Boston does matter
Recently, a recruiter who called me about a job in San Francisco told me that Boston doesn’t matter anymore. She meant that it doesn’t have market-changing tech companies in the way it did in the 1980s, so publishers don’t need to have full-time reporters here. That’s kind of true; most of Boston’s big winners in the last 15 years have been in biotech or medical devices. The most prominent tech companies now are Google, Facebook, Amazon and Apple, all of which dominate consumer markets and as a side-effect of their popularity are forcing companies to remake what they do. None of these companies are based in the Boston area, and except for Amazon, they’re all helping to drive the tech economy in Silicon Valley. Boston remains a flourishing place for technology development, but measured by venture investing it’s about a quarter of the size of Silicon Valley, making it a very large outpost.
The challenge for companies outside of Silicon Valley is stock price. Silicon Valley companies dominate the most valuable tech companies when measured by stock price: Apple, Google and Facebook are 1, 2 and 5. Microsoft (Seattle) is 3, IBM (New York) is 4. Silicon Valley’s Oracle, Intel and Cisco are 6, 9 and 10. Seattle’s Amazon is 7, San Diego’s Qualcomm is 8. The Boston area’s most valuable tech company is EMC, which is valued at about half of Cisco. By this measure, Boston is not very relevant. Plus, this analysis by Jeff Bussgang and Juan Leung Li show that it’s been 13 years since a Boston tech company was founded that reached a multi-billion dollar valuation.
Stock prices are one reason why. Companies like IBM and Oracle have stock values near $200 billion. That gives them the ability to just buy companies that have good ideas and have grown to a certain point, where IBM and Oracle can then suck them into their suite of software. Oracle did it to Endeca in 2011, buying that fast-growing Cambridge company for $1 billion.
Still, I’ve spent the last three weeks working on a story about what might be Boston’s next billion dollar tech company, and I’ve found a lot more options than that recruiter might expect. Boston has some good one-off companies and some good companies in traditional sectors. It’s already known for biotech and medical devices, robotics and data storage. I wanted to find an emergent eco-system of companies. After talking to a number of people, advertising and marketing tech seemed like the best choice. It’s a gigantic market ($400 billion a year or so just for advertising) being buffeted by the Web, mobile and social media, and there are a lot of tech companies here.
Boston has DataXu, Fiksu, HubSpot and Nanigans, all very fast-growing. DataXu was number five on the Inc. 500 last year and has revenues similar to Endeca’s when it was bought ($150 million or so), HubSpot doubled in sales, the other two are growing very rapidly. They each could define parts of the advertising and marketing tech market. They all started between 2006 and 2009, and there are a score or so of other notable startups here as well.
But there are enough good companies here to make my editors ask me questions.
Nervous editor: what about Wayfair?
Me: Good company. Almost certainly the next Boston tech company to reach a billion in revenues. But it’s not part of the traditional Boston tech world and Boston won’t be a center of e-commerce.
Nervous editor: What about Actifio?
Me: Another good company. Storage-related. That’s already a strength for Boston.
In truth, either of them could be good narratives, depending on whether they would give access and the other factors that go into making a big feature story work. They might have presented less complicated narratives. Each is in the news now, for pulling in large rounds of capital. After I filed my story, Actifio became the first Boston tech company valued at $1 billion since 2012.
I expect one or two of the companies I’m writing about will be in the news within a year for hitting the same milestone.
That there are multiple companies growing quickly in multiple areas bodes well for Boston. The vast stock market capitalizations of companies not based here mean it will be a challenge for these companies to stay independent, Wayfair and Actifio included. But with such a vibrant, diverse startup scene, recruiters ought to be calling me about jobs here.