🔒Competing for world-class capital: Worcester’s entrepreneurial ecosystem is attracting more investors

It was once common business wisdom that you had to be in either San Francisco, Los Angeles, New York City, or Boston to successfully attract venture capital for a startup.

These four metropolitan areas still play a prominent place in the venture capital world, with more than half of all deal value in 2023 originating from those cities, according to the National Venture Capital Association.

But with the COVID-induced move to virtual meetings now part of the new normal, growing cities like Worcester have been able to establish a more secure place in the startup landscape.

With the creation of the Wire Group in 2022, a Worcester-based angel investor group focused on boosting local ventures, and the January launch of Auxilum, a downtown Worcester startup hub providing funding to participants, figures who are familiar with the local startup scene feel the city is becoming a smart place for emerging companies.

“Worcester is a premium location now for startups,” said Jon Weaver, president and CEO of the Worcester life sciences incubator Massachusetts Biomedical Initiatives. “It was a major shift in the world as Zoom became more prevalent. That made it less difficult for startups to raise outside of places like Cambridge or New York City, and Worcester is now very much in that game. If you got a varsity team, you can raise from anywhere, and there's a lot of varsity teams in the area now.”

Access to capital

New Central Massachusetts business incorporations, which includes everything from tech startups to holding companies, were relatively flat in 2024 after several years of growth, with 2,904 new businesses started in the region last year compared to 2,948 in 2023, a decrease of about 1.5%, according to a WBJ analysis of data from the Massachusetts Secretary of the Commonwealth.

This decline was smaller than the statewide total, which fell from 15,200 to 14,880, a 2.11% reduction.

While the level of new Central Massachusetts corporations have flattened, startups in Worcester have had successful capital raises despite the lack of a Los Angeles or New York address; Leal Therapeutics, a biotech company focusing on developing precision medicines for high-need nervous system disorders, has raised more than $84 million in venture capital and other types of investor funding since being formed out of MBI in 2021.

“When I first got here in 2015, folks said, 'You’d never raise venture capital money from Worcester,'” said Weaver. “Now we’re seeing companies competing for world-class capital dollars.”

In total, Worcester biopharma firms brought in $56 million in venture capital in 2024, according to the annual report from the Cambridge nonprofit MassBio.

Outside the biotech space, Blustream, a Worcester-based tech firm looking to help companies stay connected with customers after purchases, has raised $10 million in multiple raises since 2017, according to Crunchbase.

Mining the local talent pool

The region’s startup ecosystem has grown since 2014. That year saw The Venture Forum, a nonprofit aiming to boost tech-based entrepreneurial activity and economic development started at Worcester Polytechnic Institute in the mid-90s with the goal of putting the city among the next generation of startup hubs, spun off into its own nonprofit.

A year later, the Worcester Idea Lab opened its doors. The collaborative workspace for startups and small businesses was part of a $42-million redevelopment project by the Worcester Business Development Corp.

Today, the Idea Lab is the home of Holios Inc., a startup focused on analyzing data from smart home devices to give companies insight into real life use of these products by consumers.

Holios is led by CEO Jay Cahill, a graduate of Stonehill College in Easton  and experienced startup leader with multiple exits under his belt. His work with startups over the past 25 years has brought him all over the world, but launching Holios out of Worcester has given the opportunity to work much closer to his home in the Blackstone Valley.

One of his former startups was based in Providence, but the area lacked the depth of skilled workers he needed.

“We did big business down there, but we were capped out of the talent pool,” he said. “Once you go through the people who exist around Brown University, the talent, at least on the tech side, drops off.”

Cahill already had experience working in Worcester, having operated tech service startup Bluefin Technology Partners from the Idea Lab since the facility opened.

Looking to spend less time commuting into a place like Boston and more time with his children, Cahill decided Worcester’s universities and growing support network for startups made it a good place to launch another venture.

“Even though you’re building a tech company, it’s not just tech,” he said. “Through Bluefin, we’ve been able to leverage great computer science resources from WPI, but there’s great marketing teams coming out of Clark University. I grab employees from Worcester [State University] and Quinsigamond [Community College]. It’s great to have a nice palette. That’s why I chose to stay here with Holios.”

Cahill said the launch of the Wire Group and Auxilum is an exciting moment in the local startup scene.

“That's where everyone kind of gets tripped up is … having to look outside the city for capital,” he said. “The more of those types of groups and organizations [like Wire Group and Auxilum] that come here to support businesses in the city, I think it'll be better for the overall startup climate.”

Cahill is exploring his options for a Holios-focused capital raise, after a few turbulent years in the venture capital industry, where the market flooded with new investors and companies looking to cash in on the artificial intelligence craze.

“We're starting to see the professional investors go back in and get serious and that frothiness of AI has cooled off a little bit, and people see through the smoke now of what's [legitimate] AI and what's not,” he said.

Funding the right startup team

With the 2022 launch of the Wire Group, Cahill may not have to travel too far to find funding sources for Holios. Focused on fast-moving, high-growth startups, the organization has made eight investments to date, with an average total of around $45,000.

“We see our pipeline and deal flow as high quality, and we’re always looking forward to our next meeting to see the kinds of companies that we can bring to the table for folks in our group,” said Tim Loew, one of Wire Group’s 21 members.

The team assembled by a startup is just as important, if not more important, than the original incarnation of the company’s gameplan, Loew said. Capital not only allows startups to begin their journey but gives them breathing room to pivot into a business model or sector more lucrative than their initial idea.

“We expect them to learn and evolve so that the startup that we may invest in six months from now or a year from now, may have made a series of pivots to find the product market fit.,” Loew said. “We take that on happily, because otherwise, many of these companies might not be able to get to where they need to be.

“Other programs in the area have really helped a lot of companies get to the point where they can go out and raise money,” Loew said. “In fact, the advent of Auxilium in Worcester is a great example of that, where we see … some real significant capital coming into the market to support Worcester-based startups.”

The next level

Perhaps the clearest sign that some of the region’s biggest business movers and shakers have faith in the continued growth of the city’s startup ecosystem is the launch of Auxilium, a full-package innovation hub and accelerator started by entrepreneur Cliff Rucker, the owner of the Worcester Railers ECHL hockey team and the Worcester Palladium.

The organization is taking applications for its innovation studio, offering a 12-month residency featuring access to mentorship, business support, and capital investments, as well as a three-month accelerator designed to boost existing businesses with access to industry leaders and investments starting at $250,000.

These efforts are being led by Zachary Dutton, another member of the Wire Group who led The Venture Forum from 2022 until the launch of Auxilium.

Dutton sees local higher educational institutions as a key part of the local scene, even when students don’t want to lead a startup themselves.

“There is a real intent on teaching entrepreneurship, but also the entrepreneurial mindset," he said. “Not everybody you know has a company or an idea that they want to follow through, but many still like the idea of being involved with startups.”

Venture Forum continues to operate, with Dutton remaining on its board, but he believes the launch of Auxilium and the capital it provides should boost Worcester’s entrepreneurial scene past its own startup phase.

“We could provide advice, guidance, connections, but we couldn't actually support the entrepreneurs with any type of capital,” Dutton said of the nonprofit Venture Forum. “Auxilium will be able to do many of the things that we wanted to do, while also supporting entrepreneurs and these startups with investment dollars.”

CORRECTION: An earlier version of this article incorrectly claimed Jay Cahill is a Worcester Polytechnic Institute graduate. In fact, Cahill attended Stonehill College in Easton, later serving as part of WPI's Tech Advisor Network.

Eric Casey is the managing editor for Worcester Business Journal, who primarily reports on the manufacturing and real estate industries.