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When it comes to high technology, Massachusetts boasts one of the deepest talent pools in the country — and some industry leaders say innovation could drive Massachusetts out of the economic doldrums.
Even though venture-capital investment fell nationwide in the first quarter of 2009, Massachusetts received more than 12 percent of all VC investment in the United States, according to the Massachusetts Technology Collaborative. That's above the historical average.
"The basic notion is that, you know, a start-up company looks something like this," says Tim Rowe, walking down one of the many long, airy corridors of the Cambridge Innovation Center in Kendall Square. It's lined with office spaces — some just cubicles where a lone person taps away on a laptop. But through windows in others you can see four to five people focused on getting their business off the ground.
Rowe founded the center in 1999 as a space for growing firms to set up headquarters without the large costs of starting a company.
"They come in, they don't buy their furniture or set up phones or get Internet lines or buy a copier or any of those things that you typically do when you start a company. Instead, they can just get going like the day they move in."
Ten years later, the center is home to 200 start-up life-science and technology companies.
Investing in ideas, not banks
One of those companies is housed here, on the 10 floors leased by Cambridge Innovation Center. Zeer provides product information, reviews and buying advice to shoppers.
"So, you'd pick up a package — I have a bag here of Famous Amos cookies, chocolate chip," Rowe says. "Now let's say that this says, 'May contain nuts.' And let's say that you're allergic to pistachios. It doesn't say whether or not it has pistachios in it.
"But if you were part of the group that's allergic to pistachios, you'd be able to go to Zeer's Web site. You'd find out what's in this product," Rowe explains. "And you would have comments from other pistachio-allergic people about this product. Extend that notion to any group of people with a particular food interest, whether they're interested in eating kosher or they're interested in eating vegetarian or vegan."
Michael Putnam, the Zeer founder and CEO, says the company is working to tailor grocery shopping according to consumers' interests. "We're also working on making it available exactly when you need it and where you need it, so we have a mobile phone browser-based application that's available anywhere."
Putnam says people can stand in a store aisle, pick up the bag of Famous Amos chocolate-chip cookies and enter the numbers on the bar code to retrieve instant product information.
"It's going very well," he says of the business. "The uptake has been wonderful, and it's been great to be in this location, as well."
And it's also going well for all or most of the other start-ups at the Cambridge Innovation Center, says Tim Rowe.
"It's remarkable. You know, you hear about the troubles out there in the economy. We're not really seeing that at the early stages of entrepreneurship," Rowe says. "We are seeing more employees, more companies, more activity. It may be related to the fact that the cost of doing start-up just went down, because you may not have good alternatives.
"But it's also related to the fact that investors are saying, 'Gee, I don't want to be in stocks right now, I don't want to be in real estate. If I can invest in the cure for paralysis, as it were, that's a great place to put my money.' "
In a way, the recession has made it something of a ripe time for innovation, and the innovators are cushioned from what's happening in the rest of the economy.
"If you're thinking about starting a start-up, there has never been a better time to do it," Rowe says. Not only is there lots of capital available for start-ups, he says, there is a large pool of talented workers. "People who may have just left bigger jobs and are looking for something to do who have tremendous experience and skills."
Competition for innovation: Silicon Valley vs. Boston
In 2007 and 2008, venture capital firms invested about $7 billion in New England technology companies. But in this recession, there's a perception that investments from large venture-capital firms have dried up here.
But Rowe says the firms at the Cambridge Innovation Center have "absolutely not" experienced that.
"And I think that what you have to do is look at what is late-stage versus early-stage investment. There is a slowdown in investment of the large investments in later-stage companies," Rowe says. "What you're not seeing, in our experience, is a slowdown in small investments in early-stage companies. That is a very hot area right now."
One venture-capital firm, Greylock Partners, announced this week it's relocating its headquarters from Waltham to California. In explaining the move, the company said the focus on Internet and enterprise technology has shifted to Silicon Valley.
Rowe isn't worried the move signals something larger about the innovation competition between Boston and Silicon Valley.
"There's more venture capital invested today in Massachusetts per capita than there is in California," Rowe says. "While some larger venture-capital funds may have chosen another strategy, you're also seeing new, young venture capital funds getting started here. So you really want to look at what's happening by stage."
A year ago, Rowe said he feared that what he called the "Greater Boston entrepreneurial cluster" had peaked — at a time when Silicon Valley and other tech sectors in the U.S. were growing.
Now, deep into the recession, Rowe says Boston start-ups are holding up well. While Silicon Valley may lead in software development, he says Boston is leading on health science and energy.
Rowe says Boston needs to find a way to keep its best talent — from the likes of Harvard and MIT — instead of losing students after graduation to Silicon Valley and other tech hubs.
"At the end of the day, whether they stay or not is a symptom. It's a symptom of how energetic and full of opportunity our economy is for these young people. We need to work on some of the causes as a community to improve the desirability of staying here.
"And, you know, myself and colleagues across the state in venture capital funds and in other parts of the sort-of entrepreneurial ecosystem are working very hard at that."
This program aired on May 27, 2009.
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