New England’s Inferiority Complex, Or Why Route 128 Lost its Mojo to Silicon Valley

Posted by: Spencer Ante on May 28, 2008

Posted May 28 by Creative Capital

New England’s entrepreneurial community has developed a sort of inferiority complex. This is one of the things that struck me when I attended the Nantucket Conference to do a fireside chat about my book.

One of the big questions in my book that really resonated at the conference is why did New England–which pioneered the venture capital industry and startup economy thanks to Georges Doriot in large part–lose its mojo to Silicon Valley?

I heard many explanations in Nantucket. Bob Metcalfe, General Partner at Polaris Ventures, blamed it on all the snooty Harvard professors and doctors who believe making money is a bad thing. The other big diss of New England is that area VCs too often sell out their companies too quickly, refusing to give them a chance to grow into large independent businesses. Silicon Valley VCs, by contrast, are all about creating the next world-changing company.

Pat McGovern, the billionaire founder of IDG, argued that Silicon Valley has developed a culture that places a supreme value on new risk-taking and new business formation. “People in New England don’t feel the pressure to start new companies,” says McGovern.

But McGovern boldly predicted that New England could regain its dominance thanks to the emerging hub of biotechnology companies. “The next great bubble will occur in 2013-2015 with the molecular medicine bubble,” says McGovern. “The time has come when New England could see a rapid increase in venture capital.” Developments in biotechnology and genomic-based drugs could help cure a whole range of brain complications, says McGovern.

McGovern must be taken seriously. After all, this is the guy who had the foresight and cojones to launch a venture capital operation in China. The result: generating enormous wealth from backing companies such as Baidu, Tencent and Sohu.com.

“Walk around the Boston-Cambridge area and you see the best and brightest people in biotechnology coming to here,” says McGovern. “In the next 5 to 15 years we could develop cures for Alzheimer’s, bi-polar disorder and other mental illnesses.”

What do you think? This could make for a good wiki.

Reader Comments

Mike Masnick

May 30, 2008 6:30 PM

Hi Spencer,

Great topic! There's actually a fair amount of academic research that's been done on this topic (and more on the way that I'm familiar with). You can read about it here:

http://www.techdirt.com/articles/20071204/005038.shtml

What the research showed, interestingly enough, is that the single biggest factor was that noncompete agreements are enforced in Massachusetts, but not California. That was the single largest differentiator, according to multiple studies that attacked the question from different angles.

Why did this matter? Because there was much more job hopping in Silicon Valley, and that resulted in much faster cross-pollination of ideas, which meant faster innovation.

It's some interesting stuff...

Spencer Ante

June 1, 2008 5:42 PM

Thanks Mike.

I will check out the url.

You make an Interesting point that I've never heard about. Guess the increased enforcement underlines the region's conservatism.

Phil Greenough

June 5, 2008 1:07 PM

New Englanders seem to lack trust in one another, to keep circles small and often closed. Years ago, I read "Trust
The Social Virtues and the Creation of Prosperity" by Francis Fukuyama, and it's always stuck w me that certain cultures assign trust more readily. Although the US overall ranks high in terms of trust, I'm convinced that certain geographies such as NE rank well below Silicon Valley. While mobility is taking down some provincial barriers, it seems like NE's DNA is slow to change.

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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