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Startup Activity in Boston Has Gone From ‘Strong’ to ‘Hyper-Strong’

Dena Levitz Headshot

Dena Levitz

Challenge Cup Reporting Fellow, 1776

Boston always has been historic and modern at the same. It’s one of the oldest cities in America, opening the nation’s first public school and first subway system. Yet, it’s internationally known for its crop of universities and medical institutions that advance discovery and learning.

The innovation culture has reverberated throughout Boston for as long as Brian Dacey, president of Cambridge Innovation Center, can remember. What’s changed in the past few years is the extent to which Boston has exploded as a hub for startup activity. AngelList puts the number of companies in the Boston area at nearly 2,600.

“It didn’t go from nothing to something,” Dacey says of the startup scene. “It went from strong to hyper-strong.”

With recent dramatic technology advancements, such as the proliferation of mobile, super-high speed connectivity and dramatic medical advancements like gene sequencing, “they all merge here,” he says.

Add to that the fact that Google, Amazon and Apple have boosted their presences in Boston. In doing so they’ve created a unique dynamic in which established tech companies want to be near startups, and startups want to work with the big tech companies.

“It all begins to feed on itself as the scale grows,” Dacey says, “and together these forces are spurring growth.”

In his innovation-related businesses Dacey has seen steady growth that parallels the Boston area’s growth. CIC launched in 1999 in Kendall Square as a magnet for upstart tech companies in the region to locate, network and grow their businesses. CIC has since expanded, with a new site in Boston’s Financial District to house and support budding tech companies.

Between all of CIC’s facilities, almost 700 startups have come through the doors.

In the last year, Boston also has gained District Hall, a gathering space for civic innovators. The project is the result of a public-private partnership. The city dreamed up the idea as part of a vision for Boston’s Innovation District. The building was privately funded by Boston Global Investors, and programming is run by the Venture Cafe Foundation, a nonprofit sister organization to CIC.

Boston’s Startup Ecosystem

Higher education and medicine are the lifeblood of Boston, so it only makes sense that the technology and innovation hotbeds in Massachusetts’ capital city would pop up around these institutions. MIT made Kendall Square a magnet for startups, and Dacey says it is still a vibrant center of entrepreneurship. Longwood Medical Center, too, has attracted a whir of innovative activity.

Dacey likes to use the term “nodes” to describe other concentrated hubs. Among these nodes,  there’s the seaport area which includes the city-mandated Innovation District. Along Boston’s waterfront the majority of buildings are former industrial ones, with ample warehouse space. That’s where larger companies, some in the energy space, who are able to pay the more expensive rent, are situated. A half-mile or so away from the waterfront, in some of the older buildings, startups are beginning to reside.

“There, you have a vibrant tech and gaming startup community,” he says, adding that ZipCar is based nearby.

If you picture Boston as a barbell, “on one end you have the old buildings, in brick and beam, that get populated by tech startups and on the other end are the more established companies,” Dacey says. “The Innovation District covers all of it, and District Hall is right in the middle.”

An emerging area for startups is the Downtown Crossing neighborhood, where CIC’s latest location is. There, startups priced out of other Boston sections are finding higher vacancies and lower rent. It’s similar to what’s happening in Manhattan, where New York financial institutions are moving away from the Financial District to Madison Avenue and, in the process, making way for startups to come in and fill the void.

Benjamin Levy, cofounder and CEO of edtech startup eduCanon, says Boston is a desirable place for education startups and that, as a result, the sector is growing. EduCanon, a platform for teachers to create interactive video content, was the ultimate education winner in last year’s Challenge Cup. Levy is mostly based in Washington, D.C., these days but graduated from Boston’s LearnLaunchX, an edtech accelerator from which his team built and launched the startup.

Massachusetts, he says, is the country’s leader in K-12 education, and, for companies with educational products, getting into the state’s schools to do product testing is “much more feasible.”

Education-specialized accelerators such as LearnLaunchX, too, are paving the way for more education startups in Boston, he says.

Another shift happening in Boston is startups’ customer bases. The city has historically been a place for B2B companies exclusively, but more consumer-facing products now are launching in the market.

Beyond CIC, there’s an abundance of coworking spaces, incubators and accelerators. MassChallenge, which runs the largest startup competition in world, also is Boston-based and a big force in the community. Microsoft’s Nerd Center is another major convener through its events and networking opportunities.

Boston’s Challenges

Cost is the biggest obstacle in Boston, hands-down, according to those in the startup community. The price of rent is close to the highest in the country. That means for companies to find physical spaces is difficult and costly. And for members of startup teams, many of whom are young graduates of the city’s many universities, living costs can easily be out of their desired price range, especially on the housing front.

In terms of talent, both Levy and Dacey say Boston is incredibly fertile. Intelligence, hard work and ambition are ever-present in Boston.

But, on the flipside, Dacey says the environment is “tremendously competitive” for tapping talented staff members. And this only drives up prices.

Boston’s Strengths

From a liveability perspective, Boston has a number of amenities. Quality of life is considered desirable, with sports teams and a robust public park system. Massachusetts’ capital also has the highest percentage of residents who walk in the country along with an expansive public transit system and subway.

In terms of its startup climate, Levy uses words like “exciting” and “vibrant,” and says he’s seeing a host of cool products that are also very revenue-focused—which makes them bound to excel.

For startup hubs, success begets success and builds the ecosystem. Boston, though not yet Silicon Valley, is beginning to have startup success stories to hang its hat on. As a result, the angel network is on the rise, as is the number of venture capital firms and their level of local investment.

Dacey says VC firms have increasingly moved to Cambridge especially.

“In the two buildings we’re in here in Cambridge, if you look at how much VC activity there is, it would be the fourth largest state in venture capital managed,” he said. “There’s a real density of activity.”

In addition to funds, Kendall Square also has an unprecedented number of Nobel Prize winners, National Academies of Science and Engineering scholars of great acclaim. And the bustling life sciences startup scene isn’t like any other city’s, according to Dacey.

“Some cities have life science companies and research. Some tend to be hubs of tech,” he says. “But there’s his balance of science and tech here that makes our environment more unique than others.”

Dena Levitz Headshot

Dena Levitz

Challenge Cup Reporting Fellow, 1776

Dena Levitz is traveling to almost all of the Challenge Cup cities to cover the competition and analyze startup ecosystems around the globe. Dena joins 1776 after finishing the first…