Never Mind Silicon Valley: Boston’s Thriving Startup Ecosystem

ReadWriteWeb just wrote an intriguing post pointing out that venture capital investment and startup activity grew in the state of Massachusetts during the last half of 2009.

In a video of a speech that Jeff Bussgang of Flybridge Venture Partners gave at Harvard Business School, Bussgang contends that Boston has a superior startup ecosystem compared to New York.

He claims Massachusetts is the number one generator of patents on a per capita basis in the U.S.–more than California or New York. “Imagine a steaming mass of innovation,” says Bussgang.

In almost every talk I have given related to Creative Capital, I am asked why Boston has fallen behind Silicon Valley as America’s center of innovation. This talk by Bussgang provides one of the best counterweights to that argument I have ever heard.

Bussgang says there are four factors that help create a vibrant ecosystem:

1. Intellectual Capital: ideas, industries and universities
2. Venture Capital: the fuel that fires startups
3. Angels, advisors and accelerators who swarm around and help startups lift off
4. Successful Companies to partner with, poach talent from and/or sell

New Amazon Review: “Creative Capital is a Must Read If You’re In Business Today”

Check out a new customer review of Creative Capital, just published on Amazon.com.

Creative Capital is a Must Read If You’re In Business Today
By Carole Gunst “loves to read” (Boston, MA)

Spencer Ante has done a wonderful job writing the life story of General Georges Doriot, respected Harvard Business School professor, military general, and the father of venture capital. I had the good fortune to hear Spencer, who also writes on business for Business Week magazine, speak about Doriot’s story at the French Library in Boston before I started reading the book. His stories about the man who was so influential for U.S. business were fascinating. Here are a few of Doriot’s quotes that he pulled from the book to share with us:

* “A real courageous man is a man who does something when no one is watching him.”
* “If information is to be exchanged over whiskey, let us get rather than give it.”
* “You will get no where if you do not inspire people.”
* “Always remember that someone somewhere is making a product that wil make your product obsolete.”

From the stories about Doriot’s early introduction to entrepreneurship as the son of a Peugot engineer, to Doriot’s entry into Harvard Business School, to the importance he played with R&D during World War II which taught him how to become a venture capitalist to the part he played in the starting up of Digital Equipment Corporation, this book remains fascinating.

If you are in business today or would like to be, this is a must read from a great writer about a visionary business thinker. I think you’ll agree that Doriot really pioneered the transition of U.S. business to an economy built on entrepreneurship an innovation.

What Arthur Rock Looked for in Entrepreneurs

Here’s a story published recently in Investor’s Business Daily about legendary investor Arthur Rock. One of the pioneers of the venture capital industry, Rock famously put together the deals to found Fairchild Semiconductor and Intel, two of the most important startups in the history of Silicon Valley. Rock later invested in Apple, capping off his incredibly successful career. The investment landed him on the cover of Time magazine, a story that I discuss at length in my book. In fact, Rock was a student of Georges Doriot at Harvard Business School.

Rock and Doriot actually had many things in common. They were both investment bankers who became successful venture capitalists. They both understood the importance of technology. And they both believed that people, more than ideas or markets, were the most important ingredient of success in a business venture. Doriot’s famous saying was, “I’ll take an Grade A individual with a B idea over a Grade B individual with an A idea.”

The writer Reinhardt Krause interviewed me for the profile and kindly included a quote from me in the story. It’s an interesting profile that tries to explain Rock’s investing philosophy. Among the most important traits Rock looked for in an entrepreneur? Intellectual honesty. Rock knew that a new business would face many challenges and that in order to succeed entrepreneurs needed to be honest about the state of their business. Or as Rock rhetorically asked: “Do they see things the way they are, and not they way they want them to be?”

View this document on Scribd

Caveat Author: Two Readers Have Spoken

One of the great (and potentially humiliating) things about Amazon.com is that its Web site enables absolute strangers to publish reviews of your book. Caveat author.

In April, one of my friends wrote the first review of my book on Amazon. I was thrilled–especially because she liked it and made me see the book in a new light. The funny thing is I didn’t ask her too. She did it completely on her own volition, without any bidding from me.

Well, after reading her post, I started to get ancy about those darn reviews. I wanted more of them. I began to compare the number of reviews my book had generated with other books I’d been following. Amazon has a knack for exposing your insecurities as an author–writers’ obsession with the Amazon’s sales rankings is only the most obvious illustration of the site’s quasi-evil ability to inspire high anxiety.

So I began asking a few other family members to pen an Amazon customer review. I pitched the task as a sort of family obligation. The result: deafening silence and inaction. As I checked my sales ranking in April and May, that lonely review became a thorn in my side. In June, though, I started to kick my daily addiction to the Amazon author page. Now, I only check my site once or twice a week.

