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Friday, May 8, 2009
Inside California & New England Rivalry
Why a company needs to be based in Massachusetts
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Massachusetts is a great place to start a business. Massachusetts is similarly a necessary place for a multinational to set up a branch office. What both startups and established business need to continue to grow are: people, capital and access to markets. Here’s my breakdown.
People: A+
Massachusetts has the largest concentration of world-class secondary and post-secondary educational institutions in the world. We have approximately 460,000 post-secondary students enrolled in 117 colleges and universities across the state. Many of these students stay in Massachusetts after graduating. We are No. 1 nationally for residents with the highest college attainment. We are No. 1 nationally in the concentration of science and engineering graduates. In most states across the U.S., about two thirds of bachelor’s degree graduates come from public universities, in Massachusetts two thirds come from private universities.
Not only does Massachusetts have fabulous intellectual capital in its workers but they are also very entrepreneurial. There were 5,000 new companies started in Massachusetts over the past six months, though this is down 13 percent from the same period a year ago.
Capital: B-
Access to venture and debt capital is crucial for company startups. Massachusetts is No. 1 nationally in the number of high-tech companies per capita and level of venture capital. The venture capital industry was established in Massachusetts after World War II, with the formation of American Research & Development (ARD) by Harvard Business School and MIT professors.
Massachusetts ranks fifth in the number of millionaires per capita with $335 billion in assets. Angel investors based in Massachusetts are active but do not invest as much as California angels. Additionally there is significant personal wealth in Connecticut and New York City that could be attracted to invest in Massachusetts startups.
Massachusetts ranks No. 1 in federal Small Business Innovation Research contracts, a form of government-funded seed capital.
Access to markets: B+
Massachusetts’ 6.5 million residents are mainly crowded inside the Route 495 ring. Enjoying the nation’s third highest per capita median income, this population is an early adopter of new technology and services. For a European or Asian company, Massachusetts is ideally situated to access markets in northeastern U.S., composed of nine states that account for 25 percent of the GDP of the U.S. Furthermore Massachusetts is No. 1 in receipt of federal R&D expenditures for academic and nonprofit institutions.
Key industries in Massachusetts are life sciences (We are ranked No. 1 in the U.S.); information, communications and technology (We have fallen behind California); clean tech (We are neck-and-neck with California); defense and aerospace (We have fallen behind Washington, D.C., Texas and California); financial services and leisure (We have a great arts, sports and general cultural scene). Other old industries that are experiencing technology-led re-emergence and where Massachusetts excels are industrial robotics, advanced transportation, and renewable energy.
How we can improve:
1. Get better at commercializing research conducted at universities. MIT is at the top of the game but Harvard and Boston University are laggards. For example BU has about 4,000 faculty, 2,000 laboratories, 13,000 graduate students and received $336 million in external research funding in fiscal 2008. According to the Association of University Technology Managers’ 2006 licensing survey, of the U.S. and Canadian institutions receiving more than $250 million in research funding, BU was at the bottom of the third quartile for research dollars spent per license granted.
2. Encourage millions of Massachusetts’ alumni to communicate through and occasionally gather in Massachusetts. Let’s create an annual alumni gathering in Boston, coordinated by all colleges. We can have sub-fairs at this gathering with themes such innovation, arts, sustainability, health care, etc. Economic activity will naturally arise from making Boston the ‘knowledge hub’ of the flat world.
3. Increase the amount of seed capital for startups by: (a) re-energizing the Massachusetts Technology Development Corp.; (b) encourage non-Massachusetts angels to invest in Massachusetts’ startups.
4. Actively retain immigrants who complete advanced degrees at Massachusetts’ universities by helping them get permanent visas from the federal government. In return they agree to stay in Massachusetts for defined period.
Vinit Nijhawan is an entrepreneur, venture capitalist and executive-in-residence at Boston University.
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