Boston Consumer Web Innovation Cycle Leakage

Consumer web is an area ripe for improvement here in Boston. It is no secret that there is a need for more angels willing to spread some funding around in portfolio fashion for early consumer web companies. The lack of angels is a result of too few big wins in the web space and therefore no groups of wealthy and successful web founders looking to angel invest. But it also seems that many of the founders that do achieve success here don’t return to become founder/angels and instead stay at the acquiring company or become VCs.

If you look at our small start-up world , you can describe it as a cycle in a similar manner to the carbon cycle or water cycle.

For the system to thrive, it depends on replenishing the driving force, in this case founders, back  into the start-up cycle to build another company.

Again, this leak is specific to the consumer web start-ups here. Industries like storage, communication/wireless, robotics, and gaming have achieved a self sustaining momentum which feeds the pipeline of new start-ups.

A lot of our best and brightest get stuck at the top of the cycle and stay at the acquiring company or become a VC.  I am not knocking anyone’s personal choice.  Given the chance,  I would be tempted to do the same. But when this happens the cycle is disrupted and energy is not reintroduced into the founder pool.

The cumulative effect is that vitality and experience necessary to create the centrifugal force that will fling a big web success out of the start-up swamp and into the IPO light of day, is sapped every time a great entrepreneur does not return.

It is somewhat a chicken and egg problem because we surely would benefit from another  large anchor consumer web company growing and training the talent pool from which small companies spring. And yes, a group of wealthy founders and execs willing to seed invest in young web companies wouldn’t hurt either.

The question is, how does Boston get those large consumer web wins we need? From the top down or bottom up? Do we try to cherry pick that one potential win and nurture it to IPO? It seems the model that works is a numbers approach, (ie..Ron Conway) where funding many early stage companies in a basket fashion has the greatest chance of producing a big win.

From the bottom up, our educational institutions are providing plenty of raw talent to be absorbed by the system. But without a thriving consumer web start-up environment and mentors and role models, they will go to a more inviting market for consumer web companies, to quench their entrepreneurial thirst.

Its not all bad though, there are a number of web entrepreneurs and seed investors that are getting involved more at the early stage and things are improving. It just feels like progress is hindered ( and probably a cute little bunny croaks) every time a successful founder becomes a VC or continues working at an acquiring company well past the earn out period.

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3 Comments to “Boston Consumer Web Innovation Cycle Leakage”

  1. Great points, Tom. It seems like this is a common theme being reiterated by many over the past 6 months. Hopefully if enough of us keep talking about it, it will lead to some change.

    I am excited about some of the new office space options and new programs that are recently forming, but they’re all VERY early. Time will tell how all the new initiatives play out. We’ll all benefit by the multiple different attempts to make things work.

    -Jason

  2. Agree with most of what you say, we’ve been over this so many times the past few years.

    But first, who’s to say it’s a problem? Why do we need more startups and investors in Boston? What’s wrong with people moving out to SF and taking left coast money? Isn’t Boston more of a biotech town than technology and consumer Internet companies?

    IPO’s are such an anomaly, why even talk about them at this point?

    We do just fine here in terms of startups. There are companies launching all the time. I personally don’t see why people get uptight about the lack of anything in Boston.

    Raising money is not the problem; it’s the lack of ideas that are worthy of significant funding. There simply may not be enough good consumer web ideas around to support more investors.

    I love working with consumer-facing Internet startups, this is what I do as a consultant and advisor. But I don’t have a single client in Boston, and it’s been that way for years. I don’t mind, but it would be nice to actually go to an office and talk f2f to get the creative business juices flowing.

    That all being said, at Deep Snow we’re trying to do pretty much what you’re talking about.

    At the moment, we’re working hard to evolve from just a great place to work into something more incubator-like, that serves a bigger purpose.

    We’re just getting started and working hard to foster a sense of entrepreneurship and collaboration between the companies in the space so far. It takes time, but we have young guns who have sold their startups for millions, and serial entrepreneurs, venture-backed established startups as well as some grey beards for guidance and advice.

    We’ll be making things more public soon. Just wanted to throw out my two cents and let you know that we are working on a solution. Come on down for a visit and we can talk more.

    • Dave, thanks. I think it is a problem because the reach of the web is still growing, the amount of e-commerce and web advertising is growing and more and more application and services are moving into the cloud/internet. If Boston doesn’t evolve into those markets we are losing a great opportunity.

      There is no reason we cannot build from a base that is strong in enterprise software, gaming, mobile applications and create a consumer web industry here as well.

      The main point I was trying to make, is that losing our best and most successful founders to VCs or roles in acquiring companies inhibits the good ideas from propagating in the pool of early stage startups.

      I agree, that there is plenty of angel money available and that it is possible the lack of investment is due to lack of good consumer web ideas. We having a growing community of young first time founders attempting to get a web app off the ground but there is a school of thought that says the good ideas are produced when there is proper execution context, which comes from experience. A lot of derivative or incremental ideas won’t get us where we need to be.

      I have been to the facility at Deep Snow and it is pretty cool. I wasn’t aware of the “don’t use incubator, that is where sick babies are taken ;-)” aspects of Deep Snow. I look forward to hearing more about your start-up accelerator program.

      I definitely drop by for a visit.

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