January 26, 2007
BOSTON – Last night, at the TIE Boston Outlook 2007 dinner and VC panel discussion, Rob Soni, general partner at Matrix Partners , sensing the crowd’s disappointment in the face of such nervy questions as “Are deals getting smaller?” or “is enterprise software still a play?” pulled the pin on this little grenade and lobbed it into the frigid New England night: “I don’t know exactly what causes it, culture or what, but Boston VCs are not swinging for the fences, and not taking the big bets to create great companies.”
Some nervous shuffling ensued, snatching the moderator away from the jaws of defeat by a panelist willing to actually say something provocative. And he wasn't done:
Boston VCs play it too safe, and pull out of companies too quickly, happy to take their losses and push for their remaining companies to give them a comfortable three- to five-times return, while Silicon Valley VCs and investors will stick with their companies longer, keep a real faith in the ones they love, and nurture a comeback when others would walk away. Big examples include Redback Networks Inc. (“The greatest comeback in the history of telecom,” said Soni), Calix Inc. (NYSE: CALX) and Infinera Corp. (Nasdaq: INFN), two companies with investors in it for the long haul, even those who’ve been squashed down along the way, and now in a terrific position to go public and reward patience and perseverance in a way New England companies never would be.
Silicon Valley VCs, for their part, love the game, and the risks. “It’s like the Cardinals and the Yankees. One will focus on manufacturing runs, the other on home runs.” And what team does every kid from Puerto Rico to Japan want to play for when they get to the major leagues?
Silicon Valley, for whatever reason, loves the consumer, and that’s where the real historic companies make their mark (think Amazon, eBay Inc. (Nasdaq: EBAY), Google (Nasdaq: GOOG), YouTube Inc. ), and once those make it big, then others come out to join the party, and build a critical mass of entrepreneurs that are chasing the same dream. Boston? Scratching of heads, darting of eyes, “Um, EMC?” one of the panelists offered. Ooh, that hurts.
Bruce Sachs of Charles River Ventures got into it too. He’s been commuting back and forth between Charles River offices in Waltham and Menlo Park and sees the difference every month. Boston-area entrepreneurs don’t have the visions of grandeur of Silicon Valley counterparts, and are quite happy enough to take the millions from their first sale and relax, walk away, spend more time with family. You know, spend the money. “In California, the saying goes, someone with $100 million is a frustrated billionaire," said Sachs. We have no Jeff Bezos, Page and Brin, Steve Jobs, and may never at this rate.
Sachs also had a point to make about great universities. “At Stanford, if you are a professor and you haven’t taken a sabbatical to start a company, you are a loser. We don’t see that attitude at MIT.” MIT feeds a lot of talent into the Boston-area startup community, but professors there seem to actually like being academics, and have this sense that “money is dirty,” said Sachs.
It all raises the question, will New England ever have a Cisco Systems Inc. (Nasdaq: CSCO)? No one on the panel (Soni, Dalton, Sachs and Jamie Goldstein of North Bridge Venture Partners ) seemed very sanguine about the prospect. Soni did point to a deal Goldstein and Dalton are in, QD Vision, as potentially game-changing, and gave them plenty of credit for that, and put out a call for local VCs to think bigger, or else stay in Silicon Valley's shadow. Areas he’s excited about? Solid-state lighting, open-source software, water purification, mobile broadband. Is there an Intel Corp. (Nasdaq: INTC), a Cisco, or a MySpace among them?
Maybe it’s the weather here. Out in the parking lot the temperature was falling to 9 degrees. This morning, the thermometer at the Boston Museum of Science read 1 degree. Palo Alto? 42, and rising.
— Scott Clavenna, Chief Analyst, Heavy Reading
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