East Coast vs West Coast

The east coast vs west coast story about consumer start-up companies has been addressed many times.

But for those of us (entrepreneurs and VCs) living in NYC/Boston - we should continue to ask ourselves this question over and over again.

Scott Kirsner, former writer the Boston Globe, spent a few years in SF and just returned to Boston. His article today revisits this topic. He interviews my partner Todd, my good friend Nabeel and others.

Scott himself makes this observation upon making his return to MA

"Having just boomeranged back to Cambridge after spending two years in San Francisco, the lack of consumer tech activity here is startling to me -- it's like going from a noisy, hot, crowded bar to another across the street where the bartender has plenty of time to wash glasses and gab with the three regulars perched on stools."

There are plenty of good points in Scott's article but I very much disagree with an entrepreneur named Matt Douglas who says:

"The mentality of East Coast investors is 'Show me revenue first, and then we'll talk again,' " says Douglas.

This couldn't be farther from the case. I know that almost all of our companies (most of them series a) didn't have any revenue when we made the initial investment. And we aren't alone. Union Square Ventures, General Catalyst, Polaris, IDG Ventures, Bessemer, Matrix and others are doing the same. And all of these east coast firms are active locally and yet all of them are investing in the west coast too. Pre-revenue is not a show stopper. They/we are just trying to invest in the very best companies. Regardless of their location.

I lived in SF for 10 years. I've been in Boston since 2001. I've been an entrepreneur most of my career (both coasts) and now I'm an investor. And I believe we do have a cultural problem in the northeast.

Both VCs and entrepreneurs are guilty.

In particular we need to build huge, standalone companies in the northeast. We need more independent, large-scale companies in gaming, consumer web services, consumer products and even consumer electronics.

It's going to happen. I believe that. These days I'm seeing super Boston/NYC entrepreneurs taking on enormous ideas. Some are part of our portfolio and some aren't.  And I'm super excited about that.

Comments

[Charlie]

Its the lack of engineers. A "second tier" city like Seattle has an advantage because they have MSFT, Amazon, Boeing... places you could pluck people from to build things. There's no shortage of ideas and capital on the East Coast.. .just not enough builders.

[Rick Burnes]

While you may be right for VC-level investing, I think angel-level investing is a different story.

Take a look at the companies being funded by Common Angels, Boston Harbor Angels and Hub Angels. Also check the backgrounds of the members. Connections to the consumer-facing internet world are minimal.

As Nabeel points out in Kirsner's article, there have been few large consumer internet successes in the Boston area, so there are few individuals willing to take the early risk needed to get companies to a VC round.

[Nabeel Hyatt]

Charlie - perhaps you are describing a New York phenomena, but I've never had issues with engineers in Boston. We actually have a crapload of them. The big pieces that are missing are really good product builders, and really good web marketing folks.

Also, the angel community is very conservative in Boston (thank god for Y Combinator). That means the early road, prior to VCs (if you ever need them), can be tougher.

[Andrew]

The VC pond is just a lot smaller in the NE compared to WC for consumer services. If you are trying to raise money your chances are better out west simply because that pond has more fish to cast a line to. Pre revenue is only a show stopper if you pitch someone who is not in-tune with say... Techcrunch. I would like to see a list of MA VC's who have a TC feed.

[fewquid]

I'm in Raleigh, NC, but we face much the same issues here.

My $0.02:

1) It's not a lack of engineers, it's a lack of folks that can get things started. IMO, that stems from an attitude that is deeply engrained in most places other than Silicon Valley. If you tell someone you're going to a startup, the response in Silicon Valley will probably be "Cool. What are you working on". Here it's more like "Why are you doing that? Isn't it risky?".

2) If you look at it as a percentage, I would guess that we maybe aren't that different to CA for seed stage investors. There are just waaaaay more VCs out west so the corresponding number of seed guys is greater.

3) I think it is common for VCs (and some Angels) on the East Coast to confuse "seed" with "small investment" when they present themselves. While there are true seed-stage funds like the ones mentioned, there are far more that claim to be early stage but won't fund without revenues. My lousy related joke is that in Raleigh, "Seed" is an abbreviation for "See da product, see da revenue, then you see da money". I'll apologise for that one right now.

Dharmesh Shah has talked about this topic in the past too. Check out:

http://onstartups.com/home/tabid/3339/bid/1249/Massachusetts-Ranked-1-Perhaps-Entrepreneurs-Can-Stay-East-After-All.aspx

and

http://onstartups.com/home/tabid/3339/bid/59/Go-West-Young-Entrepreneur-Is-The-Valley-Better-For-Software-Startups.aspx

[REM]

I agree with Nabeel, that the builders are not the problem. theHub area has produced an impressive list of products and technologies over the years. It seems to stem more from the lack of "dreamers" and a more conservative approach to investing. But I believe that even this is changing. There is certainly significant energy in the burgeoning Web start up community. As YC and General Catalyst lead the way, CRV and even Matrix (Tablo)are making inroads. I say stay tuned and stick around.

[Tyrene]

we know many are leaving mass in droves; govt. corruption, massive taxes/insurance, horrible weather, rude/abrasive work addicted people, poor paying jobs, no jobs, etc... state with negative pop. growth. The west coast, south west--although not utopia is FAR better for living life, than just surviving in mass....life is far too short to be miserable and terry nickell dimed by mass.