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When a local hero jilts us for fame and fortune in a bigger market, we in Boston have known what to do since Babe Ruth left for the Yankees. Y Combinator’s Paul Graham is probably safe from heckling at Fenway, but the familiar mix of anger and introspective self-recrimination came swiftly after he announced his plans never to return.
For the past four years, Y Combinator has alternated seasons between Silicon Valley and Boston, pre-seeding about 50 Massachusetts startups along the way. Last week, I caught up by phone with Graham, who has been celebrating with his wife and business partner, Jessica Livingston, the birth of their baby boy, which took place days after he announced the company would not return to its Cambridge digs this summer.
Graham cited family as the reason for ending Y Combinator’s bicoastal focus — then threw Boston under the bus, saying the Hub “just doesn’t have the startup culture that the Valley does.”
The startup jobs blog Genotrope.com called it a “sad day for Boston.” And Black Duck Software Inc.’s Doug Levin, on his blog New Software Pathways, called Graham’s comments a “stick in the eye.”
Y Combinator’s departure is a blow for Beantown, sure, but for startup investors it shouldn’t mean a thing: The fact is, Boston investors were never interested in what Y Combinator had to offer. Graham outlined the numbers for me when we talked last week. Of the 118 startups that have launched on about $20,000 each from Y Combinator, only five have drawn any other investment from Boston. Hub-area angels invested in three. Only two took money from Boston-area VCs. (Twenty have gone out of business, and 16 just launched this fall.)
With a globally unrivaled educational ecosystem churning out brainy hackers, why doesn’t Boston produce more startups? Graham said he thinks it’s the “timid” angel investors, who should be a vital group for any startup hoping to make it from pre-seed to Series A.
But it could be that Boston investors just aren’t interested in the web application entrepreneurial efforts that Y Combinator favors. HubAngels tends to put money in life sciences investments. CommonAngels pools funds for $1.5 million to $3 million Series A-type rounds. Last week, Atlas Venture chopped five partners from its technology investing team, and Jo Tango told Mass High Tech that Web 2.0 has become a four-letter word.
That being the case, some web startups still find it makes sense to resist the allure of California gold. “In San Francisco, you’re a commodity,” explained Dan Haubert, who co-founded the event ticket marketplace site TicketStumbler.com. By staying in Boston, bootstrapped Ticket Stumbler Inc. has gotten publicity and access to earnest potential investors, he said.
Plus, said Haubert, whose office is a room of the Somerville apartment he shares with co-founder Tom Davis, moving to California would have meant living in Mountain View — and on Ticketstumbler’s budget that’s a sacrifice the two entrepreneurs just weren’t willing to make.
Stealth Watch
Regulatory filings by two Boston-area startups crossed my desk recently — and curiously neither company was interested in talking to me about their success in getting funded or their plans for how to spend the money.
Late last year, Metatomix Inc. pulled down a $1.3 million tranche of a $4 million funding round. The Dedham-based maker of semantic middleware for search had already received $47 million in funding from existing investors Apex Venture Partners, Battelle Ventures, Dunrath Capital, North Hill Ventures and Velocity Equity Partners — all of whom returned for the latest round.
At nearly the same time, Softrax Corp. reported $1.9 million in new funding, according to public filings. The Canton-based maker of revenue management software lists six investors: Allegra Partners, Citizens Capital Inc., Egan-Managed Capital, Knickerbocker LLC, Mid-Atlantic Venture Funds and Walnut Venture Associates.
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