive Winners. The perception that Boston has not recently generated massive wins appears to be only somewhat accurate, depending on which sector you focus on.  Of the 19 companies that were > $1 billion in value, seven were greater than $2 billion (TripAdvisor, athenahealth, IPG Photonics, Alnylam Pharma, Starent, Boston Biomedical, Acme Packet).  That said, only three of these companies are software technology companies – TripAdvisor ($12.5B), athenahealth ($5.0B) and Starent ($2.8B) – and they were founded in 2000, 1997 and 2000, respectively.  In other words, there have been no multi-billion dollar valued tech companies founded in Boston in the last 13 years.  There are three companies that have achieved >$1 billion in value in the tech sector founded in the last 10 years: Demandware ($1.9B/2004), Kayak ($1.8B/2004) and Fleetmatics ($1.4B/2004), although the latter was founded in Dublin.
  • Essential Role of Immigrants.  Here was a statistic that blew me away:  over half of these companies (51%) had an immigrant founder.  In my research related to my Senate testimony on immigration reform, I noted that 40% of Fortune 500 companies had an immigrant founder.  Apparently, successful Boston-based startups have an even greater concentration of immigrant influence.
  • Strong Diversity.  The breadth of the Unicorns is impressive, reinforcing the view that Boston's startup ecosystem is one of the most diverse in the world.  Of the 50 companies that achieved > $500M in value, 23 were life sciences (plus materials science), 22 enterprise technology and 5 consumer technology.  To see the companies in their various segments laid out, see the chart below:

Boston Unicorns 1 v6

Much of this data refutes the belief that all the major startup winners have been created in Silicon Valley.  In fact, the vibrant life science sector is now arguably more heavily concentrated in Boston than in any other cluster at any other time in history.  That said, Boston has definitely come up short in the race to build massively valuable tech companies.  And if you want to build a consumer Internet company, there are few role models. 

However, I am quite optimistic about the future. As evidenced by this review of the Boston startup ecosystem, the quality and robustness of the environment has improved greatly in the last few years.  As for big winners, the pipeline looks pretty good.  Globoforce and have filed to go public and companies like Acquia, Actifio, DataXu, Dyn, Hubspot and Wayfair and are all reputed to be on a similar path in the next year or two.

If you want to see the entire spreadsheet with the underlying data, you can click here.

Related articles

Unicorns and MBAs
What Makes the Boston Start Up Scene Special?
Billion-dollar software success is almost rare as unicorns

Unicorns and MBAs

I like being a contrarian.  As a kid, if a certain TV show was popular amongst my buddies, I’d purposefully ignore that show and search for other shows that were less well known (e.g., Hogan's Heroes was a personal favorite that never hit mainstream).  When someone declares something is conventional wisdom, I look to poke holes and challenge the underlying assumptions.

Recently, the conventional wisdom in Startup Land has been that young, technical founders are the prototype for creating valuable companies.  The formula, this theory goes, is to find a hacker in a hoodie and bring out the wheelbarrow of cash to back them.  Think Mark Zuckerberg/Facebook, Drew Houston/Dropbox, David Karp/Tumblr and – the most recent poster boy darlings of Startup Land – the SnapChat founders

I have always thought that stereotype was skewed. Don’t get me wrong – I love young founders.  At Flybridge, we have invested in many of them (e.g., Eliot Buchanan and Dan Choi at Plastiq) and we plan to continue investing in many others.  But in my twenty years living in Startup Land, I have found that there is no single model or archetype for success.  Success comes in many flavors and combinations.  And, in my last five years on the HBS faculty, I have become more convinced of the value of the MBA entrepreneur. 

Thus, I was thrilled to read Aileen Lee’s terrific analysis of unicorns (companies that have been created in the last 10 years worth more than $1 billion) and have it shatter this piece of conventional wisdom.  Aileen systematically analyzed the common characteristics behind this cohort of 39 companies and found that “inexperienced, twentysomething founders were an outlier. Companies with well-educated, thirtysomething co-founders who have history together have built the most successes.”

Aileen’s analysis didn’t provide any data on the role of MBAs in the unicorns.  So, in partnership with HBS second year Juan Leung Li, we did some of our own digging.  Here's what we learned:

  • 33% of the Unicorns had at least one founding member who had an MBA. Examples include Kayak (Steve Hafner/Kellogg), Workday (Aneel Bhusri/Stanford and Dave Duffield/Cornell), Yelp (Jeremy Stoppelman/HBS) and Zynga (Mark Pincus/HBS).
  • 82% of Aileen's Unicorns had at least one founding member or current executive team member with an MBA. Examples of unicorns where MBAs were hired to help build the company include Evernote (COO Ken Gullicksen/Stanford), Facebook (COO Sheryl Sandberg/HBS), Twitter (COO Ali Rowghani/Stanford).
  • Of those that had MBAs, the leading schools represented were: HBS (21%), Stanford's GSB (17%) and Wharton (10%).

Unicorns pic - companies v2


Unicorns pic - schools
This week, John Byrne of Poets & Quants published a complimentary analysis, ranking the top 100 MBA Start-Ups.  In this analysis, he found some terrific companies that have been MBA founded in the last 5 years, such as Okta, Rent the Runway, Warby Parker and Wildfire.  Among this MBA founder list, HBS (34%), Stanford (32%) and MIT (11%) came out on top.

Why all the momentum with MBAs and start ups? Simply put, the major schools have radically changed their curriculum. These schools and others have become super-focused on training their MBAs to be effective executives across a range of company sizes, from start-ups to large enterprises.  For example, HBS now teaches two courses to help train students to be effective start-up executives:  Launching Technology Ventures (which I teach) and Product Management 101.  MIT is considering offering their own version of these classes in the spring or next year and Stanford has a plethora of strong course offerings for future start-up executives.

So the next time someone tells you that you need a hoodie to be a great start up entrepreneur, don't be afraid to flash your MBA diploma with pride.

To see the detailed spreadsheet that Juan Leung Li did, click here.