A leading center for venture capital deals, Boston has placed third for venture capital investment for five consecutive years, according to the National Venture Capital Association.
Boston-area startups landed 371 deals in 2014, according to the group, known as the NVCA, for a total of $4.4 billion — an increase of 37 percent over 2013. And it’s not just venture capital strongholds like San Francisco, San Jose and Boston that are enjoying a rise in venture deals. The number of U.S. cities in which deals were made last year climbed to 160, compared to 148 in 2013, with Springfield among the cities to produce a venture capital deal for the first time in the five years, the NVCA reported.
What about Worcester? Local investor experts agree that Greater Worcester falls within the Boston-area venture net. An hour’s drive is nothing if an investor is intrigued by a business, said Joe Rubin, managing director at FundingPost, a Connecticut-based networking organization that connects startups with venture capitalists and angel investors. Geography is just one factor investors consider when sizing up a deal, and if there’s a fund that’s a good fit, most are willing to go almost anywhere, he said.
As the NCVA figures indicate, venture capitalists in 2015 are an eager lot. Rubin said people who have money to invest are increasingly considering venture funding. He attributes some of that to ABC’s popular reality television series “Shark Tank,” in which people present pitches to famous investors in hopes of taking their companies to the next level.
“I’d say there’s a lot of discussion on early-stage investing. It’s a hot topic,” said Rubin, who is also a partner with ARC Angel Fund, a New York City angel investor group. “It’s kind of a cool thing to do. It’s good water cooler talk.”
While the Boston area may be seen as just as much a hub for venture funding for Central Massachusetts companies as it is for those based in Greater Boston, some local sources say having more locally-based venture funding sources wouldn’t hurt.
Local VC players
There are a couple of local organizations that are already active in the venture space. One is Boynton Angels, a Westborough-based group of angel investors who are in the business more for the fun of it than the return on investment. Peter Aranow, a retired investment banker and former chief financial officer who lives in Uxbridge, became involved with Boynton back in 2006. It had recently been launched by Worcester Polytechnic Institute, and Aranow saw it as an opportunity for intellectual stimulation.
While Boynton invests in a variety of sectors, and in companies located throughout New England, a venture with a local connection is more likely to make it through the screening process to pitch at Boynton’s monthly pitch sessions, which Aranow described as “exactly like Shark Tank” in nature.
“A Worcester company is more likely to get a hearing from us,” Aranow said.
That said, Boynton has made only a couple of local deals. Aranow recognized that angel investment is in a separate category from traditional venture capital since angel investors are usually the first to provide funding to startups that they didn’t generate through personal savings and contributions from family and friends. Statistically, most companies that angels fund don’t survive long-term.
“Eight out of 10 don’t work out,” Aranow said.
For more advanced companies seeking venture capital in Greater Worcester, there is another organization with a local focus. Long River Ventures, of Amherst, is headed by former Boynton investor Will Cowen, and Tripp Peake, who has more than 20 years of experience in venture funding.
Peake said Long River focuses on health care and information technology companies throughout the Northeast. Although there has been some investment in Central Massachusetts and “lots of interesting things happening” in this region, he said, “there tends to be a real gravitational pull” among venture capitalists to the Boston area.
While local startups may have access to venture and angel funding in Greater Boston, Joe Vignaly, chairman of The Venture Forum in Worcester and a member of Boynton Angels, said having more groups focus on the region would elevate the local startup ecosystem.
In Boston and Cambridge, startups have access to a host of venture-funding events, which they can attend just to learn about the pitching process, before they’re ready to pitch themselves. And unlike others, Vignaly believes some Boston-area investors would rather invest in companies located within their immediate circle. He said he could think of a few Worcester startups that moved to Boston at the behest of their investors.
“These companies didn’t feel they could say ‘No,’” said Vignaly, who declined to name the companies.
If startups with good ideas flee to Boston, then more venture funding resources will almost certainly not increase their focus on the region, Vignaly said. That’s why he and others at The Venture Forum are pushing for the city or local businesses to help fund an incubator for startups, to create a higher concentration of local companies.
“When you have a thriving community of entrepreneurs, then you’ll get some venture capital groups setting up shop too,” Vignaly said. n