Here’s the happy ending: While I regained some balance in my life, two people published reviews of my book on Amazon like little elves in the night spreading happiness and joy. The first review from Harvard Business School student Franklin J. Seker came on July 7; and the second, from HBS student B. Beatty, popped up July 9. Thankfully, my patience was rewarded: both gave Creative Capital five stars. See the two reviews below:

An inspirational mentor — General Doriot, July 9, 2008
By B. Beatty “cirencester” (Winston-Salem, NC United States) – See all my reviews

I was in the General’s class at HBS in 1961. When he discovered that I was an active duty military officer, he took an obvious personal interest in me (although he did not call me “Bernie”, as he called Samuel Bodman “Sammy”). Nevertheless, I will never forget the inspiring interactions with him and his varied guests from many walks in life, including Jackie Cochran, pioneer aviator. The author has done a first-rate job of pulling together details that shed light on a great man, as well as his wife. I finished the book in record time.

HARVARD BUSINESS SCHOOL’S BEST, July 7, 2008
By Franklin J. Sekera – See all my reviews

I was General Doriot’s student at Harvard in 1960. He and his views had a profound impact on my life, both in business and personally. His emphasis on ethics, patience, creativity and freedom led me, in my various roles in life, to pass on these same qualities to all my associates.
The book is well written and provides a useful insight on the private man. It’s too bad that this information was not available in 1960.

Harvard Business School Working Knowledge Excerpts Creative Capital

On April 9, Harvard Business Working Knowledge ran an excerpt from Chapter 7 (“Founding Fathers”) of Creative Capital. Every day, HBSWK features new work from among the more than 200 HBS faculty at the forefront of their diverse fields of expertise. They made an exception for my book, given that Doriot was such a force at HBS.

Here’s the beginning of the excerpt, which centers on the birth of the first successful venture capital firm, American Research and Development.

“The Matchmaker of the Modern Economy”

Editor’s Note: A legendary professor at Harvard Business School for 40 years, Georges Doriot was a pivotal player in the founding of the modern venture capital industry. As Spencer E. Ante’s new book notes, venture capital per se is as old as commercial activity itself. What was special about Doriot’s contribution? As Ante writes, “ARD was the first professional venture firm that sought to raise money from nonfamily sources—primarily institutional investors such as insurance companies, educational organizations, and investment trusts. This was a critical development since it greatly expanded the potential amount of money that could be devoted to venture capital.”

Although little has been written about Doriot to date, he was one of the 20th-century’s visionary thinkers. Based on his personal background and intellectual breadth, he quickly grasped the potential of globalization and creativity in business.

A book excerpt follows from Creative Capital: Georges Doriot and the Birth of Venture Capital (Harvard Business School Press).

In hindsight, it makes perfect sense that Boston would serve as a springboard for the venture capital movement. Since its founding in the seventeenth century, Boston has always been fueled by an Enlightenment belief in scientific progress and human perfectibility. It is home to America’s first public school, Boston Latin School (1635), and college, Harvard College (1636). After the American Revolution, Boston became a major shipping port and leader in manufacturing new mechanical or scientific instruments. And the city has always had a revolutionary streak, with movements for women’s suffrage, antislavery, and the American Revolution itself all being launched from its streets.

Georges Doriot embodied these same traits—innovation, risk-taking, and an unwavering belief in human potential. After the war, the stage was set for an explosion of innovation, and Doriot was in a perfect position to light the fuse. As a professor of a leading business school and a director of dozens of companies, Doriot had become an expert in finance and technology manufacturing. And thanks to the war, Doriot has gained a lifetime of experience in organizing and managing new ventures in a pressure-cooker environment.

It is not surprising, then, that the former head of the New England Council’s Venture Capital Subcommittee was ARD’s first choice for president. But Doriot could not take the job, as he was still employed by the Army. So in the interim, the directors named him chairman of the board of directors.[…]

The group of men who founded ARD believed it could crack the conundrum of the risk-less economy. And now that the war was over, they were in a position to do something about it. Money for new enterprises had been restricted, they believed, by the New Deal’s onerous tax system, and by the increasing prominence of ultraconservative investment trusts. Investment trusts and life insurance companies accounted for an expanding portion of the U.S. savings market, but they were reluctant to invest in risky new ventures.

Custom and prudence dictated that the trustees of these firms confined their investments to high-grade bonds or blue-chip securities. [ARD’s acting president Ralph] Flanders, who observed this problem during his presidency of the Federal Reserve Bank, succinctly explained the purpose of ARD in an address he gave in November 1945 before the National Association of Securities Commissioners in Chicago.

“We have the [greatest] number of possibilities for new investments. We have various means for selecting the most attractive possibilities and for spreading the risk on those selected. Does this not furnish a sound business basis for trying new methods of applying development capital? We cannot depend safely for an indefinite time on the expansion of our old big industries alone. We need new strength, energy, and ability from below. We need to marry some small part of our enormous fiduciary resources to the new ideas which are seeking support.”

According to this theory, venture capitalists were like the matchmakers of the modern economy. They would marry money with people and their crazy, new ideas. And the result would be a stronger country with a growing supply of well-paying jobs.

Click here to read the full excerpt.

HOW TO BUY CREATIVE CAPITAL: To pre-order Creative Capital and get a 34% discount, click here and go to Amazon