The Investing Edge
of Enterprise IT



Four reasons why more foreign startups are moving to the Northeast

September 8, 2016
Matt Fates

Boston

For more than 30 years, we have been laser focused on investing in early stage business technology in the northeast U.S. because we believe an ideal combination of factors exist: B2B tech has the potential for capital efficient and rapid growth which fits the venture model well, the competition is lower than the west coast, and, perhaps most importantly, the region is rich in the key factors for building great tech companies. Over the past 10 years, we’ve witnessed a growing trend of startups from other parts of the world – notably Europe and Israel – moving their headquarters to the northeast to take advantage of the attractive environment. We have backed 13 companies with roots overseas including Ascent portfolio companies CloudLock, StartApp, Rapidminer and Vee24. In fact, our most recent portfolio company Codeship moved from Austria to Boston in 2014 to better position the company for rapid growth. And with the northeast boasting an impressive 158,000 new companies each year, not to mention over a third of all angel investment dollars, it’s no wonder entrepreneurs and startups from around the world are flocking to the region. However, it’s not just the vibrant startup community that is a draw. It’s also:

1. Our density of talent. The northeast is home to more than 82,500 technology companies, compared to around 42,000 technology companies out west. Fueling the talent pool necessary to drive all these companies is the fact that of the top 100 universities in the U.S., 13 are on the west coast while 45 are in the northeast, with nearly 120 schools within a 25-mile radius of Boston alone and Cambridge’s own MIT ranking as the #1 engineering school in the U.S. In fact, the northeast grants 47 percent of the science and engineering doctorates awarded versus 16 percent for the west coast. This makes for a fabulous, dense population of well-educated, tech-oriented people creating the perfect breeding ground for startups.

2. Customers. The northeast is home to an array of customers: 31 percent of Fortune 500 and 30 percent of Inc. 5000 companies are here, while 11 and 14 percent, respectively, are found on the west coast. And U.S. companies are more comfortable with the risks of working with startups as compared to Europe. Startups abroad are looking for a community that is ready to take a gamble when it comes to buying new technology solutions.

3. Partners. Over 80 percent of the world’s largest technology companies have a presence in the northeast.  These industry leading vendors are important partners, sources of management talent, and potential acquirers for startups.

4. The quality of life. For companies moving across the Atlantic, the time difference proves a factor. The less drastic time change on the east coast is appealing to companies moving from overseas. Additionally, when it comes to the cost of living and the cost of business in Boston versus Silicon Valley, Boston wins. For startups looking to make the move, the financial benefits can be a determining factor.

The startup ecosystem continues to flourish in the northeast and the addition of global companies only adds to the innovation and diversity in the B2B IT world.

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