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Venture Capital's Search for Innovation in Massachusetts
“The biggest single trend we’ve observed is the growing acknowledgment
of innovation as a centerpiece of corporate strategies and
initiatives.” So says Tom Kelley in his book, The Art of Innovation.
Kelley, one of the key members of Silicon Valley’s most creative
companies, IDEO, endlessly promotes innovation for today’s businesses.
Locally, it’s not hard to see why. With over 3,500 corporate clients
and assets in excess of $2.5 billion, Boston Private Bank & Trust
Company enjoys a unique perspective on the innovation behind some of
the leading companies in Massachusetts. We see all types of strategies,
visions, and missions; we see companies separating themselves from the
competition and others that fail to do so. The bottom line: if your business is looking for long-term success, you’d better start innovating.
Great leaders understand that promoting innovation doesn’t produce
innovation; successful innovation requires diligent execution. Steve
Jobs once ran a computer company; now he is best known for music and
telephones. Bill Gates has given Microsoft prominence in the video game
arena. And at a home here in Massachusetts, the management of Dunkin
Donuts, sensing a declining business model, transformed their company
from one that concentrated on donut sales to a company focused on
coffee. The result of their strategic initiative: a line of loyal,
coffee-hungry customers willing to wait outside in 15 degree weather.
Without innovation, Dunkin’ Donuts would be compared to the
once-glorious Krispy Kreme rather than the perennially thriving
Starbucks.
Home to arguably the world’s best teaching hospitals and universities,
Massachusetts provides an ideal landscape for innovation. A recent
survey conducted by The Wall Street Journal asked a group of national
recruiters to recognize those MBA programs which produce “the most
creative and innovative students.” Among all 86 of the ranked US and
international MBA programs, Massachusetts enjoys three of the top ten
spots (#2 MIT, #9 Babson College, and #10 Harvard University). These
schools were chosen primarily because they have “a strong reputation
for technology and entrepreneurship.”
Yet despite Massachusetts’ exceptional education institutions, when it
comes to innovative companies, it’s hard to dispute the west coast’s
reputation as a leader. Google, Netscape, Apple, LinkedIn, PayPal – the
list goes on. Even Facebook, born in Massachusetts, is now
headquartered in Palo Alto, CA. This begs the question: with such
fertile ground for innovation, why isn’t Massachusetts recognized as
the leader?
Since most emerging, innovative companies need funding and guidance
during various stages of their business lifecycle, a venture capitalist
plays a crucial role in a company’s success. But among some in the
venture community, the perception is that west coast firms are less
conservative with their funds than their east coast venture
counterparts. “I would dispute this claim,” counters Josh Lerner, a
professor at Harvard Business School. “That east coast firms are more
conservative is something that has been claimed for twenty years or
more. But venture firms are bi-coastal now so the argument—even if once
true—is not anymore.” It’s true that pre-revenue companies may receive
more funding on the west coast than on the east coast; however, this is
because of the sheer volume of opportunities and a higher percentage of
total dollars. Lerner states that, in fact, compilations suggest that
the share of venture funding going to New England has, if anything,
increased since the mid-1990s: certainly, Massachusetts is not seeing
the vertical collapse that some alarmists would like you to believe...
continue...
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