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Friday, January 9, 2009
Inside New York/New England connections
N.Y. new media pull from Boston VCs, technology
By Jim Schakenbach, Special to Mass High Tech
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While the spirited — some might say “pathological” — rivalry between Boston and New York sports teams is well documented, is there another, less visible, technological competition between the two East Coast metro giants? We’re talking investments, and particularly the funding of New York-based new-media companies by Boston venture capitalists.
It’s no secret that a number of high-profile Massachusetts tech investment firms have provided funding for a wide range of new-media firms in the home of the Evil Empire. So what’s the connection? According to several Massachusetts-based investors, it all comes down to location — and for new-media companies with an ad-based revenue model, New York is the country’s advertising headquarters.
“If you are in the new-media business, you are likely selling ads, which means that if you want to get to any scale you need to set up an advertising sales office,” said William “Bo” Peabody, co-founder and managing general partner of Village Ventures, headquartered in Williamstown, Mass. “And that office will undoubtedly be located in New York City because that is where all the ad agencies are, which is, in part, due to its history as a media center.”
Jeff Bussgang, general partner of Flybridge Capital Partners in Boston, agreed that New York has historically been very strong in advertising and media — from Madison Avenue to the media giants in midtown, through which billions of dollars of advertising flow. “And that’s all going digital,” Bussgang said. “New York is where the buyers are.”
He also said that he sees that beginning to change. “There are a lot of good interactive agencies in the Boston area — Hill Holliday, Mullen, Arnold, Digitas, Isobar, Havas. The larger interactive players all have locations here in Boston.”
Josh Silberstein, CEO of New York-based Fullturn Media, one of Village Ventures’ portfolio companies, said it’s easier right now to do business in New York. “There’s a huge advantage — if you want to strike an ad deal or are trying to put together a video production, it’s significantly easier to do it in New York,” he said. Silberstein claims that New York offers a much larger professional resource base than Boston for his company, which produces expert online video content for the health care, fitness and beauty markets.
But Massachusetts venture capitalists point out that there is no intentional geographic strategy to their investments. “We are geographically agnostic,” said Rob Go, senior analyst for Boston’s Spark Capital venture firm.
Go said that his firm is “fanatical” in its investment strategy, looking for just the right companies, regardless of location. However, “one of the primary areas we invest in — advertising and media — is in New York. The companies are there and the talent is there,” he said.
With New York-based companies such as Tumblr Inc. (a blogging platform developer), KickApps (a technology platform for social sites), and Admeld (online advertising optimization and integration platform developer) in Spark’s portfolio, Go dismisses a clear-cut Boston-New York delineation, noting, “The two locations are relatively close and easily accessible to each other. Professional talent is constantly moving between the two areas.”
Go adds that for new-media companies to succeed they need to get over the idea that the two cities are distinctly different markets. “There is no reason to silo the two areas. If you (a new media company) want to focus on the media space, you need to be active in both cities,” he said.
Flybridge’s Bussgang agrees: “It’s very natural for people to be shuttling back and forth.”
Two Boston-based Flybridge investments — BzzAgent Inc., a word-of-mouth marketing and media network, and DigitalArbor, a provider of digital production service to interactive agencies — have CEOs who are in New York one or two days a week. “I think you’re going to see more hybrid management teams shuttling back and forth. With the efficiency of the Acela, I don’t think it has to be an either/or.”
For Bussgang, the two cities together provide a powerful launching pad for startups. “New York is a strong market for new-media and consumer Internet, so I would perhaps put New York on a stronger footing than Boston in that niche, although it’s a close call. But Boston has a broader startup community and a strong venture capital base. There are quite a few technology clusters in the Boston area — there’s life sciences here, there’s enterprise software — and those clusters don’t extend to New York City.”
Bussgang sees Boston’s technological strengths contributing to the emergence of more platform developers in the Hub, while New York’s media-centricity lends itself to more content providers. “You will see fewer YouTubes (in Boston),” says Bussgang. “But you will see six companies providing the video platforms to power the next YouTube.”
The New York-New England connection
A sampling of New England investments in New York new-media companies drawn from Massachusetts venture capital firm websites.
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Jim Schakenbach is a freelance writer in Jefferson.
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